HomeMy WebLinkAbout11 WATER REVENUE BONDS BY TPFA• A enda Item 11
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_ ~ ~ ~ ~ AGENDA REPORT Reviewed:
City Manager
Finance Director t~~'~-~'
MEETING DATE: MAY 3, 2011
TO: WILLIAM A. HUSTON, INTERIM CITY MANAGER
FROM: PAMELA ARENDS-KING, FINANCE DIRECTOR
SUBJECT: ISSUANCE OF WATER REVENUE BONDS BY THE TUSTIN PUBLIC
FINANCING AUTHORITY
SUMMARY:
Approval by the Tustin Public Financing Authority ("TPFA") and the City of Tustin
("City") is requested to authorize the issuance and sale of Water Revenue Bonds, 2011
Series A ("Bonds") in an aggregate principal amount not to exceed $22 million to
finance water system improvements, primarily the replacement of the Rawlings
Reservoir and the Tustin Avenue Well.
RECOMMENDATION:
It is recommended that:
1. The TPFA adopt TPFA Resolution 11-02 AUTHORIZING THE ISSUANCE AND
SALE OF BONDS BY THE TPFA TO FINANCE VARIOUS WATER
ENTERPRISE CAPITAL PROJECTS, APPROVING THE FORM OF RELATED
DOCUMENTS AND AUTHORIZING ALL ACTIONS NECESSARY TO
CONSUMMATE THE ISSUANCE AND SALE OF THE BONDS.
a. Indenture of Trust;
b. Installment Sale Agreement;
c. Bond Purchase Agreement; and
d. Preliminary Official Statement.
2. The City Council adopt City council Resolution 11-39 APPROVING THE
ISSUANCE AND SALE OF THE BONDS TO FINANCE VARIOUS WATER
ENTERPRISE CAPITAL PROJECTS.
a. Installment Sale Agreement;
b. Bond Purchase Agreement; and
c. Preliminary Official Statement.
FISCAL IMPACT:
The Bonds will have no financial impact on the City's General Fund or the TPFA, as all
payment of principal and interest on the Bonds will be paid solely from the Water
Enterprise Fund revenues collected from water customers.
ISSUANCE OF WATER REVENUE BONDS BY THE TUSTIN PUBLIC FINANCING AUTHORITY
MAY 3, 2011 PAGE 2
BACKGROUND:
Proceeds from the sale of the Bonds will be used to finance water system
improvements. The two primary projects the proceeds will finance are the replacement
of the Rawlings Reservoir and the Tustin Avenue Well.
The City, working with its consultants, has determined that, due to prevailing financial
market conditions and for other reasons, it is in the best interests of the City at this time
to debt finance water enterprise activities related to the rehabilitation of the water
system infrastructure. To provide moneys for such purposes, the TPFA has determined
to issue its Bonds in the aggregate principal amount of not to exceed $22 million.
The proposed bond issue will be payable solely from the pledge of net revenues from
the Water Enterprise Fund. The water rates adopted June 15, 2010 were structured to
provide the revenue necessary to issue the proposed Bonds and meet the principal
payments for the life of the Bonds.
Based on the current interest rates, the TPFA is proposing to issue approximately $22
million par amount of Bonds to net $20 million to fund various water system capital
projects, primarily the replacement of the Rawlings Reservoir and the Tustin Avenue
Well. The City will be obtaining an underlying credit rating for the Bonds from
Standards & Poor's as well as obtaining a quote for municipal bond insurance from
Assured Guaranty Municipal Corporation to ensure the best possible interest rate.
The TPFA resolution being presented for approval authorizes the issuance of the Bonds
and approves the form and authorizes execution of the related financing documents
including a draft of an Official Statement that describes the terms of the Bonds. The City
Council resolution being presented for approval approves the issuance of the Bonds
and approves the form and authorizes execution of the related financing documents
including a draft of an Official Statement that describes the terms of the Bonds. These
documents will be finalized when the exact terms of the Bonds are determined at the
time the Bonds are sold to investors, anticipated to occur on or about May 12, 2011.
The date for the closing of the Bond issue, and the time when Bond proceeds are
expected to be available, is currently expected to be May 25, 2011.
,,/j
Pamela Arends-King
Finance Director
Attachment(s): Resolution No. 11-02
Resolution No. 11-39
Preliminary Official Statement Dated May 4, 2011
Indenture of Trust
Installment Sale Agreement
Bond Purchase Agreement
TPFA RESOLUTION NO. 11-02
RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF WATER
REVENUE BONDS TO FINANCE IMPROVEMENTS TO THE CITY OF
TUSTIN'S MUNICIPAL WATER ENTERPRISE AND APPROVING
RELATED DOCUMENTS AND OFFICIAL ACTIONS
The Tustin Public Financing Authority of the City of Tustin (the "Authority") does hereby
resolve as follows:
WHEREAS, the City of Tustin (the "City") and the Tustin Community
Redevelopment Agency have heretofore entered into a joint exercise of powers
agreement establishing the Authority for the purpose, among others, of issuing its bonds
to be used to provide financial assistance to the City;
WHEREAS, the City has determined that, due to prevailing financial market
conditions, it is in the best interests of the City to finance the acquisition and
construction of certain improvements and facilities (the "Improvements") which will
constitute part of the City's municipal water enterprise (the "Water System");
WHEREAS, for the purpose of raising funds necessary to provide such financial
assistance to the City, the Authority proposes to authorize the issuance of its revenue
bonds under the provisions of Article 4 (commencing with section 6584) of Chapter 5 of
Division 7 of Title 1 of the California Government Code (the "Act"), designated as the
Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "Bonds"),
all pursuant to and secured by an indenture of trust (the "Indenture"), by and between
the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee");
WHEREAS, in order to provide for the repayment of the Bonds, the Authority will
sell the Improvements to the City pursuant to an installment sale agreement (the
"Installment Sale Agreement"), under which the City will agree to make installment
payments to the Authority payable from the net revenues of the Water System which will
be calculated to be sufficient, in time and amount, to enable the Authority to pay the
principal of and interest and premium (if any) on the Bonds when due and payable;
WHEREAS, the City's obligations under the Installment Sale Agreement will be
on parity as to payment and security with the City's obligations with respect to its
$14,355,000 City of Tustin 2003 Refunding Water Revenue Bonds, of which
$11,165,000 is currently outstanding;
WHEREAS, the form of an official statement (the "Official Statement") describing
the Authority, the City, the Water System, the Bonds and other matters, to be used in
TPFA Resolution No. 11-02
Page 2
connection with the marketing of the Bonds, has been prepared and presented to the
Authority;
WHEREAS, the firm of Citigroup Global Markets -nc. (the "Underwriter") has
proposed to purchase and underwrite the Bonds and has presented to the Authority a
form of bond purchase agreement for the Bonds, to be entered into among the
Authority, the City and the Underwriter (the "Bond Purchase Agreement"); and
WHEREAS, the Board has duly considered such transactions and wishes at this
time to approve said transactions in the public interests of the Authority;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1: Issuance of Bonds; Approval of Indenture. The Board hereby
authorizes the issuance of the Bonds under and pursuant to the Bond Law and the
Indenture for the purpose of providing funds to enable the City to finance the
Improvements, so long as (a) the principal amount of Bonds does not exceed
$22,000,000, (b) so long as the true interest cost of the Bonds is not greater than 7%,
and (c) so long as the final maturity date of the Bonds is not later than April 1, 2041. The
Board hereby approves the Indenture in the form on file with the Secretary, together
with such additions thereto and changes therein as the Chairperson, the Executive
Director, the Assistant Executive Director or the Treasurer, or any designee thereof (the
"Designated Officers") shall deem necessary, desirable or appropriate, the execution of
which by the Authority shall be conclusive evidence of the approval of any such
additions and changes. The Designated Officers, each acting alone, are hereby
authorized and directed to execute, and the Secretary is hereby authorized and directed
to attest and affix the seal of the Authority to, the final form of the Indenture for and in
the name and on behalf of the Authority. The Board hereby authorizes the delivery and
performance of the Indenture.
SECTION 2: Approval of Installment Sale Agreement. The Board hereby
approves the Installment Sale Agreement in the form on file with the Secretary, together
with such additions thereto and changes therein as the Designated Officers shall deem
necessary, desirable or appropriate, the execution of which by the Authority shall be
conclusive evidence of the approval of any such additions and changes. The
Designated Officers, each acting alone, are hereby authorized and directed to execute,
and the Secretary is hereby authorized and directed to attest and affix the seal of the
Authority to, the final form of the Installment Sale Agreement for and in the name and on
behalf of the Authority. The Board hereby authorizes the delivery and performance of
the Installment Sale Agreement.
SECTION 3: Sale of Bonds. The Board hereby approves the sale of the Bonds
by the Authority by negotiation with the Underwriter, pursuant to the Bond Purchase
TPFA Resolution No. 11-02
Page 3
Agreement in the form on file with the Secretary, together with such additions thereto
and changes therein as a Designated Officer shall deem necessary, desirable or
appropriate, the execution of which by the Authority shall be conclusive evidence of the
approval of any such additions and changes. The Designated Officers, each acting
alone, are hereby authorized and directed to execute the final form of the Bond
Purchase Agreement for and in the name and on behalf of the Authority upon the
submission of an offer by the Underwriter to purchase the Bonds, which offer is
acceptable to a Designated Officer and consistent with the requirements of this
Resolution. The amount of Underwriter's discount for the Bonds shall be not more than
1 % of the par amount thereof (not taking into account any original issue discount on the
sale thereof).
SECTION 4: Official Statement. The Board hereby approves the preliminary
Official Statement in the form on file with the Secretary, together with such additions
thereto and changes therein as a Designated Officer shall deem necessary, desirable or
appropriate. The Designated Officers, each acting alone, are hereby authorized and
directed to deem final within the meaning of Rule 15c2-12 of the Securities Exchange
Act of 1934 except for permitted omissions, the preliminary form of the Official
Statement. Distribution of such preliminary Official Statement is hereby approved. The
Designated Officers, each acting alone, are hereby authorized to execute the final form
of the Official Statement, including as it may be modified by such additions thereto and
changes therein as any Designated Officer shall deem necessary, desirable or
appropriate, and the execution of the final Official Statement by the Authority shall be
conclusive evidence of the approval of any such additions and changes. The Board
hereby authorizes the distribution of the final Official Statement. The final Official
Statement shall be executed in the name and on behalf of the Authority by a Designated
Officer.
SECTION 5: Official Actions. The Chairperson, the Executive Director, the
Assistant Executive Director, the Treasurer, the Secretary and any and all other officers
of the Authority are hereby authorized and directed, for and in the name and on behalf
of the Authority, to do any and all things and take any and all actions, including
execution and delivery of any and all assignments, certificates, requisitions,
agreements, notices, consents, instruments of conveyance, warrants and other
documents, including the application to providers of municipal bond insurance for the
Bonds, which they, or any of them, may deem necessary or advisable in order to
consummate the lawful issuance and sale of the Bonds and the consummation of the
transactions as described herein.
SECTION 6: Effective Date. This Resolution shall take effect from and after the
date of its passage and adoption.
TPFA Resolution No. 11-02
Page 4
PASSED AND ADOPTED at a special meeting of the Tustin Public Financing
Authority held on the 3~d day of May, 2011.
Jerry Amante
Chairperson
PAMELA STOKER
Recording Secretary
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
I, Pamela Stoker, Recording Secretary of the Tustin Public Financing Authority of
the City of Tustin, California, do hereby certify that the whole number of the members of
the Directors of the Tustin Public Financing Authority is five; that the above and
foregoing TPFA Resolution No. 11-02 was duly passed and adopted at a special
meeting held on the 3~d day of May, 2011 by the following vote:
DIRECTORS AYES:
DIRECTORS NOES:
DIRECTORS ABSTAINED:
DIRECTORS ABSENT:
PAMELA STOKER
Recording Secretary
CITY OF TUSTIN RESOLUTION NO. 11-39
RESOLUTION APPROVING PROCEEDINGS TO FINANCE
IMPROVEMENTS TO THE CITY'S MUNICIPAL WATER SYSTEM,
APPROVING THE ISSUANCE OF WATER REVENUE BONDS BY THE
TUSTIN PUBLIC FINANCING AUTHORITY FOR SUCH PURPOSES AND
APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS
The City Council of the City of Tustin does hereby resolve as follows
WHEREAS, the City and the Tustin Community Redevelopment Agency have
heretofore entered into a joint exercise of powers agreement establishing the Tustin
Public Financing Authority (the "Authority") for the purpose, among others, of issuing its
bonds to be used to provide financial assistance to the City;
WHEREAS, the City has determined that, due to prevailing financial market
conditions, it is in the best interests of the City to finance the acquisition and
construction of certain improvements and facilities (the "Improvements") which will
constitute part of the City's municipal water enterprise (the "Water System");
WHEREAS, for the purpose of raising funds necessary to provide such financial
assistance to the City, the Authority proposes to authorize the issuance of its revenue
bonds under the provisions of Article 4 (commencing with section 6584) of Chapter 5 of
Division 7 of Title 1 of the California Government Code (the "Act"), designated as the
Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "Bonds"),
all pursuant to and secured by an indenture of trust (the "Indenture"), by and between
the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee");
WHEREAS, in order to provide for the repayment of the Bonds, the Authority will
sell the Improvements to the City pursuant to an installment sale agreement (the
"Installment Sale Agreement"), under which the City will agree to make installment
payments to the Authority payable from the net revenues of the Water System which will
be calculated to be sufficient, in time and amount, to enable the Authority to pay the
principal of and interest and premium (if any) on the Bonds when due and payable;
WHEREAS, the City's obligations under the Installment Sale Agreement will be
on parity as to payment and security with the City's obligations with respect to its
$14,355,000 City of Tustin 2003 Refunding Water Revenue Bonds, of which
$11,165,000 is currently outstanding;
Resolution No. 11-39
Page 2
WHEREAS, the form of an official statement (the "Official Statement") describing
the Authority, the City, the Water System, the Bonds and other matters, to be used in
connection with the marketing of the Bonds, has been prepared and presented to the
City;
WHEREAS, the firm of Citigroup Global Markets, Inc. (the "Underwriter") has
proposed to purchase and underwrite the Bonds and has presented to the City a form of
bond purchase agreement for the Bonds, to be entered into among the Authority, the
City and the Underwriter (the "Bond Purchase Agreement"); and
WHEREAS, the Council approves all of said transactions in furtherance of the
public purposes of the City, and wishes at this time to take its action approving the
issuance and sale of the Bonds and the financing to be accomplished thereby;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1: Approval of Bonds. The Council hereby approves the issuance of
the Bonds by the Authority for the purpose, among others, of providing funds to finance
the Improvements, so long as (a) the principal amount of Bonds does not exceed
$22,000,000, (b) so long as the true interest cost of the Bonds is not greater than 7%,
and (c) so long as the final maturity date of the Bonds is not later than April 1, 2041.
SECTION 2: Approval of Installment Sale Agreement. The Council hereby
approves the Installment Sale Agreement in the form on file with the City Clerk, together
with such additions thereto and changes therein as the Mayor, the City Manager, the
Assistant City Manager or the Finance Director (the "Designated Officers") shall deem
necessary, desirable or appropriate, the execution of which by the City shall be
conclusive evidence of the approval of any such additions and changes. The
Designated Officers, each acting alone, are hereby authorized and directed to execute,
and the City Clerk is hereby authorized and directed to attest to, the final form of the
Installment Sale Agreement for and in the name and on behalf of the City. The Council
hereby authorizes the delivery and performance of the Installment Sale Agreement.
SECTION 3: Sale of Bonds. The Council hereby approves the sale of the Bonds
by the Authority by negotiation with the Underwriter pursuant to the Bond Purchase
Agreement in the form on file with the City Clerk, together with such additions thereto
and changes therein as a Designated Officer shall deem necessary, desirable or
appropriate, the execution of which by the City shall be conclusive evidence of the
approval of such additions and changes. The Designated Officers, each acting alone,
are hereby authorized and directed to execute the final form of the Bond Purchase
Agreement for and in the name and on behalf of the City upon the submission of an
offer by the Underwriter to purchase the Bonds, which offer is acceptable to a
Designated Officer and consistent with the requirements of this Resolution. The amount
of Underwriter's discount for the Bonds shall be not more than 1 % of the par amount
thereof (not taking into account any original issue discount on the sale thereof).
Resolution No. 11-39
Page 3
SECTION 4: Official Statement. The Council hereby approves the preliminary
Official Statement in the form on file with the City Clerk, together with such additions
thereto and changes therein as a Designated Officer shall deem necessary, desirable or
appropriate. The Designated Officers, each acting alone, are hereby authorized and
directed to deem final within the meaning of Rule 15c2-12 of the Securities Exchange
Act of 1934 except for permitted omissions, the preliminary form of the Official
Statement describing the Bonds. Distribution of such preliminary Official Statement is
hereby approved. The Designated Officers, each acting alone, are hereby authorized to
execute the final form of the Official Statement, including as it may be modified by such
additions thereto and changes therein as a Designated Officer shall deem necessary,
desirable or appropriate, and the execution of the final Official Statement by the City
shall be conclusive evidence of the approval of any such additions and changes. The
Council hereby authorizes the distribution of the final Official Statement by the
Underwriter. The final Official Statement shall be executed in the name and on behalf of
the City by a Designated Officer.
SECTION 5: Official Actions. The Mayor, the City Manager, the Assistant City
Manager, the Finance Director, the City Clerk and any and all other officers of the City
are hereby authorized and directed, for and in the name and on behalf of the City, to do
any and all things and take any and all actions, including execution and delivery of any
and all assignments, certificates, requisitions, agreements, notices, consents,
instruments of conveyance, warrants and other documents, including the application to
providers of municipal bond insurance for the Bonds, which they, or any of them, may
deem necessary or advisable in order to consummate the lawful issuance and sale of
the Bonds and the consummation of the transactions as described herein.
SECTION 6: Effective Date. This Resolution shall take effect from and after the
date of its passage and adoption.
PASSED AND ADOPTED at a regular meeting of the Tustin City Council held on
the 3~d day of May, 2011.
Jerry Amante
Mayor
ATTEST:
PAMELA STOKER
City Clerk
Resolution No. 11-39
Page 4
STATE OF CALIFORNIA
COUNTY OF ORANGE
CITY OF TUSTIN
I, Pamela Stoker, City Clerk and ex-officio Clerk of the City Council of the City of
Tustin, California, do hereby certify that the whole number of the members of the City
Council of the City of Tustin is five; that the above and foregoing Resolution No. 11-39
was duly passed and adopted at a regular meeting of the Tustin City Council, held on
the 3~d day of May, 2011 by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
PAMELA STOKER
City Clerk
,'tZLLl~i1 N ~ EtY t)i TlC:t.~ t. > i' 1 t~t:~i Eli T D ~ t~Ft~ `i ~Y 1, ._i)11
NEW ISSUE-FULL BOOK ENTRY RATING:
S&P: " _"
(See "RATING" herein)
In the opinion of Quint &Thimmig hLI', San Francisco, California, Bond Counsel, subject to compliance by the [Authority and the City with certain covenants,
interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference
in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used
in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt ti~om
personal income taxation imposed by the State of California. See "TAX MATTFILS" herein.
~. , ~ ~
~'_"""" Tustin Public Financing Authority
g ' ~ (Orange County, California)
Water Revenue Bonds, 2011 Series A
Dated: Date of Delivery Due: April 1, as shown below
The S * Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the 'Bonds"), will be registered in the name of Cede & Co., as
nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the Bonds. h~dividuaL purchases of
Bonds will be made in book-entry form only, in denominations of $5,000 or any integral multiple thereof. Purchasers of Bonds will not receive certificates
representing their interest in the Bonds purchased but will receive a credit balance in the records of DTC. Principal of and interest on the Bonds are pavable
directly to UTC by The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, as trustee (the "Trustee"). Principal is payable on the dates
set forth below. interest is payable semiannually on each April 1 and October 1, commencing October 1, 2011. Upon receipt of payments of principal of,
premium, if any, and interest on the Bonds, DTC is obligated in turn to remit such principal, premium, if any, and interest to the DTC Participants (as defined
herein) for subsequent disbursement to purchasers of the Bonds, as described herein.
The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See "THF. BONDS-Redemption" herein.
The Bonds are special obligations of the Tustin Public Financing Authority (the "Authority"") payable from the revenues pledged timdcr the Indenture of
Trust, dated as of May 1, 2011, by and between the Authority and the Trustee, consisting primarily of installment payments (the "[nstalbnent Payments") to
be made by the City of Tustin (the "City") under an installment sale agreement, dated as of May 1, 2011, by and between the Authority and the City (the
"[nstrlhnent Sale Agreement"). The Installment Payments are secured by a pledge of and lien on the net revenues of the City's municipal water enterprise.
The Bonds ire being issued to (a) finance the 2011 Project (as defined herein), (b) fund a reserve fund for the Bonds, and (c) pay the costs of issuance of the
Bonds. The City's obligations under the Installment Sale Agreement will be on parity as to payment and security with the Citv's obligations with respect to its
_ $1T,355,000 City of Tustin 2003 Refunding Water Revenue Bonds, of which 511,165,000 is currently outstanding (the '2003 Bonds"). The 2003 Bonds mature
- on April 1, ?023.
Neither the Bonds nor the obligation of the City to make Installment Payments constitutes an obligation of the City or the Authority for which the City is
obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The Authority has no taxing power.
Neither the Bonds nor the obligation of the City to make Installment Payments under the Installment Sale Agreement constitutes a debt of the City, the
County of Orange, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or
restriction.
MATURITY SCHEDULE
CL'S[Pt Prefix:
$ Serial Bonds
Maturity
Date ~ Principal
A aril 1 Amount
_ $
Interest CUSIPt
Rate Price Suffix
"/o Term Bonds Maturing April 1, ;Price:
`% Term Bonds Maturing April 1, J Price:
Maturity
Date Principal Interest
A rill Amount Rate Price
`%, to Yield %-CUSIPt:
%, to Yield %-CUSIPt:
CUSIPt
Suffix
This cover page contains information for general reference only. [t is not a summary of this issue Potential purchasers of the Bonds ore advised to read the
entire Official Statement to obtain information essential to making an informed investment decision.
The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Quint &Thimmig LLP, San Francisco,
California, Bond Counsel. Certain legal matters will be passed upon for the Authority and the City by Quint &Thimmig LLP, San Francisco, California,
Disclosure Counsel and by Woodruff, Sprodlin & Smart, P.G, Costa Mesa, California, Authority Counsel and Citv Attorney. Certain legal matters ~~~ill be
passed on for the Underwriter by Stradling Yocca Carlson & Routh, A Professional Corporation, Newport Beach, California It is expected that the Bonds, in
book-entry form, will be available for delivery on or about May 25, 201].
Cltl
Dated: May , 2011
*Preliminary, subject to change.
t Copyriy,ht 2011, American Bankers Association. CUSIP io is a ref~stered trademark of the American Bankers Association. CUSIP data herein is provided tiv the CUSIP
Service Bureau, operated by Standard & Poor's, a division of The McGraw-Hill Companies, Inc This data is not intended to create a database and does not serve. in any ~~'ay
as a substitute for the CUSIP Serviees Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the Authority and are included solely for
the convenience of the registered owners of the Bonds. iVeither the Authority nor the City is responsible for the selection ur uses of these CGS[P numbers, and no
representation is made as to their correctness on the Bonds or as included herein. The Ch~SIP number for a specific maturity is subject to being changed after the issuans ~~t
file Bonds as a result of various subsequent actions including, but not limited to, a refunding in tiehole or in part or as a result of the procurement of secondary market
..,...4„n.. ~.,~~~.~.~.-„ ... „tl~.,. ~~:...: 1-,. ..,,h ~,., ~....,..t h.. :...,~,~t..r~ tl.,r ;~ -,...~I:. L.I., ~.. III ..r ~ ..,..t~......i .,.,.t-, ~.. ~..~t~..: 4:~~ ~.F tl,., lE.....1.-
No dealer, broker, salesperson or other person has been authorized by the Authority, the City or
the Underwriter to give any information or to make any representations other than those contained
herein and, if given or made, such other information or representation must not be relied upon as having
been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in
which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such and are not to be construed as a
representation of facts.
The information set forth herein has been furnished by the Authority and the City and from other
sources which are believed to be reliable. The Underwriter has provided the following sentence for
inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement
in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied
to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or
completeness of such information. The information and expression of opinion herein are subject to change
without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the affairs of the Authority,
the City or any other parties described herein since the date hereof.
Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements" within the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and
Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally
identifiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar
words. The achievement of certain results or other expectations contained in such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements described to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. No assurance is
given that actual results will meet the City's forecasts in any way, regardless of the level of optimism
communicated in the information. The City is not obligated to issue any updates or revisions to the
forward-looking statements if or when its expectations, or events, conditions or circumstances on which
such statements are based occur. See "CONTINUING DISCLOSURE" herein.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT SUCH
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANYTIME.
The execution, sale and delivery of the Bonds has not been registered under the Securities Act of 1933
or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided
thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities.
The City maintains a website. Unless specifically indicated otherwise, the information presented on
such website is not incorporated by reference as part of this Official Statement and should not be relied
upon in making investment decisions with respect to the Bonds.
TABLE OF CONTENTS
PP-awe
INTRODUCTION ................................................................ .1
Genera I .............................................................................. .1
TI1e Authority ................................................................... . l
The City ............................................................................. . i
The Enterprise .................................................................. . 1
Authority for Issuance of the Bonds ............................. . 1
Purpose of the Bonds ...................................................... . 2
Security and Source of Repayment ............................... .2
Reserve Account .............................................................. .2
Redemption of the Bonds .............................................. ..2
Book-Entry Form ............................................................ .. 3
Continuing Disclosure ................................................... ..3
Tax Matters ...................................................................... ..3
Professionals Involved in the Offering ........................ .. 3
Forward-Looking Statements ....................................... .. ~
Other Matters .................................................................. ..-I
Other Information .......................................................... ..-I
THE PROJECT .................................................................... .. 5
ESTIMATED SOURCES AND USES OF PROCEEDS .. .. 5
DEBT SERVICE REQUIREMENTS .................................. .. h
THE BONDS ........................................................................ ..7
General Provisions ......................................................... ..7
book-Entry Only System ............................................... .. 8
Transfer and Exchange .................................................. ..8
Terms of Redemption .................................................... .. 8
SECURITY FOR THE BONDS .......................................... 11
Revenues .......................................................................... 11
histallment Payments .................................................... 11
Application of Gross Revenues; Pledge and
Application of Net Revenues ...................................... l l
Special Obligation of the City; Obligations
Absolute ......................................................................... 13
Rate Covenant ................................................................. 14
Limitations on Future Obligations Secured by
Net Revenues ................................................................ 14
Additional Payments ..................................................... 16
Reserve Account ............................................................. 16
Flow of Funds ................................................................. 16
THE CITY ............................................................................ 17
THE AUTHORITY ............................................................. 17
THE ENTERPRISE ............................................................. 17
History ............................................................................. 17
Existing Facilities ............................................................ 17
Management .................................................................... 18
Service Area ..................................................................... 18
Page
Budgetary Process ....................................................... ... 21
Rate Setting Process .................................................... ... 21
Rates .............................................................................. ... 21
Water Connections ...................................................... ... 24
Water Users .................................................................. ... 25
Capital Improvement Program ................................. ... 25
Pension Plans .............................................................. .... 26
Post Employment Healthcare Benefits .................... .... 27
Financial Statements .................................................. .... 27
Historical Revenues and Expenditures ................... .... 28
Projection of Revenues, Expenditures and Debt
Service Coverage ...................................................... .... 29
INVESTMENT OF CITY FUNDS ................................. .... 29
CONSTITUTIONAL LIMITATIONS ON
APPROPRIATIONS AND FEES ................................. ..... 30
Article X[IiA ............................................................... ..... 30
Article XIIIB ................................................................ ..... 3U
Proposition 218 .......................................................... ..... 31
Effect of Proposition 218 nn the City; Possible
Limitations on Enforcement Remedies ................ ..... 33
Proposition 26 ............................................................ ..... 33
Future Initiatives ....................................................... ..... 34
RISK FACTORS RELATING TO THE BONDS ....... ...... 3-I
Limited Obligations ................................................. ...... _34
Maintenance and Operation Costs ........................ ...... 35
Limited Recourse on Default ................................. ....... 35
Limitations on Remedies ......................................... ...... 35
hiitiatives ................................................................... ...... 35
Bankruptcy ................................................................ ...... 35
Tax Exemption .......................................................... ...... 3h
Additional Obligations ............................................ ...... 36
Seismic Considerations ............................................ ...... 36
Secondary Market .................................................... ...... 3h
APPROVAL OF LEGAL PROCEEDINGS ............... ....... 36
LITIGATION ................................................................ ....... 37
RATINGS ...................................................................... ....... 37
FINANCIAL ADVISOR ............................................. ....... 37
CONTINUING DISCLOSURE .................................. ....... 37
TAX MATTERS ........................................................... ....... 38
UNDERWRITING ....................................................... ....... -10
OTHER INFORMATION ........................................... ....... -10
MISCELLANEOUS ..................................................... ....... -I0
APPENDIX A: GENERAL INFORMATION ABOUT THE CITY OF TUST>I\!
APPENDIX B: COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDED JUNE 30, 2010
APPENDIX C: CITY INVESTMENT POLICY
APPENDIX D: SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX E: FORM OF FINAL OPINION OF BOND COUNSEL
APPENDIX F: FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX G: BOOK-ENTRY ONLY SYSTEM
TUSTIN PUBLIC FINANCING AUTHORITY
CITY OF TUSTIN, CALIFORNIA
300 Centennial Way
Tustin, CA 92780
(714) 573-3000
(714) 832-0825 (Fax)
http: / / www.tustinca.org
Authority Board/City Council
Jerry Amante, Chair/Mayor
John Nielsen, Vice Chair/Mayor Pro Tem
Debora Gavello, Boardmember/Councilmember
Rebecca Gomez, Bonrdmernber/Councilrnernber
Al Murray, Bonrdmen~ber/Coiincilmember
Authority/City Staff and Officials
William A. Huston, Executive Director/City Manager
Christine A. Shingleton, Assistant Executive Director/Assistnizt Citi~ Mc~rlager
George Jeffries, Treasurer/City Treasurer
Pamela Stoker, Secretary/City Clerk
Pamela Arends-King, Director of Finance
Douglas C. Holland, Authority Counsel/Cih~ Attorney
Douglas S. Stack, Director of Public Works/City Engineer
Special Services
Heldman, Rolapp & Associates
Irvine, California
Financial Advisor
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Trustee
Quint & Thimmig LLP
San Francisco, California
Bond Counsel and Disclosure Counsel
TUSTIN CALIFORNIA
101 - Jlerfa NIBQfe Ml
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° East Los Angeles Hacienda Rowland ° Glen Avon
~anta ° ~2 Heights° so o eights Chino 0
Inglewood Maywood ^ Bell Gardens i ~ ;~? ~ ~d I =a
_Downe Riversic
ti~?onica Bey Cudahy ,,, Y o a Habra- 71
Manhattan Willow Brook° ^ ~ 39 ° ^
Lynwood ~ Brea 9o Norco
Beach° ° Norwalk Wood
Compton ° .Fullerton ,,
Paramount ; ° 91 Home Gar
Hermosa Beach ^ Buena Corona
,.~ ^ o arson Lakewood park JAnaheim 2a1
Torrance West Carson Stanton
Lomita 1 Long Beach ° .Garden Grove
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z13 ,:; Tustin
Rancho Palos Seal Beach Santa Ana 261
Verdes Los ,angeles '
Irvine
-.arbor ~_:, ~'
i~1 133
Huntington
Beach Costa Mesa Mission !~~v~'~a};°~
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$ '~
TUSTIN PUBLIC FINANCING AUTHORITY
Water Revenue Bonds, 2011 Series A
INTRODUCTION
General
The purpose of this Official Statement is to provide certain information concerning the
issuance, sale and delivery by the Tustin Public Financing Authority, a joint exercise of powers
authority organized and existing under the laws of the State of California (the "Authority"), of
its Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "Bonds"), in the
aggregate principal amount of $ .* The Bonds are special obligations of the Authority
payable from the revenues (the "Revenues") pledged under an indenture of trust, dated as of
May 1, 2011 (the "Indenture"), by and between the Authority and The Bank of New York
Mellon Trust Company, N.A., as trustee (the "Trustee"), consisting primarily of installment
payments (the "Installment Payments") to be made by the City of Tustin (the "City") under an
installment sale agreement, dated as of May 1, 2011 (the "Installment Sale Agreement"), by and
between the Authority and the City, as the purchase price for certain improvements to the
City's municipal water enterprise (the "Enterprise"). The Installment Payments are secured by a
pledge of and lien on the net revenues of the Enterprise.
Capitalized terms used, but not otherwise defined herein, shall have the meanings
assigned thereto as set forth in APPENDIX D-SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS-Certain Definitions.
The Authority
The Authority was established on May 1, 1995, by the City and the Tustin Community
Redevelopment Agency (the "Agency"), to provide for the financing of public capital
improvements by the City and the Agency. See "THE AUTHORITY."
The City
The City is located in Orange County (the "County"), approximately 41 miles south of
the City of Los Angeles and approximately 90 miles north of the City of San Diego.
Incorporated in 1927, the City operates as a general law city with aCouncil-Manager form of
government. The Mayor is selected by the City Council from among its members. See
APPENDIX A-GENERAL INFORMATION ABOUT THE CITY OF TUSTIN.
The Enterprise
The Enterprise provides water service to most of the City as well as an area outside the
City limits. The Enterprise was begun as Tustin Water Works, a privately owned water utility,
and was acquired by the City in 1980. See "THE ENTERPRISE" herein.
Authority for Issuance of the Bonds
The Bonds are being issued pursuant to the provisions of Article 4 (commencing with
section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the
* Preliminary, subject to change.
"Law"), the Indenture, a resolution of the governing body of the Authority adopted on May 3,
2011, and a resolution of the City Council of the City adopted on May 3, 2011.
Purpose of the Bonds
The net proceeds of the Bonds will be used to finance certain water system
improvements (the "Project"). See "THE PROJECT" for a more detailed description of the
Project.
The Bonds are being issued to (a) finance, together with other available moneys, the
Project, (b) fund a reserve fund for the Bonds, and (c) to pay the costs of issuance of the Bonds.
Security and Source of Repayment
In accordance with the Installment Sale Agreement, the City is required to make
Installment Payments to the Trustee for the account of the Authority. The Installment Payments
are designed to be sufficient, in both time and amount, to pay, when due, the principal of, and
interest on the Bonds. The City is also required to make additional payments in the amount of
any taxes, assessments, insurance premiums, expenses of the Authority and the Trustee
incidental to the sale and delivery of the Bonds, administrative costs or charges of the Authority
in connection with the Project and costs and expenses which the Authority may incur as a
consequence of a default by the City. See APPENDIX D-SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS-Installment Sale Agreement.
The City's obligation to make the Installment Payments is a special obligation of the City
payable solely from and secured by a pledge of and lien upon the Net Revenues of the
Enterprise (as described in the section "SECURITY FOR THE BONDS"). Under no
circumstances is the City required to advance any moneys derived from any source of income
other than the Net Revenues nor are any other funds or property of the City liable for the
payments of the Installment Payments. See "SECURITY FOR THE BONDS."
The City's obligations under the Installment Sale Agreement will be on parity as to
payment and security with the City's obligations with respect to its $14,355,000 City of Tustin
2003 Refunding Water Revenue Bonds, of which $11,165,000 is currently outstanding (the "2003
Bonds"). The 2003 Bonds mature on April 1, 2023.
Reserve Account
A reserve account (the "Reserve Account") will be established and held under the
Indenture in order to secure the payment of principal of and interest on the Bonds in an
amount, as of the Closing Date, equal to the Reserve Requirement. If, on any Interest Payment
Date for the Bonds, the amounts on deposit under the Indenture to pay the principal of or
interest due on the Bonds are insufficient therefor, the Trustee will draw on the Reserve
Account to replenish the Interest Account, the Principal Account or the Sinking Account, in that
order, to make up such deficiencies. See "SECURITY FOR THE BONDS-Reserve Account" and
APPENDIX D-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Indenture for additional
information on the Reserve Account.
Redemption of the Bonds
The Bonds are subject to redemption prior to their stated maturity dates, as provided
herein. See "THE BONDS-Redemption."
-2-
Book-Entry Form
The Bonds will be delivered in fully registered form only and, when issued and
delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust
Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds.
Ownership interests in the Bonds may be purchased in denominations of $5,000 or any integral
multiple thereof, in book-entry form only. Principal, premium, if any, and interest are payable
directly to DTC by the Trustee. Upon receipt of payments of principal of, premium, if any, and
interest on the Bonds, DTC is obligated to remit such principal, premium, if any, and interest to
the participants in DTC for subsequent disbursement to the beneficial owners of the Bonds. See
"THE BONDS-Book-Entry Only System" below and APPENDIX G-BOOK-ENTRY ONLY
SYSTEM.
Continuing Disclosure
The City will covenant, pursuant to a continuing disclosure certificate (the "Continuing
Disclosure Certificate") to be executed on the date of delivery of the Bonds, for the benefit of
owners and beneficial owners of the Bonds, to provide certain financial information and
operating data related to the Enterprise by not later than nine months following the end of the
City's Fiscal Year (the "Annual Report"), and to provide notices of the occurrence of certain
enumerated events. The Annual Report and notices of enumerated events will be filed by the
City with the Municipal Securities Rulemaking Board. The specific nature of the information to
be contained in the Annual Report and any notices of enumerated events is summarized below
under the caption "CONTINUING DISCLOSURE." The form of the Continuing Disclosure
Certificate is set forth in APPENDIX F-FORM OF CONTINUING DISCLOSURE
CERTIFICATE. The covenants of the City in the Continuing Disclosure Certificate have been
made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).
Tax Matters
In the opinion of Quint &Thimmig LLP, San Francisco, California, Bond Counsel,
subject to compliance by the Authority and the City with certain covenants, interest on the
Bonds is excludable from gross income of the owners thereof for federal income tax purposes
and is not included as an item of tax preference in computing the federal alternative minimum
tax for individuals and corporations, but such interest is taken into account in computing an
adjustment used in determining the federal alternative minimum tax for certain corporations. 1n
addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income
taxation imposed by the State of California. See "TAX MATTERS."
Professionals Involved in the Offering
The proceedings of the Authority and the City in connection with the issuance of the
Bonds are subject to the approval as to their legality of Quint &Thimmig LLP, San Francisco,
California, Bond Cotmsel Certain legal matters will be passed upon for the Authority and the
City by Quint &Thimmig LLP, San Francisco, California, as Disclosure Counsel, and by
Woodruff, Spradlin & Smart, P.C., Costa Mesa, California, Authority Counsel and City
Attorney. Certain legal matters will be passed on for the Underwriter by Stradling Yocca
Carlson & Rauth, A Professional Corporation, Newport Beach, California. The Bank of New
York Mellon Trust Company, N.A., Los Angeles, California, will act as the Trustee under the
Indenture. Fieldman, Rolapp and Associates, Irvine, California, is serving as financial advisor to
the Authority and the City for the Bonds (the "Financial Advisor"). The fees of Bond Counsel,
Disclosure Counsel, the Financial Advisor and the Trustee are contingent upon the sale and
delivery of the Bonds.
-3-
Forward-Looking Statements
This Official Statement, and particularly the information contained under the headings
entitled "PROJECT," "THE ENTERPRISE," "BONDOWNERS' RISKS" and APPENDIX A-
GENERAL INFORMATION ABOUT THE CITY OF TUSTIN, contains statements relating to
future results that are "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 2000. When used in this Official Statement, the words "estimate,"
"forecast," "intend," "expect" and similar expressions identify forward-looking statements.
Such statements are subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements. Any forecast is subject
to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be
realized and unanticipated events and circumstances may occur. Therefore, there are likely to
be differences between forecasts and actual results, and those differences may be material. The
City is not obligated to issue any updates or revisions to the forward-looking statements if or
when its expectations, or events, conditions or circumstances on which such statements are
based occur. See "BONDOWNERS' RISKS" and "LIMITATIONS ON TAX REVENUES."
Other Matters
There follows in this Official Statement brief descriptions of the Bonds, the security for
the Bonds, the Indenture, the Authority, the City, the Enterprise, and certain other information
relevant to the issuance of the Bonds. The descriptions and summaries of documents herein do
not purport to be comprehensive or definitive, and reference is made to each such document for
the complete details of all its respective terms and conditions. All statements herein with respect
to such documents are qualified in their entirety by reference to each such document for the
complete details of all of their respective terms and conditions. All statements herein with
respect to certain rights and remedies are qualified by reference to laws and principles of equity
relating to or affecting creditors' rights generally. Copies of the Indenture are available for
inspection during business hours at the corporate trust office of the Trustee.
The information and expressions of opinion herein speak only as of the date of this
Official Statement and are subject to change without notice. Neither delivery of this Official
Statement nor any sale made hereunder nor any future use of this Official Statement shall,
under any circumstances, create any implication that there has been no change in the affairs of
the Authority or the City since the date hereof.
All financial and other information presented in this Official Statement has been
provided by the Authority and the City from their records, except for information expressly
attributed to other sources. The presentation of information, including the table of receipts from
taxes and other revenues, is intended to show recent historic information and is not intended to
indicate future or continuing trends in the financial or other affairs of the Authority or the City.
No representation is made that past experience, as it might be shown by such financial and
other information, will necessarily continue or be repeated in the future.
Other Information
This Official Statement speaks only as of its date and the information contained herein is
subject to change without notice. Copies of the Indenture are available from the City upon
written request to the City, 300 Centennial Way, Tustin, CA 92780, Attention: City Manager.
The City may impose a charge for copying, mailing and handling expenses related to any
request for documents.
-~-
THE PROJECT
The proceeds of the Bonds, together with other available moneys, will be used to finance
the Project, which includes various water capital improvement projects for storage,
production/supply, distribution, treatment, and control/security including, but not limited to,
the following water projects:
Rawlings Reservoir: Water storage is a key element of any water distribution system.
Water storage provides operational supply during peak periods of the day, fire protection and
as a backup supply for emergency conditions. In 1996, an engineering analysis of the existing
3.8 million gallon (MG) Rawlings Reservoir identified several structural deficiencies in the
reservoir and recommended its demolition and replacement. In November of 2004, the reservoir
was taken out of service. As part of the proposed Project the existing reservoir will be
demolished and replaced with two 3 MG circular pre-stressed concrete reservoirs at the same
site. The overall system storage capacity will be increased to 13.8 MG. This represents an
increase of 2 MG of storage that will provide added system-wide operational, fire and
emergency storage.
Tustin Avenue Well: The Tustin Avenue Well Site Project involves the demolition of an
aging existing water well and facility and replacing it with a new higher capacity water well
housed in a 2000 square foot facility with modern appurtenances. The new Tustin Avenue Well
reduces the City's reliance on more expensive imported water and increases the system
reliability. This component of the Project includes drilling a new well and providing all
pumping equipment, electrical panels, sand separators, disinfection system and a standby
power generator. The proposed Project also includes the replacement of two sections of
undersized 8 inch water main lines on Tustin Avenue north of Seventeenth Street and on
Seventeenth Street west of Carroll Way with 12 inch water main lines. The purpose of these
water main improvements is to optimize the main line distribution in relation to the new well
production rate.
ESTIMATED SOURCES AND USES OF PROCEEDS
SOURCES
Par Amount of Bonds
Less: Original Issue Discount
Total Sources
USES
Deposit to Project Fund
Deposit to Reserve Account ~`~
Costs of Issuance ~'~
Total Uses
(1) Represents the Reserve Requirement for the Bonds.
(2) Includes the Underwriter's discount, legal and financing costs, printing costs, fees of rating agencies, initial fees
of the Trustee and other costs related to the issuance of the Bonds.
- ~-
DEBT SERVICE REQUIREMENTS
below.
Annual debt service on the Bonds (assuming no redemptions of the Bonds) is presented
Year
Ending
April 1 Principal ~`~ Interest Total
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
TOTALS
(1) Includes mandatory sinking fund installments.
-h-
Set forth below is the combined annual debt service on the Bonds and the 2003 Bonds
secured by Net Revenues (assuming no optional redemption).
Year
Ending
April 1
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2003 Bonds ~'~ Bonds ~'~ Total
$1,214,305.00
1,214,705.00
1,213,905.00
1,211,905.00
1,213,705.00
1,214,105.00
1,212,205.00
1,212,935.00
1,216,010.00
1,211,640.00
1,215,000.00
1,213,940.00
TOTALS $14,564,360.00
(l) Includes mandatory sinking fund installments.
THE BONDS
General Provisions
The Bonds will be dated their date of delivery, will bear interest from such date at the
rates per annum set forth on the cover page hereof, payable semiannually on each April 1 and
October 1, commencing October 1, 2011, and will mature on April 1, in each of the designated
years in the principal amounts set forth on the cover page hereof. Interest on the Bonds will be
payable from the Interest Payment Date next preceding the date of authentication thereof,
unless (a) a Bond is authenticated after the fifteenth (15th) calendar day of the month preceding
such Interest Payment Date and on or before the following Interest Payment Date, in which
event it will bear interest from such Interest Payment Date, or (b) unless a Bond is authenticated
on or before September 15, 2011, in which event it will bear interest from its date of delivery;
provided, however, that if, as of the date of authentication of any Bond, interest thereon is in
default, such Bond will bear interest from the Interest Payment Date to which interest has
previously been paid or made available for payment thereon.
Book-Entry Only System
The Bonds, when issued, will be registered in the name of Cede & Co., as registered
owner and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC
will act as securities depository for the Bonds so purchased. Individual purchases will be made
in book-entry-only form. Purchasers will not receive a certificate representing their beneficial
ownership interest in the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as
nominee of DTC, references herein to the Bondholders, holders or registered owners shall mean
Cede & Co. as aforesaid, and shall not mean the "Beneficial Owners" of the Bonds. In this
Official Statement, the term 'Beneficial Owner" shall mean the person for whom a Participant
(as defined herein) acquires an interest in the Bonds. See APPENDIX G-BOOK-ENTRY ONLY
SYSTEM.
In the event the use of the book-entry-only system is discontinued, principal of the
bonds will be payable upon surrender thereof at the principal corporate trust office of the
Trustee in Los Angeles, California. Interest payable on the Bonds will be paid by check mailed
on the Interest Payment Date to the person in whose name each Bond is registered in the
registration books maintained by the Trustee as of the applicable Record Date for such Interest
Payment Date; provided that registered owners of $1,000,000 or more in aggregate principal
amount of Bonds may request payment by wire transfer, such request to be submitted in
writing to the Trustee on or before the applicable Record Date for such Interest Payment Date in
accordance with the provisions set forth in the Indenture.
Transfer and Exchange
Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred on the
Registration Books by the person in whose name it is registered, in person or by his duly
authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of
a written instrument of transfer, duly executed in a form approved by the Trustee. Transfer of
any Bond shall not be permitted by the Trustee during the period established by the Trustee for
selection of Bonds for redemption or if such Bond has been selected for redemption. Whenever
any Bonds or Bonds shall be surrendered for transfer, the Authority shall execute and the
Trustee shall authenticate and shall deliver a new Bond or Bonds for a like aggregate principal
amount and of like maturity. The Trustee may require the Bond Owner requesting such transfer
to pay any tax or other governmental charge required to be paid with respect to such transfer.
Exchange of Bonds. Any Bond may be exchanged at the principal corporate trust office of
the Trustee for a like aggregate principal amount of Bonds of other authorized denominations
and of like maturity. Exchange of any Bond shall not be permitted during the period established
by the Trustee for selection of Bonds for redemption or if such Bond has been selected for
redemption. The Trustee shall require the Bond Owner requesting such exchange to pay any tax
or other governmental charge required to be paid with respect to such exchange.
Terms of Redemption
Sinking Account Redemption.
Term Bonds Maturing on April 1, ____. The Term Bonds maturing on April 1,
____ (the "____ Term Bonds") are subject to mandatory redemption, in part by lot,
from Sinking Account payments set forth in the following schedule on April 1, ____,
and on April 1 in each year thereafter to and including April 1, ____, at a redemption
-8-
price equal to the principal amount thereof to be redeemed (without premium),
together with interest accrued thereon to the date fixed for redemption; provided,
however, that if some but not all of the ____ Term Bonds have been optionally
redeemed as described below, the total amount of Sinking Account payments to be
made subsequent to such redemption shall be reduced in an amount equal to the
principal amount of the ___ Term Bonds so redeemed by reducing each such future
Sinking Account payment as shall be determined by the City and, in lieu of such
determination, on a pro rata basis (as nearly as practicable) in integral multiples of
$5,000, as shall be designated pursuant to written notice filed by the Authority with the
Trustee.
Redemption Date Principal
(Apri11) Amount
t Maturity.
Term Bonds Maturing on April 1, ____. The Term Bonds maturing on April 1,
____ (the "____ Term Bonds") are subject to mandatory redemption, in part by lot,
from Sinking Account payments set forth in the following schedule on April 1, ____,
and on April 1 in each year thereafter to and including April 1, ____, at a redemption
price equal to the principal amount thereof to be redeemed (without premium),
together with interest accrued thereon to the date fixed for redemption; provided,
however, that if some but not all of the ____ Term Bonds have been optionally
redeemed as described below, the total amount of Sinking Account payments to be
made subsequent to such redemption shall be reduced in an amount equal to the
principal amount of the ____ Term Bonds so redeemed by reducing each such future
Sinking Account payment as shall be determined by the City and, in lieu of such
determination, on a pro rata basis (as nearly as practicable) in integral multiples of
$5,000, as shall be designated pursuant to written notice filed by the Authority with the
Trustee.
Redemption Date Principal
(Apri11) Amount
t Mahirity.
Optional Redemption. The Bonds maturing on or before April 1, ,shall not be subject
to optional redemption prior to maturity. The Bonds maturing on or after April 1, ,shall be
subject to redemption, at the option of the City on any date on or after April 1, , as a whole
or in part, by such maturities as shall be determined by the City, and by lot within a maturity,
from prepayments of the Installment Payments made at the option of the City pursuant to the
Installment Sale Agreement, from any available source of funds, at a redemption price equal to
the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the
date fixed for redemption, without premium.
Pt~rc{lase of Bonds In Lien of Redemption. In lieu of redemption of Bonds as provided
above, amounts held by the Trustee for such redemption may also be used on any Interest
-9-
Payment Date, upon receipt by the Trustee at least ninety (90) days prior to the next scheduled
Interest Payment Date of the written request of an Authorized Representative of the City, for
the purchase of Bonds at public or private sale as and when and at such prices (including
brokerage, accrued interest and other charges) as the City may in its discretion direct, but not to
exceed the redemption price which would be payable if such Bonds were redeemed. Such
purchases may be affected through the investment department of the Trustee or of an affiliate of
the Trustee. The aggregate principal amount of Bonds of the same maturity purchased in lieu of
redemption shall not exceed the aggregate principal amount of Bonds of such maturity which
would otherwise be subject to such redemption.
Selection of Bonds for Redemption. The Trustee shall select the Bonds to be redeemed from
all Bonds or such given portion thereof not previously called for redemption by lot within a
maturity. For purposes of such selection, the Trustee shall treat each Bond as consisting of
separate $5,000 portions and each such portion shall be subject to redemption as if such portion
were a separate Bond. No Bonds selected for redemption may be transferred.
Notice of Redemption. Notice of redemption shall be mailed by first class mail, postage
prepaid, not less than thirty (30) nor more than sixty (60) days before any redemption date, to
the respective Owners of any Bonds designated for redemption at their addresses appearing on
the Registration Books, and to the Securities Depositories and to the Information Services. Each
notice of redemption shall state the date of the notice, the redemption date, the place or places
of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be
redeemed, the CUSIP numbers and Bond numbers of the Bonds to be redeemed, the maturity or
maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only,
the respective portions of the principal amount thereof to be redeemed. Each such notice shall
also state that on the redemption date there will become due and payable on each of said Bonds
the redemption price thereof, and that from and after such redemption date interest thereon
shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure
to receive any notice nor any defect therein shall affect the proceedings for such redemption or
the cessation of accrual of interest from and after the redemption date. Notice of redemption of
Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the
Authority.
Notice of any optional redemption of Bonds shall either (i) explicitly state that the
proposed redemption is conditioned on there being on deposit in the applicable fund or account
on the redemption date sufficient money to pay the full redemption price of the Bonds to be
redeemed, or (ii) be sent only if sufficient money to pay the full redemption price of the Bonds
to be redeemed is on deposit in the applicable fund or account.
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the
Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at
the expense of the Authority, a new Bond or Bonds of authorized denominations equal in
aggregate principal amount to the unredeemed portion of the Bonds surrendered.
Effect of Redemption. Notice of redemption having been duly given as aforesaid, and
moneys for payment of the redemption price of, together with interest accrued to the date fixed
Eor redemption on, the Bonds (or portions thereof) so called for redemption being held by the
Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so
called for redemption shall become due and payable, interest on the Bonds so called for
redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to
any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights
in respect thereof except to receive payment of the redemption price thereof.
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All Bonds redeemed pursuant to the provisions of the Indenture shall be canceled by the
Trustee upon surrender thereof and destroyed.
SECURITY FOR THE BONDS
Revenues
The Bonds are special obligations of the Authority payable from and secured by a
pledge of the Revenues, consisting primarily of Installment Payments to be made by the City
under the Installment Sale Agreement, and any other amounts (including proceeds of the sale of
the Bonds) held in any fund or account established pursuant to the Indenture.
The Installment Payments payable to the Trustee are calculated to be sufficient to pay,
when due, the principal of and interest on the Bonds.
Installment Payments
Obligation to Pay. The City agrees to pay to the Authority, its successors and assigns, but
solely from the Net Revenues, as the purchase price of the Project, an amount equal to the
aggregate principal amount of the Bonds, together with interest on the unpaid principal
balance, payable in Installment Payments coming due and payable on each Installment
Payment Date. The Installment Payments will be paid by the City to the Trustee, as assignee of
the Authority pursuant to the Indenture.
The City's obligations under the Installment Sale Agreement are secured by a pledge of
and lien on Net Revenues on parity as to payment and security with the City's obligations with
respect to the 2003 Bonds.
Effect of Prepayment. In the event that the City prepays all remaining Installment
Payments in full, the City's obligations under the Installment Sale Agreement will thereupon
cease and terminate, including but not limited to the City's obligation to pay Installment
Payments; provided, {zowever, that the City's obligations to compensate and indemnify the
Trustee shall survive such prepayment. In the event that the City prepays the Installment
Payments in part but not in whole, the principal component of each succeeding Installment
Payment will be reduced and the interest component of each remaining Installment Payment
will be reduced by the aggregate corresponding amount of interest which would otherwise be
payable on the Bonds thereby redeemed.
Rate on Overdue Payments. In the event the City fails to make any of the payments
reQuired in the Installment Sale Agreement, the payment in default will continue as an
obligation of the City until the amount in default is fully paid, and the City agrees to pay the
same with interest thereon, from the date of default to the date of payment, at the rate of ten
percent (10%) per annum.
Assignment. The City agrees that all Installment Payments have been assigned by the
Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the
Bonds, and the City assents to such assignment.
Application of Gross Revenues; Pledge and Application of Net Revenues
Deposits Into Water Fund; Transfers to Make
Installment Sale Agreement, the City has covenanted
immediately upon receipt, in the Water Fund.
Installment Payments. Pursuant to the
to deposit all of the Gross Revenues,
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Upon receipt of Gross Revenues, the City will segregate such amounts as shall be
estimated to be required to pay all Maintenance and Operation Costs for the period beginning
on such date and ending on the next anticipated date of receipt of Gross Revenues. Amounts
remaining on deposit in the Water Fund are Net Revenues.
The City covenants and agrees in the Installment Sale Agreement that all Net Revenues
will be held by the City in the Water Fund in trust for the benefit of the Trustee (as assignee of
the rights of the Authority under the Installment Sale Agreement) and the Owners, and for the
benefit of the owners of any Parity Obligations.
Ple~~ge of Net Revem~es; Transfers. Under in the Installment Sale Agreement, the Net
Revenues are irrevocably pledged, charged and assigned to the punctual payment of the
Installment Payments and all Parity Obligations and, except as otherwise provided in the
Installment Sale Agreement, the Net Revenues may not be used for any other purpose so long
as any of the Installment Payments or payments with respect to any Parity Obligations remain
unpaid. Such pledge, charge and assignment constitutes a first lien on the Net Revenues for the
payment of the Installment Payments and all Parity Obligations.
On or before the fifth Business Day preceding each Interest Payment Date, commencing
September 26, 2011, the City shall withdraw from the Water Fund:
(i) and transfer to the Trustee for deposit in the Bond Fund, an amount (other
than amounts resulting from the prepayment of the Installment Payments and other
than amounts required for payment of principal of or interest on any Bonds which have
matured or been called for redemption but which have not been presented for
payment), equal to the interest component of the Installment Payment and the interest
component of any outstanding Parity Obligations coming due and payable on the next
succeeding Interest Payment Date, and the principal component of the Installment
Payment and the principal component of any outstanding Parity Obligations coming
due and payable on the next succeeding principal payment date, if any, provided that
any amounts on deposit in the Bond Fund, shall be credited against the City's
obligation to make such deposits or transfers therein,
(ii) and transfer to the Tnistee for deposit in the Reserve Account (and transfer
on a parity to such similar funds or accounts established as reserve funds with respect
to Parity Obligations such amounts as are required for the replenishment thereof), the
amount, if any, required to increase the amount on deposit in the Reserve Account to
the Reserve Requirement, and amount, if any, required to increase the amount on
deposit in similar funds or accounts established as reserve funds with respect to Parity
Obligations, the amount, if any, required to increase the amount on deposit therein to
the reserve requirement of such funds or account,
(iii) and pay all other amounts, including Additional Payments, when and as
due and payable under the Installment Sale Agreement and under any agreements
relating to Parity Obligations, and
(iv) and pay all amounts, when and as due and payable with respect to any
Subordinate Debt.
Release from Lien. Following the transfers described above, excess Net Revenues shall be
released from the lien of the Installment Sale Agreement and shall be available for any lawful
purpose of the City.
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Special Obligation of the City; Obligations Absolute
The City's obligation to pay the Installment Payments, the Additional Payments, any
other amounts coming due and payable under the Installment Sale Agreement and payments
with respect to Parity Obligations is a special obligation of the City limited solely to the Net
Revenues. Under no circumstances is the City required to advance moneys derived from any
source of income other than Net Revenues and other sources specifically identified in the
Installment Sale Agreement for the payment of the Installment Payments, the Additional
Payments or payments with respect to Parity Obligations, nor will any other funds or property
of the City be liable for the payment of the Installment Payments, the Additional Payments or
payments with respect to Parity Obligations and any other amounts coming due and payable
under the Installment Sale Agreement.
The obligations of the City to make the Installment Payments, the Additional Payments
and payments with respect to Parity Obligations from Net Revenues and to perform and
observe the other agreements contained in the Installment Sale Agreement and under
agreements with respect to Parity Obligations are absolute and unconditional and are not
subject to any defense or any right of setoff, counterclaim or recoupment arising out of any
breach of the City, the Authority or the Trustee of any obligation to the City or otherwise with
respect to the Enterprise, whether under the Installment Sale Agreement or otherwise, or out of
indebtedness or liability at any time owing to the City by the Authority or the Trustee. Until
such time as all of the Installment Payments, all of the Additional Payments and all other
amounts coming due and payable under the Installment Sale Agreement and payments with
respect to Parity Obligations shall have been fully paid or prepaid, the City (a) will not suspend
or discontinue payment of any Installment Payments, Additional Payments, payments with
respect to Parity Obligations or such other amounts, (b) will perform and observe all other
agreements contained in the Installment Sale Agreement and under any agreements with
respect to Parity Obligations, and (c) will not terminate the Installment Sale Agreement or
agreements with respect to Parity Obligations for any cause, including, without limiting the
generality of the foregoing, the occurrence of any acts or circumstances that may constitute
failure of consideration, eviction or constructive eviction, destruction of or damage to the
Enterprise, failure to complete the Acquisition and Construction of any Project by the estimated
Completion Date thereof, sale of the Enterprise, the taking by eminent domain of title to or
temporary use of any component of the Enterprise, commercial frustration of purpose, any
change in the tax law or other laws of the United States of America or the State or any political
subdivision of either thereof or any failure of the Authority or the Trustee to perform and
observe any agreement, whether express or implied, or any duty, liability or obligation arising
out of or connected with the Indenture, the Installment Sale Agreement or agreements with
respect to Parity Obligations.
Nothing contained in the Installment Sale Agreement shall be construed to release the
Authority or the Trustee from the performance of any of the agreements on its part contained in
the Installment Sale Agreement or in the Indenture, and in the event the Authority or the
Trustee shall fail to perform any such agreements, the City may institute such action against the
Authority or the Trustee as the City may deem necessary to compel performance so long as
such action does not abrogate the obligations of the City contained in the preceding paragraph.
The City may, however, at the City's own cost and expense and in the City's own name or in the
name of the Authority prosecute or defend any action or proceeding or take any other action
involving third persons which the City deems reasonably necessary in order to secure or protect
the City's rights under, the Installment Sale Agreement and in such event the Authority hereby
agrees to cooperate fully with the City and to take such action necessary to effect the
substitution of the City for the Authority in such action or proceeding if the City shall so
request.
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Rate Covenant
The City covenants under the Installment Sale Agreement to fix, prescribe, revise and
collect rates, fees and charges for the services and facilities furnished by the Enterprise during
each Fiscal Year which (together with other funds accumulated from Gross Revenues and
which are lawfully available to the City for payment of any of the following amounts during
such Fiscal Year) are at least sufficient, after making allowances for contingencies and error in
the estimates, to pay the following amounts:
(a) all Maintenance and Operation Costs estimated by the City to become due and
payable in such Fiscal Year;
(b) The Installment Payments and all payments required with respect to Parity
Obligations;
(c) all other payments required for compliance with the Installment Sale Agreement and
the instruments pursuant to which any Parity Obligations shall have been issued; and
(d) all payments required to meet any other obligations of the City which are charges,
liens, encumbrances upon or payable from the Gross Revenues or the Net Revenues; and
In addition, the City covenants under the Installment Sale Agreement to fix, prescribe,
revise and collect rates, fees and charges for the services and facilities furnished by the
Enterprise during each Fiscal Year which are sufficient to yield Net Revenues, including
connection charges together with other funds accumulated in the City's Water Fund and which
are lawfully available to the City for payment of the debt service on the Bonds, at least equal to
one hundred twenty percent (120`%) of the amounts payable under the preceding paragraph (b)
in such Fiscal Year.
Limitations on Future Obligations Secured by Net Revenues.
No Obligations Superior to Installment Pai~r~ierits. In order to protect further the availability
of the Net Revenues and the security for the Installment Payments and any Parity Obligations,
the City hereby agrees that the City shall not, so long as the Installment Payments are not fully
paid or any Parity Obligations are outstanding, issue or incur any obligations payable from Net
Revenues superior to the Installment Payments or such Parity Obligations.
Parity Obligations. The City further covenants under the Installment Sale Agreement that
it will not issue or incur any Parity Obligations unless:
(i) Net Revenues, calculated on sound accounting principles, as shown by the
books of the City for the latest Fiscal Year or any more recent twelve (12) month period
selected by the City ending not more than sixty (60) days prior to the adoption of the
resolution pursuant to which instrument such Parity Obligations are issued or incurred,
as shown by the books of the City, plus, at the option of the City, the additional
allowance described below, shall have amounted to at least 1.20 times Maximum
Aggregate Annual Debt Service immediately subsequent to the incurring of such
additional obligations; provided, {iozvever, that in the event that such Parity Obligations
are to be incurred solely for the purpose of refunding and retiring any Parity
Obligations then Outstanding, interest and principal payments on the Parity
Obligations to be so refunded and retired from the proceeds of such Parity Obligations
being incurred shall be excluded from the foregoing computation of Maximum Annual
Debt Service; and provided further, that the City may at any time incur Parity
Obligations without compliance with the foregoing conditions if the Annual Debt
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Service for each Fiscal Year during which such Parity Obligations are Outstanding will
not be increased by reason of the incurrence of such Parity Obligations.
Either or both of the following items maybe added to such Net Revenues for the
purpose of applying the restriction contained herein:
(A) An allowance for revenues from any additions to or improvements
or extensions of the Enterprise to be constructed with the proceeds of such
Parity Obligations, and also for Net Revenues from any such additions,
improvements or extensions which have been constructed from any source of
funds but which, during all or any part of such Fiscal Year, were not in service,
all in an amount equal to 70°/~ of the estimated additional average annual Net
Revenues to be derived from such additions, improvements and extensions to be
constructed during the first 36-month period following issuance of the proposed
Parity Obligations, all as shown by the certificate or opinion of a qualified
independent consultant employed by the City, may be added to such Net
Revenues for the purpose of applying the restriction contained in this paragraph
(ii) and/or
(B) An allowance for earnings arising from any increase in the charges
made for service from the Enterprise which has become effective prior to the
incurring of such Parity Obligations but which, during all or any part of such
Fiscal Year, was not in effect, in an amount equal to 100`% of the amount by
which the Net Revenues would have been increased if such increase in charges
had been in effect during the whole of such Fiscal Year and any period prior to
the incurring of such additional obligations, as shown by the certificate or
opinion of a qualified independent consultant employed by the Cit; and
(ii) So long as the 2003 Bonds remaining outstanding, a reserve fund shall be
funded for such Parity Obligations, and thereafter a reserve fund may be funded for
such Parity Obligations, with cash or Permitted Investments, which is at least equal to
the least of the maximum annual payments to be made with respect to such Parity
Obligations, 125% of the average annual payments to be made with respect to such
Parity Obligations and 10% of the principal amount of such Parity Obligations.
Subordinate Debt. The City further covenants under the Installment Sale Agreement that
the City will not issue or incur any Subordinate Obligations unless Net Revenues, calculated on
sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any
more recent twelve (12) month period selected by the City ending not more than sixty (60) days
prior to the adoption of the resohction pursuant to which instrument such Subordinate
Obligations are issued or incurred, as shown by the books of the City shall, after deducting all
amounts required for the payment of the Bonds and any Parity Obligations, have amounted to
at least 1.0 times the sum of the maximum annual debt service on all Subordinate Obligations
outstanding immediately subsequent to the incurring of such additional obligations. An
allowance for earnings arising from any increase in the charges made for service from the
Enterprise which has become effective prior to the incurring of such additional obligations but
which, during all or any part of such Fiscal Year, was not in effect, may be added in an amount
equal to 100°/~ of the amount by which the Net Revenues would have been increased if such
increase in charges had been in effect during the whole of such Fiscal Year and any period prior
to the incurring of such additional obligations, as shown by the certificate or opinion of a
qualified independent consultant employed by the City.
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Additional Payments
In addition to the Installment Payments, the City covenants under the Installment Sale
Agreement to pay when due all costs and expenses incurred by the Authority to comply with
the provisions of the Indenture, including without limitation all Costs of Issuance (to the extent
not paid from amounts on deposit in the Costs of Issuance Fund or the Project Fund), and to
pay to the Trustee upon request therefor all compensation for fees due to the Trustee and all of
its costs and expenses payable as a result of the performance of and compliance with its duties
under the Installment Sale Agreement or under the Indenture or any related documents,
together with all amounts required to indemnify the Trustee pursuant to the Installment Sale
Agreement and the Indenture, and all costs and expenses of attorneys, auditors, engineers and
accountants. Such rights of the Trustee and the obligations of the City shall survive the
termination of the Installment Sale Agreement.
Reserve Account
The Reserve Account is established by the Indenture and is required to be funded in an
amount equal to the least of (a) Maximum Annual Debt Service on all Outstanding Bonds, (b)
125°/~ of average annual debt service on all Outstanding Bonds, and (c) 10% of the principal
amount of all Outstanding Bonds (the "Reserve Requirement"). The Reserve Requirement as of
the date is delivery of the Bonds is $ .Amounts in the Reserve Account are to be used
only for the payment of the principal of and interest on Bonds to the extent amounts in the
Principal Account and/or the Interest Account are insufficient therefor. Prior to the completion
of the acquisition and construction of the Project, interest income on investments credited to the
Reserve Account are to be periodically transferred to the Project Fund, provided that the
Reserve Account is at its required amount. Following completion of acquisition and
construction of the Project, amounts from investment earnings accumulating in the Reserve
Account in excess of its requirement are to be transferred to the Bond Fund on or prior to April
15 and October 15 of each year.
Flow of Funds
No later than the first Business Day preceding each date on which principal of or interest
on the Bonds becomes due and payable, the Trustee shall transfer from the Bond Fund and
deposit into the following respective accounts, the following amounts in the following order of
priority, the requirements of each such account (including the making up of any deficiencies in
any such account resulting from lack of Revemies sufficient to make any earlier required
deposit) at the time of deposit to be satisfied before any transfer is made to any account
subsequent in priority:
(a) The Trustee will deposit in the Interest Account an amount required to cause the
aggregate amount on deposit in the Interest Account to be at least equal to the amount of
interest becoming due and payable on such date on all Bonds then Outstanding.
(b) The Trustee will deposit in the Principal Account an amount required to cause the
aggregate amount on deposit in the Principal Account to equal the principal amount of the
Bonds coming due and payable on such date.
(c) The Trustee will deposit in the Sinking Account an amount equal to the aggregate
principal amount of the Term Bonds required to be redeemed on such date, if any.
(d) The Trustee will deposit in the Reserve Account an amount, if any, required to cause
the amount on deposit in the Reserve Account to be equal to the Reserve Requirement.
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THE CITY
The City covers approximately 11.8 square miles in central Orange County. The City is
bounded by the cities of Orange to the north, Santa Ana to the west and Irvine to the south. It
has a temperate climate, with a mean average temperature of 63 degrees and average annual
rainfall of 13 inches.
In 1868, Columbus Tustin, the City's founder and namesake, purchased with a partner
1,300 acres of Rancho Santiago de Santa Ana, originally with a Spanish land grant. Tustin
started "Tustin City" on his portion of the property. The orange industry began in Tustin City
in 1875, when the first sizeable grove was planted. The City was soon surrounded by orange,
walnut and apricot orchards. Between 1900 and 1950 the production of oranges gradually
became the City's major agricultural crop, and processing citrus fruits was the City's most
important industry. The rate of agriculture in the City has diminished since the early 1960's as
the City has diversified its economic base.
Information with respect to the City, including financial information and certain
economic and demographic information relating to the City is provided in APPENDIX A-
GENERAL INFORMATION ABOUT THE CITY OF TUSTIN. Also, see APPENDIX B-
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2010.
THE AUTHORITY
The Authority is a joint exercise of powers authority duly organized and existing tinder
and pursuant to that certain Joint Exercise of Powers Agreement, dated May 1, 1995, by and
between the City and the Agency. The Authority is authorized pursuant to Article 4
(commencing with section 6584) of the Act to borrow money for the purpose of financing the
acquisition of bonds, notes and other obligations of, or for the purpose of making loans to,
public entities, including the City and the Agency and to provide financing for public capital
improvements for lease to public entities, including the City and the Agency. The members of
the City Council of the City also sit as the Board of Directors of the Authority.
THE ENTERPRISE
History
The Enterprise was begun as Tustin Water Works, a privately owned water utility, and
was acquired by the City in 1980. The City has operated the water system since that time.
Existing Facilities
The current facilities of the Enterprise include transmission and distribution lines,
storage reservoirs, wells, pump stations, treatment facilities, imported water turnouts and
emergency interconnections with other water agencies.
The City has two treatment plants, Main Street Treatment Plant and the 17"' Street
Desalter. The two treatment facilities remove excess nitrates, perchlorates and total dissolved
solids from the groundwater underlying the service area. These facilities help the City in its goal
of increasing the use of local groundwater and reducing reliance on more expensive imported
water.
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Management
The Water Service Division (the "Division") is a division of the City's Public Works
Department. The Division staff includes twenty-six (26) individuals performing administrative,
engineering, construction and maintenance, water production, water treatment, water quality,
preventative maintenance, and customer service activities.
Service Area
The Enterprise serves approximately 69,010 water consumers (residential and
commercial) through 14,100 water service connections. Approximately 9,045 (64%,) of the
connections are within a five square mile area within the City limits and the remaining 5,055
(36`%) of the connections are located within a 3.4 square mile area to the north of the City limits,
within the unincorporated area of the County. The service area is fully developed and the
number of water customers has been essentially stable since 1980. No significant growth within
the service area is anticipated.
The areas of the City not within the Enterprise's service area include the Tustin Ranch
development located on the eastern side of the City, and the Tustin Legacy development,
formerly the Tustin Marine corps Air Station. These areas are, or will be served by the Irvine
Ranch Water District, a public agency.
Water Supply
The Enterprise has two sources of water: imported water and groundwater.
In a typical year, about 15 percent of the Enterprise's water supply is imported. The
Metropolitan Water District of Southern California (MWD) imports water from the Colorado
River and the State Water Project into the Southern California area where it is treated and
distributed to its member agencies. The Enterprise purchases treated imported water from East
Orange County Water District, which is a member agency of Municipal Water District of
Orange County (MWDOC), which in turn is a member agency of MWD.
Imported water reaches the City through three (3) connections to the MWD system. The
East Orange County Water District can provide water to the City at six locations along the
northern extents of the City's service area. These connections can supply up to 6,500 gallons per
minute, or 9.36 million gallons per day.
The third connection is located south of the I-5 Freeway near Newport Avenue, and can
supply up to 4,500 gallons per minute, or 6.48 million gallons per day.
The remaining 85 percent of the Enterprise's water supply is pumped by Enterprise-
owned wells from groundwater aquifers managed by the Orange County Water District
(OCWD) underlying the City and the majority of central and western Orange County.
The Enterprise's Water Master Plan for a reliable water supply mix includes developing
sufficient groundwater production capacity to pump to the basin production percentage set by
OCWD. Enterprise's groundwater pumping is affected by policies of OCWD, including the
setting of basin production percentages and basin equity assessments. Each year, OCWD sets a
Basin Production Percentage ("BPP"). The BPP targets the amount of groundwater, as a
percentage of the total water demands, to be produced from the Orange County groundwater
basin during the year. Groundwater producing agencies within OCWD pay a Replenishment
Assessment established annually by OCWD, on each acre foot of groundwater produced within
-"IS-
the BPP. OCWD also sets a Basin Equity Assessment ("BEA"). The BEA is a surcharge to
discourage, yet still allow for, the production of groundwater in excess of the BPP. One of the
Enterprise's operating objectives is to produce the maximum amount of groundwater within
the BPP and to avoid producing in excess of such maximum in order to avoid paying the BEA.
In Fiscal Year 2010, the Enterprise did not pay a BEA to OCWD. For the year ending June 30,
2011, the BPP is 62`%, and OCWD has set the BPP for the fiscal year ending June 30, 2012 at 65%.
The Enterprise pays OCWD a Replenishment Assessment fee per acre foot of groundwater
pumped up to the BPP.
Groundwater is produced from the Enterprise's thirteen (13) wells. When operated at
full capacity, they can produce 13,000 gallons per minute or up to 1.8.7 million gallons of water
in a twenty-four hour period. Eight (8) of the wells can pump groundwater directly into the
distribution system without any need for treatment. The groundwater from the remaining five
(5) wells is treated at one of the Enterprise's two treatment facilities before being pumped into
the distribution system. The groundwater produced by both the treatment facilities is
completely exempt from the BEA by contract with OCWD.
One of the Enterprise's treatment facilities is a 3.0 million gallon per day reverse osmosis
plant, and the other is a 2.0 million gallon per day reverse osmosis and ion exchange plant. Both
facilities remove high nitrate and perchlorate concentrations from the groundwater that would
otherwise exceed the United States Environmental Protection Agency and the California
Department of Health Services maximum contaminant level regulations.
Through the construction of additional well facilities, which are included in the capital
improvement program, the Enterprise anticipates reducing its reliance on imported water from
current levels to maintain groundwater reliability, and replace aging infrastructure. Due to
restrictions on the amount of groundwater that can be pumped from the groLmdwater basin as
compared to total system demand, the Enterprise does not expect to fully eliminate its reliance
on the less reliable and more expensive imported water.
The table below is a summary of the Enterprise's sources of water supply for the last five
fiscal years.
CITY OF TUSTIN
Historic Water Supply
(Acre-feet) ~'~
Fiscal Years 2005-06 through 2009-10
Fiscal Year Pumped Water ~~~ Imported Water
Total Increase
2006 11,844 1,776 13,620 -
2007 11,462 3,054 14,416 6° ~>
2008 9,493 «~ 4,166 13,660 -3"4~
2009 8,366 ~~~ 4,623 12,989 -3°~,
2010 11,332 1,171 12,502 -4° o
Source: City of Tustin Finance Dept.
(1) One acre-foot (AF) equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet)
(2) Pumped water that is not treated is subject to a basin pumping percentage (BPP) restriction imposed by the
Orange County Water District. Currently, the BPP is 62% which allows the Enterprise to pump up to 8,091 AF of
untreated groundwater from. the basin without penalty.
(3) Pumped water declined in 2008 and 2009 as a result of a well being decommissioned during that period.
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The table below is a summary of the Enterprise's projected sources of water supply for
the next five fiscal years.
CITY OF TUSTIN
Projected Water Supply
(Acre-feet) (1)
Fiscal Years 2010-11 through 2014-15
Fiscal Year Pumped Water ~`~ Imported Water Total Increase
2011 10,457 1,709 12,166 -1 `%>
2012 11,000 2,000 13,000 6°%
2013 11,000 2,000 13,000 0`%
2014 11,000 2,000 13,000 0`%,
2015 11,000 2,000 13,000 0°4~
Source: City of Tustin Finance Dept.
(1) One acre-foot (AF) equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet)
(2) Pumped water that is not treated is subject to a basin pumping percentage (BPP) restriction imposed by the
Orange County Water District. Currently, the BPP is 62`% which allows the Enterprise to pump up to 8,091 AF of
untreated groundwater from the basin without penalty.
Water Use
The Enterprise's average daily demand is approximately 12 million gallons per day. The
highest recent daily demand was 18 million gallons per day.
The following table shows the water use for the Fiscal Year ended June 30, 2010.
Consumption is shown in hundred cubic feet (hcf), which is the Enterprise's basic billing unit
that appears on the bi-monthly water bills.
CITY OF TUSTIN
Water Consumption by Customer Type ~'~
Fiscal Year 2006-2010
Type of Customer 2006 2007 2008 2009 2010
Residential 2,847,140 3,319,069 3,202,982 3,012,575 2,749,4"15
Apartments/Multiple Units 1,218,770 1,312,731 1,264,584 1,226,181 1,142,749
Commercial 331,990 360,170 326,987 305,601 287,951
Fire Services 306 11,453 478 184 217
h~ri g a ti on 137,651 171,200 174,858 171,382 145,287
Government 179,426 265,158 260,688 264,425 238,914
Restaurants 71,356 67,378 61,029 54,916 52,761
Hospitals 14,690 14,243 14,376 11,222 9,636
Nonprofit 43,427 48,320 48,922 45,387 43,985
Industrial 77,425 71,065 69,920 67,985 56,360
Hotels/ Motels 10,878 13,367 12,803 12,890 13,562
Al l Others 103,570 100,604 115,246 105,221 171,781
5,036,629 5,754,758 5,552,873 5,277,969 4,912,618
Source: City of Tustin Finance Dept
(1) Measured in hundred cubic feet
Supply and use varies due to changes in weather patterns, temperatures and rainfall.
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Water Storage
The Enterprise stores water in five (5) reservoirs, with a total storage capacity of 7.83
million gallons. Current plans include the destruction and reconstruction of the Rawlings
Reservoir that would increase the storage capacity to 13.8 million gallons in order to satisfy
operating, fire, and emergency storage requirements, as discussed in the section titled "Capital
Improvement Program."
Distribution System
The water distribution system has three pressure zones that consist of over 170 miles of
transmission and distribution mains, 2,020 fire hydrants, four (4) booster stations and four (4)
emergency interconnections with neighboring water agencies.
Budgetary Process
Prior to July 1 of each calendar year, the City Council adopts a budget for the
forthcoming fiscal year covering the anticipated revenues and expenses of the Enterprise.
Rate Setting Process
The water rates for the Enterprise are set by the City Council and are not subject to
review by any state or local government agency. In the past, changes have been enacted by the
City Council based upon recommendations of staff and independent consultants. See
"CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND FEES-Proposition 218."
Rates
The water rate structure consists of meter charges (based on meter size), capital
replacement charges (based on meter size), consumption charges, and pass-through charges.
Meter charges are designed to generate about one-third of the annual revenue. This approach is
designed to reduce fluctuations in water revenue and to recover a portion of fixed costs, such as
debt service. Most single-family residential customers have a 5/8-inch meter, and it is the most
common meter size in the water system.
Volume charges consist of ascending block rates per hcf of water consumption. The rate
structure is designed to encourage conservation through the use of ascending block rates, that
is, as a customer's water use increases, the rate for additional water also increases. Seven block
rates are employed in ten (10) hcf increments for single family, commercial, and industrial
customers and in eight (8) hcf increments for multi-family customers..
The pass-through charge is designed to offset the increasing third part costs. Imported
water rates are established by MWD and additional fees are added to those rates by wholesale
water purveyors, MWOC and East Orange County Water District (EOCWD). Ground water
rates are established by the Orange County Water District (OCWD) and electricity rates are
established by Southern California Edison. The pass-through allows the Enterprise to assess and
recoup the costs of providing water beyond current budget appropriation in case of unexpected
supply cost increase. The pass-through is restricted to-not-exceed 7°% of the annual water
charges to a typical residential user in any given fiscal year.
A typical single family residential customer with a 5/8-inch meter using 40 hcf of water
in a bi-monthly period has a current bimonthly bill of $71.82.
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The most recent revision of the rate structure took place in June 2010, with new five year
rates effective as of July 1, 2010. The following table outlines the present rate structure for
domestic and commercial uses, inchtding approved increases. No action is required of the City
Council for each increase to become effective.
RATES FOR WATER SERVICE
Bi-Monthly Fixed Char~~e
Meter Size 7/1/10 7/1/11 7/1/12 7/1/13 7/1/14
5/8" and 3/4" $ 24.49 $ 26.94 $ 29.63 $ 32.59 $ 35.85
1" 61.23 67.35 74.09 81.50 89.65
1-1 / 2" 122.45 134.70 148.17 162.99 179.29
2" 195.93 215.52 237.07 260.78 286.86
3" 367.36 404.10 444.51 488.96 537.86
4" 612.24 673.46 740.81 814.89 896.38
6" or larger 1,224.48 1,346.93 1,481.62 1,629.78 1,792.76
Multiple Units/ per unit 19.60 21.56 23.72 26.09 28.70
Source: City of Tustin.
Bi-Monthl y Capital Char ge
Meter Size 7/1/10 7/1/11 7/1/12 7/1/13 7/7/14
5 / 8" and 3 / 4" $ 10.00 $ 10.00 $ 11.00 $ 11.00 $ 11.00
1" 12.00 12.00 13.00 13.00 14.00
1-1 / 2" 16.00 16.00 17.00 17.00 18.00
2" 22.00 23.00 23.00 24.00 25.00
3" 33.00 34.00 35.00 36.00 37.00
4" 53.00 55.00 56.00 58.00 60.00
6" or larger 90.00 93.00 95.00 98.00 101.00
Multiple Units/ per unit 8.00 8.00 9.00 9.00 9.00
Source: City of Tustin.
Bi-Monthly Consump tion Charge (Single Family
(per one hundred cubit foot units)
Small Meter Consumption Charge (Mete rs under 2 inches)
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7
0-10 Units 11-20 Units 21-30 Units 31-40 Units 41-50 Units 51-60 Units 61+ Units
7/1/10 X0.58 $1.02 $1.33 $1.65 $1.97 X2.29 X2.62
7 / 1 / 71 0.70 1.22 1.60 1.99 2.37 2.76 3.17
7/1/12 0.73 1.29 1.69 2.10 2.56 2.97 3.40
7 / 1 / 13 0.79 1.38 1.81 2.25 2.79 3.24 3.70
7 / 1 / ] 4 0.84 1.48 1.94 2.41 3.05 3.53 4.05
Source: City of Tustin.
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Bi-Monthly Consumption Charge (Multi Family)
(per one hundred cubit foot traits)
Small Meter Consumption Charge (Meters under 2 inches)
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7
0-8 Units 9-16 Units 17-24 Units 25-32 Units 33-40 Units 41-48 Units 49+ Units
7/1/10 $0.58 $1.02 X1.33 $L65 $1.97 $2.29 $2.62
7/1/11 0.70 1.22 1.60 1.99 2.37 2.76 3.17
7/7/12 0.73 1.29 1.69 2.10 2.56 2.97 3.-10
7 / 1 / 13 0.79 1.38 1.81 2.25 2.79 3.24 3.70
7 / 1 / 14 0.84 1.48 1.94 2.41 3.05 3.53 4.05
Source: City of Tustin.
Large Meter Consumption Charge (Meters 2 inches or larger)
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7
11-20 21-30 31-40 41-50 51-60 61+
"' 0-10 Units Units Units Units Units Units Units
7/1/10 High $0.71 $1.24 X1.61 $2.00 $2.39 $2.77 X3.17
Normal 0.64 1.13 L47 1.82 2.17 2.52 2.89
Low 0.58 1.02 1.33 1.65 197 2.29 2.62
7/1/11 High 0.84 1.48 1.93 2.40 2.87 3.34 3.83
Normal 0.77 1.35 1.76 2.18 2.61 3.04 3.-18
Low 0.70 1.22 1.60 1.99 2.37 2.76 3."17
7/1/12 Nigh 0.89 1.56 2.04 2.54 3.09 3.59 4.11
Normal 0.81 1.42 1.85 2.31 2.81 3.27 3.74
Low 0.73 1.29 1.69 2.10 2.56 2.97 3.-t0
7/1 /13 High 0.95 1.67 2.19 2.72 3.38 3.92 4.-18
Normal 0.86 1.52 199 2.47 3.07 3.56 4.07
Low 0.79 1.38 1.81 2.25 2.79 3.2.1 3.70
7/1/14 High 1.02 1.79 2.34 2.91 3.69 4.27 4.91
Normal 0.92 1.63 2.13 2.65 3.35 3.88 4.-16
L.ow 0.84 1.48 1.94 2.41 3.05 3.53 -1.05
Source: City of Tustin.
(1) High: Greater than 110`% of prior year consumption
Normal: 90% to 110`% of prior year consumption
Low: Less than 90% of prior year consumption
Bi-Monthly Fire Meter Charge
Meter Size 7/1/10 7/1/11 7/1/12 7/1/13 7/1/14
4" $ 77.46 $ 85.21 $ 93.73 $103.10 X113.41
5" 97.60 107.36 118.10 129.91 142.90
6" 117.74 129.51 142.46 156.71 172.38
8" 158.03 173.83 191.21 210.33 231.36
10" 195.22 214.74 236.21 259.83 285.81
12" 233.95 257.35 283.09 311.40 342.54
Source: City of Tustin.
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Water Connections
The following table shows the number of water connections over the last five fiscal years
within the Enterprise based on type of customer.
CITY OF TUSTIN
Historic Water Connections by Customer Type
Fiscal Years 2005-06 through 2009-10
Type of Customer
Single-Family
Multi-Family
Commercial
Industrial
Public Agencies
Irrigation
Total ~'~
2006 2007 2008 2009 2010
11,482 11,478 11,472 11,460 11,450
847 846 S39 839 839
1,496 1,475 1,451 1,447 1,444
51 51 50 50 50
125 123 123 123 122
212 212 212 212 212
14,213 14,185 14,147 14,131 14,117
Source: City of Tustin Finance Dept.
(1) Recent declines in water connections is primarily due to foreclosure activities.
The following table shows the projected number of water connections over the next five
fiscal years within the water distribution system based on type of customer.
CITY OF TUSTIN
Projected Water Connections by Customer Type
Fiscal Years 2010-11 through 2014-15
Type of Customer 2011 2012 2013 2014 2015
Single-Family 11,443 11,443 11,443 11,443 11,443
Multi-Family 837 837 837 837 837
Commercial 1,439 1,439 1,439 1,439 1,=139
Industrial 50 50 50 50 50
Public Agencies 120 120 120 120 120
Irrigation 211 211 211 211 211
Total ~'~ 14,100 14,100 14,100 14,100 14,100
Source: City of Tustin Finance Dept.
(1) The Enterprise service area is built out an d any fuhire developments will be infill projects. Therefore, no
significant increases in services connections a re anticipated.
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Water Users
The ten largest water users account for approximately 8.96% of the annual water
consumption. The top 100 users account for approximately 25.1% of total water consumption
and approximately 13.79% of total revenues.
The following are the top 25 water users for the Fiscal year ended June 30, 2010.
TWENTY-FIVE LARGEST USERS OF WATER
Year Ended June 30, 2010
Water Customer
Water
Charges
Percent of
Total Water
Revenues
Tustin Unified School Dist $380,441.59 3.59`%
City of Tustin 129,089.79 1.22
Sp/Pcreekside Venture LLC 109,015.38 1.03
Tustin Acres Comm Assoc 54,958.01 0.52
AT& T Services, Inc. 51011.44 0.49
V Kay - NNC Valencia Gardens A 46,115.59 0.44
Cal Trans -District 12 46,017.39 0.43
Schroeder Prop Mgmt 45,008.94 0.42
Ricoh Electronics Inc 43,618.22 0.41
Briarwood Investment Co Lt 43,208.59 0.41
Carmel. Partners MS#3 39,869.77 0.38
CMC Association Mgmt 38,374.02 0.36
Cadigan Communities -Monterey Pines 37,964.83 0.36
Westchester Park L.P 37,052.62 0.35
Villa Valencia MHP 35,942.76 0.34
Sierra Corp Mgt 35,218.98 0.33
Saddleback Mobilodge 34,439.76 0.33
Roy E Daly & Co 34,198.19 0.32
Regency West 33,347.60 0.31
15701 TV Way Partnership 32,822.42 0.31
Tustin Village Properties 31,846.08 0.30
Waterstone Gardens Investments LP 30,370.75 0.29
SKB- Tustin LLC 30,288.62 0.29
Alders Apartment Company 29,966.97 0.28
Tustin Village Com. Assn 29,936.16 0.28
Total Water Sales $1,460,824.00 13.79%
Source: City of Tustin.
Capital Improvement Program
The City's Water System Capital Improvement Program budgeted for the next seven
fiscal years consists of (1) Rawlings Reservoir Replacement ($14,500,000), (2) Drilling and
installation of Tustin Avenue Well ($4,500,000), (3) Simon Ranch Reservoir, Booster Pump
Station, and Pipeline Replacement ($ 8,200,000), (4) Replacement of old, substandard water
main lines of various locations ($3,000,000), (5) Existing Water Wells Rehabilitation ($ 1,800,000),
(6) New Water Well in Southwest Tustin ($4,500,000), (7) Reservoir Improvements at John
Lyttle, Foothill, Newport Reservoirs ($ 750,000).
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bVater C[P Sununary FYll-12 FY72-13
Rawlings Reservoir 14,500,000
Replacement (60136)
Drill ana Instau water z,ooo,oo0 2,500,000
WeII at Tustin Avenue
(60150)
Weal Rehabilitation 300,000
Program
Simon Ranch Reservoir, 1,000,000
[3ooster Pump and
Pipeline
Tustin Avenue and 17th 25,000 550,000
Street Water Main
Replacements
MWD Turnouts -orange 100,000 -I00,000
Countv 43 Improvements
Mardick Road Water 100,000
plain Replacement
(60160)
Drill and Install
Wellhead -Southwest
Tustin
Tustin Ave/Santa Clara
Ave Water Main Project
(60155)
Water Main Replacement
-Simon Ranch Road to
Racquet Hill
browning Avenue Water __ _
Main Replacement
John LytHe Reservoir Site
Improvements(60148)
Foothill Reservoir Phase
2 Improvements
Foothill and Newport
Reservoir Altitude
Valves
Newport Avenue
Reservoir Repairs (60149)
Source: City of Tustin
Pension Plans
FY13-74 FY14-15 FY75-16 FY16-17
FY17-18 Total
514,500,000
5 4,500,000
300,000 300,000 300,000 300,000 300,000 S 1,800,000
7,200,000 S 8,200,000
S 575,000
S 500,000
600,000 S 70Q000
300,000 2,000,000 2,200,000 S I,500,000
75,000 600,000 S 675,000
75,000 '_50,000 5 325,000
125,000 `~ 125,000
100,000 500,000 S 600,000
(15,000 S 65,000
25,000 S 25,000
30,000 S 30,000
Plan Description. The City contributes to the California Public Employees' Retirement
System (PERS), an agent-multiple employer public employee defined pension benefit plan for
miscellaneous employees and a cost-sharing multiple-employer public employee defined
benefit pension plan for public safety employees. PERS provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plan members and
beneficiaries. PERS acts as a common investment and administrative agent for participating
public entities within the State of California. Benefit provisions and all other requirements are
established by state statute and City ordinance. Copies of PERS' annual financial report may be
obtained from their executive office: 400 P Street, Sacramento, CA 95814.
Flulding Policti/. Participants are required to contribute 7°/~ (9% for safety employees) of
their annual covered salary. The City makes a portion of the contributions required of City
employees on their behalf and for their account. The City is required to contribute the
remaining amount necessary to fund the benefits for its members, using the actuarial methods
recommended by the PERS actuaries and actuarial consultants and adopted by the Board of
Administration.
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The required employer contribution rate for year ended June 30, 2010 was 8.775%~ for
miscellaneous employees. The contribution requirements of the plan members are established
by the state statute and the employer contribution rate is established and may be amended by
PERS. See APPENDIX B- COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2010 for more information relating to the City's
pension plans.
Post Employment Healthcare Benefits
Plnn Description. The City provides other postemployment benefits (OPEB) to retired
employees in the form of a contribution towards their medical premiums under the PERS health
plan, which provides medical insurance benefits to eligible retirees in accordance with various
labor agreements. Survivor benefits are not provided. The City's OPEB plan does not issue a
separate stand-alone report.
Eligibility. Employees are eligible for retiree health benefits if they retire from the City on
or after age 50 (unless disabled), with five years of service and are eligible for a PERS pension
and are enrolled in a PERS retiree health plan. The benefits are available only to employees who
retire from the City. Membership of the plan consisted of the following at June 30, 2010:
Police General Mgmt
Retirees Receiving Benefits 25 21 18
Eligible Active Employees 91 101 41
Police
Conf Support Total
- 3 67
5 40 278
The above table does not reflect current retirees not enrolled in the PERS health plan
who may be eligible to enroll in the plan at a later date.
Funding Policy. The City's current contribution is based on pay-as-you-go. As of July 1,
2009, the City's monthly contribution rate was $250 for the Confidential, General, and Police
Support groups; $350 for the Police group and $430 for the Management group. For the year
ended June 30, 2010, the City paid $135,678 directly to retirees towards their postemployment
health care benefits. Current active employees are not required to contribute any portion
towards these benefits. See APPENDIX B-COMPREHENSIVE ANNUAL FINANCIAL
REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2010 for more information
relating to the City's post employment healthcare benefits.
Financial Statements
The City's audited financial statements dated June 30, 2010, for the fiscal year ended
June 30, 2010, which include the financial results of the Enterprise, are attached hereto as
APPENDIX B-COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDED JUNE 30, 2010.
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Historical Revenues and Expenditures
The following table presents Enterprise revenues, expenditures, Net Revenues and debt
service coverage for each of the fiscal years ended June 30, 2006, through June 30, 2010:
HISTORICAL REVENUES, EXPENDITURES AND DEBT SERVICE COVERAGE
Fiscal Years Ended June 30,
2006 2007 2008 2009 2010
Revenues
Charges for Services $8,858,151 $10,418,522 $10,923,061 $11,281,679 $10,594,471
Investment Income 513,610 425,993 294,353 145,826 86,654
General Fund Loan ~'~ 0 0 0 0 2,123,437
Other 19,860 0 23,337 82,810 25,340
Total Revenues $9,391,621 $10,844,515 $11,240,751 $11,510,315 $12,829,902
Maintenance and Operation Costs ~`~ $7,417,023 $9,986,251 $10,005,364 $10,573,932 $9,928,608
Net Revenues $1,974,598 $858,264 $1,235,387 $936,383 $2,901,294
Debt Service on 2003 Bonds $705,410 $750,470 $898,450 $1,070,385 $1,215,105
Debt Service Coverage Ratio ~3~ 2.SOx 1.14x 1.38x 0.87x 2.39x
Source: City of Tustin Audited Financial Statements.
('1) 2010 Revenues include a $2,123,437 five year, `%~ loan From the City's general fund to the Enterprise to enable
the City to meet its rate covenant (1.20x maximum annual debt service) under the 2003 Indenture.
(2) Excludes depreciation and amortization.
(3) In 2007 and 2009 the City failed to increase its rates and charges Eor the services of the Enterprise in order to meet
its rate covenant (1.20x maximum annual debt service) under the 2003 Indenture. The rate covenant was met in
2010 by the City's loan to the Enterprise. Approved rate increases in June of 2010 will generate sufficient Gross
Revenues to yield Net Revenues adequate to meet the rate covenant in the future.
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Projection of Revenues, Expenditures and Debt Service Coverage
The following table presents Enterprise revenues, expenditures, Net Revenues and debt
service coverage for each of the fiscal years ended June 30, 2011, through J une 30, 2015:
PROJECTION OF REVENUES, EXPENDITURES AN D DEBT SERVICE COVERAGE
Fiscal Years Ended June 30,
2011 2012 2013 2014 2015
Revenues
Fixed Charges ~" $ 4,653,900 $ 4,940,957 $ 5,434,896 ~ 5,978,240 $ 6,576,135
Consumption Charge ~'~ 7,739,900 9,687,547 9,724,029 10,504,557 11,382,309
Interest Income 59,000 30,000 49,500 71,800 107,600
Capital Fee ~'~ 1,001,256 1,007,292 1,088,946 1,094,982 "1,121,184
Other 271,000 277,775 284,719 291,837 299,133
Total Revenues 13,725,056 15,943,571 16,582,090 17,941,416 19,486,361
Maintenance and Operation Costs ~'`~ 10,540,911 10,711,810 10,887,830 11,069,122 11,255,849
Net Revenues 3,184,145 5,231,761 5,694,260 6,872,294 8,230,512
Debt Service
2003 Bonds 1,212,705 1,214,305 1,214,705 1,213,905 1,211,905
2011 Bonds ~~~ - 1,059,631 1,246,625 1,246,625 1,246,255
Proposed 2013 Bonds `~~ - - - 842,888 842,888
Total Debt Service 1,212,705 2,273,936 2,461,330 3,303,418 3,301,048
Debt Service Coverage Ratio
Net Revenues Remaining after Debt
Service
Repayment of City Loan ~'~
Net Revenues Remaining after Debt
Service and Repayment of City Loan
2.63x 2.30x 2.31x 2.08x 2.49x
1,971,440 2,957,825 3,232,930 3,568,877 4,929,465
-I82,513 477,296 484,655 492,393 500,527
1,488,927 2,480,529 2,748,275 3,076,484 4,428,938
Source: City of Tllstln.
(1) Reflects approved rate increases and assumes static demand
(2) Excludes depreciation and amortization. Assume expenses will increase at the rate of 3°/ per year.
(3) Preliminary, subject to change. Interest is estimated at h`% per annum.
(4) Preliminary, subject to change. Interest is estimated at h% per annum.
(5) The City loan will be fully repaid in 2015.
No assurances are provided by the City as to the certainty of the projected Enterprise
revenues and expenses shown on the foregoing table. Actual revenues and expenses may be
1ligher or lower than what has been projected.
INVESTMENT OF CITY FUNDS
Revenues collected by the City will be held and invested by the City in accordance with
the provisions of the Indenture.
Funds held by the City, including Enterprise moneys, are invested in accordance with
the City's Statement of Investment Policy (the "Investment Policy") prepared by the Finance
Director as authorized by section 53601 of the Government Code of California. The Investment
Policy is submitted to the City Council annually. The Investment Policy allows for the purchase
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of a variety of securities and provides for limitations as to exposure, maturity and rating which
vary with each security type. The composition of the portfolio will change over time as old
investments mature, or are sold, and as new investments are made. Invested funds are managed
to insure preservation of capital through high quality investments, maintenance of liquidity and
then yield. Further, operating funds may not be invested in any investment with a maturity
greater than five years. The City has never invested in derivatives or reverse repurchase
agreements and such investments and instruments are not allowed by City policy.
For more information about the City's investment policy, see APPENDIX C-CITY
INVESTMENT POLICY.
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND FEES
Under the California Constitution, the power of initiative is reserved to the voters for the
purpose of enacting statutes and constitutional amendments. In the past, the voters have
exercised this power from time to time, including through the adoption of Propositions 13 and
218.
From time to time other State and local initiative measures could be adopted, affecting
the ability of the City to increase revenues and to increase appropriations.
Article XIIIA
On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA
to the California Constitution ("Article XIIIA"). Article XIIIA limits the maximum ad valorem
tax on real property to 1% of full cash value thereof, except that additional ad valorem taxes
may be levied to pay debt service on indebtedness approved by voters prior to July 1, 1978 and
(as a result of an amendment to Article XIIIA approved by California voters on June 3, 1986) on
bonded indebtedness for the acquisition or improvement of real property which has been
approved on or after July 1, 1978 by two-thirds of the voters voting on such indebtedness.
Article XIIIA defines full cash value to mean "the County Assessor's valuation of real property
as shown on the 1975-76 tax bill under "full cash value," or, thereafter, the appraised value of
real property when purchased, newly constructed, or a change in ownership has occurred after
the 1975 assessment." This full cash value may be increased at a rate not to exceed 2°/~ per year
to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the full cash value
based in the event of declining property values caused by damage, destruction, or other factors
and to provide that there would be no increase in the full cash value base in the event of
reconstruction of property damaged or destroyed in a disaster and in other minor or technical
ways.
Article XIIIB
Article XIIIB of the California State Constitution limits the annual appropriations of the
State and of any city, county, school district, authority or other political subdivision of the State
to the level of appropriations of the particular governmental entity for the prior fiscal year, as
adjusted for changes in the cost of living and population. The "base year" for establishing such
appropriations limit is the 1978-79 fiscal year and the limit is to be adjusted annually to reflect
changes in population and consumer prices. Adjustments in the appropriations limit of an
entity may also be made if (i) the financial responsibility for a service is transferred to another
public entity or to a private entity, (ii) the financial sources for the provision of services is
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transferred from taxes to other revenues, or (iii) the voters of the entity approve a change in the
limit for a period of time not to exceed four years.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by
the State or other entity of local government, exclusive of certain State subventions and refunds
of taxes. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to
an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the
extent such proceeds exceed the cost of providing the service or regulation), and (ii) the
investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in
any year exceed the amounts permitted to be spent, the excess would have to be returned by
revising tax rates or fee schedules over the subsequent two years. Certain expenditures are
excluded from the appropriations limit including payments of indebtedness existing or legally
authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters
and payments required to comply with court or federal mandates which without discretion
require an expenditure for additional services or which unavoidably make the providing of
existing services more costly.
Proposition 218
General. On November 5, 1996, California voters approved Proposition 218, the so-called
"Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State
Constitution, which affect the ability of local governments to levy and collect both existing and
future taxes, assessments, and property-related fees and charges. Proposition 218, which
generally became effective on November 6, 1996, changed, among other things, the procedure
for the imposition of any new or increased property-related "fee" or "charge," which is defined
as "any levy other than an ad valorem tax, a special tax or an assessment, imposed by a [local
government] upon a parcel or upon a person as an incident of property ownership, including
user fees or charges for a property related service" (and referred to in this section as a
"property-related fee or charge").
Specifically, under Article XIIID, before a municipality may impose or increase any
property-related fee or charge, the entity must give written notice to the record owner of each
parcel of land affected by that fee or charge. The municipality must then hold a hearing upon
the proposed imposition or increase at least 45 days after the written notice is mailed, and, if a
majority of the property owners of the identified parcels present written protests against the
proposal, the municipality may not impose or increase the property-related fee or charge.
Further, tinder Article XIIID, revenues derived from aproperty-related fee or charge
may not exceed the funds required to provide the "property-related service" and the entity may
not use such fee or charge for any purpose other than that for which it imposed the fee or
charge. The amount of aproperty-related fee or charge may not exceed the proportional cost of
the service attributable to the parcel, and no property-related fee or charge may be imposed for
a service unless that service is actually used by, or is immediately available to, the owner of the
property in question.
In addition, Article XIIIC provides that "the initiative power shall not be prohibited or
otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.
The power of initiative to affect local taxes, assessments, fees and charges shall be applicable to
all local governments and neither the Legislature nor any local government charter shall impose
a signature requirement higher than that applicable to statewide statutory initiatives."
Judicial Interpretation of Proposition 218. After Proposition 218 was enacted in 1996,
appellate court cases and an Attorney General opinion initially indicated that fees and charges
levied for water and wastewater services would not be considered property-related fees and
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charges, and thus not subject to the requirements of Article XIIID regarding notice, hearing and
protests in connection with any increase in the fees and charges being imposed. However, three
recent cases have held that certain types of water and wastewater charges could be subject to
the requirements of Proposition 218 under certain circumstances.
In Ric{tn~totld v. Sjtasta Community Services District (9 Cal. Rptr. 3rd 121), the California
Supreme Court addressed the applicability of the notice, hearing and protest provisions of
Article XIIID to certain charges related to water service. In Richmond, the Court held that
connection charges are not subject to Proposition 218. The Court also indicated in dictum that a
fee for ongoing water service through an existing connection could, under certain
circumstances, constitute aproperty-related fee and charge, with the result that a local
government imposing such a fee and charge must comply with the notice, hearing and protest
requirements of Article XIIID.
In Howard Jarvis Taxpayers Association v. City of Fresno (March 23, 2005), the California
Court of Appeal, Fifth District, concluded that water, sewer and trash fees are property-related
tees subject to Proposition 218 and a municipality must comply with Article XIIID before
imposing or increasing such fees. The California Supreme Court denied the City of Fresno's
petition for review of the Court of Appeal's decision on June 15, 2005.
In July 2006 the California Supreme Court, in Bighorn-Desert Viezv Water Agency v. Verjil
(39 Cal. 4th 205), addressed the validity of a local voter initiative measure that would have (a)
reduced a water agency's rates for water consumption (and other water charges), and (b)
required the water agency to obtain voter approval before increasing any existing water rate,
fee, or charge, or imposing any new eater rate, fee, or charge. The court adopted the position
indicated by its statement in Richmond that a public water agency's charges for ongoing water
delivery are "fees and charges" within the meaning of Article XIIID, and went on to hold that
charges for ongoing water delivery are also "fees" within the meaning of Article XIIIC's
mandate that the initiative power of the electorate cannot be prohibited or limited in matters of
reducing or repealing any local tax, assessment, fee or charge. Therefore, the court held, Article
XIIIC authorizes local voters to adopt an initiative measure that would reduce or repeal a public
agency's water rates and other water charges. (However, the court ultimately ruled in favor of
the water agency and held that the entire initiative measure was invalid on the grounds that the
second part of the initiative measure, which would have subjected future water rate increases to
prior voter approval, was not supported by Article XIIIC and was therefore invalid.)
The court in Bi~~>horn specifically noted that it was not holding that the initiative power is
free of all limitations; the court stated that it was not determining whether the electorate's
initiative power is subject to the statutory provision requiring that water service charges be set
at a level that will pay for operating expenses, provide for repairs and depreciation of works,
provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest
on any bonded debt, and provide a sinking or other fund for the payment of the principal of
such debt as it may become due.
Current Practice Regarding Rates and Charges. The City's practice has been to provide
public notice of proposed water rate increases through means that include, among others,
holding informational presentations at community group meetings, mailings to residential and
commercial customers of public hearings on rate increases, and press releases and media
campaigns regarding rate increases, followed by public hearings conducted by the City Council.
The most recent rate increase was enacted by the City in strict compliance with the procedures
mandated by Proposition 218 and Bighorn.
Cortclusiort. It is not possible to predict how courts will further interpret Article XIIIC and
Article XIIID in future judicial decisions, and what, if any, further implementing legislation will
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be enacted. Under the Big{Torn case, local voters could adopt an initiative measure that reduces
or repeals the City's rates and charges, though it is not clear whether (and California courts
have not decided whether) any such reduction or repeal by initiative would be enforceable in a
situation in which such rates and charges are pledged to the repayment of bonds or other
indebtedness. There can be no assurance that the courts will not further interpret, or the voters
will not amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose,
levy, charge and collect increased fees and charges for wastewater, or to call into question
previously adopted wastewater rate increases.
Effect of Proposition 218 on the City; Possible Limitations on Enforcement Remedies.
The general financial condition of the City may be affected by provisions of Article XIIIC
and Article XIIID. In particular, provisions of Article XIIIC (i) require taxes for general
governmental purposes to be approved by a majority vote and taxes for specific purposes, even
if deposited into the General Fund, to be approved by two-thirds vote, (ii) require any general
purpose tax which the City imposed, extended or increased, without voter approval, after
December 31, 1994, to be approved by majority vote on November 5, 1998 and (iii) provide that
all taxes, assessments, fees and charges are subject to reduction or repeal at any time through
the initiative process, subject to overriding constitutional principles relating to the impairment
of contracts. Provisions of Article XIIID that affect the ability of the City to fund certain services
or programs that it may be required or choose to fund include (i) adding notice, hearing, protest
and, in some cases, voter approval requirements to impose, increase or extend certain
assessments, fees and charges and (ii) adding stricter requirements for finding individualized
benefits associated with such levies.
The ability of the City to comply with its covenants under the Installment Sale
Agreement and to generate Net Revenues sufficient to pay the Installment Payments and,
therefore, the principal of and interest on the Bonds may be adversely affected by actions and
events outside of the control of the City and may be adversely affected by actions taken (or not
taken) under Article XIIIC or Article XIIID by voters, property owners, taxpayers or payers of
assessments, fees and charges. Furthermore, any remedies available to the owners of the Bonds
upon the occurrence of an event of default under the Installment Sale Agreement are in many
respects dependent upon judicial actions which are often subject to discretion and delay and
could prove both expensive and time consuming to obtain. In addition to the possible
limitations on the ability of the City to comply with its covenants under the Installment Sale
Agreement, the rights and obligations under the Bonds and the Indenture may be subject to
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and
other laws relating to or affecting creditors' rights, to the application of equitable principles, to
the exercise of judicial discretion in appropriate cases and to limitations on legal remedies
against cities in the State of California.
Based on the foregoing, in the event the City fails to comply with its covenants under the
installment Sale Agreement, including its covenants to generate sufficient Net Revenues, as a
consequence of the application of Article XIIIC and Article XIIID, or to pay principal of or
interest on the Bonds, there can be no assurance that available remedies will be adequate to
fully protect the interests of the holders of the Bonds.
Proposition 26
On November 2, 2010, State voters approved Proposition 26 which amended certain
sections of Article XIIIC. The proposition attempts to define "tax" as used within Article XIIIC
as "any levy, charge, or exaction of any kind imposed by a local government, except the
following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to
the payor that is not provided to those not charged, and which does not exceed the reasonable
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costs to the local government of conferring the benefit or granting the privilege; (2) a charge
imposed for a specific government service or product provided directly to the payor that is not
provided to those not charged, and which does not exceed the reasonable costs to the local
government of providing the service or product; (3) a charge imposed for the reasonable
regulatory costs to a local government for issuing licenses and permits, performing
investigations, inspections, and audits, enforcing agricultural marketing orders, and the
administrative enforcement and adjudication thereof; (~) a charge imposed for entrance to or
use of local government property, or the purchase, rental, or lease of local government property;
(5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a
local government, as a result of a violation of law; (6) a charge imposed as a condition of
property development; and (7) assessments and property-related fees imposed in accordance
with the provisions of Article XIII D." The local government bears the burden of proving by a
preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount
is no more than necessary to cover the reasonable costs of the governmental activity, and that
the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to
the payor's burdens on, or benefits received from, the governmental activity.
The foregoing discussion of Proposition 218 and Proposition 26 should not be
considered an exhaustive or authoritative treatment of the provisions of such propositions or
the possible effects of Proposition 218 and Proposition 26. Interim rulings, final decisions,
legislative proposals and legislative enactments affecting Proposition 218 and Proposition 26
may impact the City's ability to make debt service payments on the Bonds. The City does not
expect to be in a position to control the consideration or disposition of these issues and cannot
predict the timing or outcome of any judicial or legislative activity related to these issues.
Future Initiatives
Articles XIIIC, XIIID and Proposition 26 were adopted as measures that qualified for the
ballot pursuant to California's initiative process. From time to time other initiatives could be
proposed and adopted affecting Net Revenues or the City's ability to increase its rates for water
service. See "Proposition 218" above. The California constitution, Article XIIID, Section 5(c),
specifically recognizes that any assessment existing on the effective date (of Article XIIID) shall
be exempt from the procedures and approval process set forth in Article 4, to wit: "....(c) Any
assessment the proceeds of which are exclusively used to repay bonded indebtedness of which
the failure to pay would violate the Contract Impairment Clause of the Constitution of the
United States."
RISK FACTORS RELATING TO THE BONDS
Payment by the City of the Installment Payments and, therefore, of principal of and
interest on the Bonds, depends primarily upon the Net Revenues derived from operation of the
Enterprise. Some of the events which could affect the revenues received by the Enterprise are
set forth below. The following discussion of risks is not meant to be an exhaustive list of the
risks associated with the purchase of the Bonds and the order in which the risks are discussed
does not necessarily reflect the relative importance of the various risks.
Limited Obligations
The Installment Payments are limited obligations of the City and are not secured by a
legal or equitable pledge or charge or lien upon any property of the City or any of its income or
receipts, except the Net Revenues. The obligation of the City to pay debt service on the Bonds
from Net Revenues does not constitute an obligation of the City to levy or pledge any form of
taxation or for which the City has levied or pledged any form of taxation.
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The City is obligated tinder the Installment Sale Agreement to make Installment
Payments solely from Net Revenues. There is no assurance that the City can succeed in
operating the Enterprise such that the Net Revenues in the future will be sufficient for that
purpose.
Maintenance and Operation Costs
There can be no assurance that the City's expenses for the Enterprise will be consistent
with the descriptions in this Official Statement. Changes in technology, changes in quality
standards, loss of large customers, increased or decreased development, increases in the cost of
operation, or other expenses could require increases in rates or charges in order to comply with
the City's rate covenant in the Installment Sale Agreement.
Limited Recourse on Default
Failure by the City to make Installment Payments constitutes an event of default under
the Installment Sale Agreement and the Trustee is permitted to pursue remedies at law or in
equity to enforce the City's obligation to make such payments. Although the Trustee has the
right to accelerate the total unpaid principal amocmt of the Installment Payments, there is no
assurance that the City would have sufficient funds to pay the accelerated amounts.
Limitations on Remedies
The ability of the City to comply with its covenants under the Installment Sale
Agreement and to generate Net Revenues sufficient to pay the Installment Payments and,
therefore, of principal of and interest on the Bonds, may be adversely affected by actions and
events outside of the control of the City and may be adversely affected by actions taken (or not
taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and
charges. Furthermore, the remedies available to the owners of the Bonds upon the occurrence of
an event of default under the Installment Sale Agreement are in many respects dependent upon
judicial actions which are often subject to discretion and delay and could prove both expensive
and time consuming to obtain.
Initiatives
In recent years several initiative measures have been proposed or adopted which affect
the ability of local governments to increase taxes and rates. There is no assurance that the
electorate or the State legislature will not at some future time approve additional limitations
which could affect the ability of the City to implement rate increases which could reduce Net
Revenues and adversely affect the security for the Bonds. See CONSTITUTIONAL
LIMITATIONS ON APPROPRIATIONS AND FEES-Proposition 218."
Bankruptcy
The rights and remedies provided in the Installment Sale Agreement and the Indenture
may be limited by and are subject to the provisions of federal bankruptcy laws, to other laws or
equitable principles that may affect the enforcement of creditors' rights, to the exercise of
judicial discretion in appropriate cases and to limitations on legal remedies against public
agencies in the State of California. The various opinions of counsel to be delivered with respect
to the Bonds, the Installment Sale Agreement and the Indenture, including the opinion of Bond
Counsel, will be similarly qualified. If the City were to file a petition under Chapter 9 of the
bankruptcy Code, the Owners of the Bonds and the City could be prohibited from taking any
steps to enforce their rights under the Indenture.
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Tax Exemption
The Authority and the City have covenanted that they will take all actions necessary to
assure the exclusion of interest with respect to the Bonds from the gross income of the Owners
of the Bonds to the same extent as such interest is permitted to be excluded from gross income
under the Internal Revenue in the gross income of the Owners thereof for federal tax purposes.
See "TAX MATTERS."
Additional Obligations
The Installment Sale Agreement permits the incurrence of obligations by the City
secured by Net Revenues on a parity basis or a subordinate basis to the 2003 Bonds and to the
Installment Sale Agreement. Such additional Bonds would increase debt service payable from
Net Revenues and could adversely affect debt service coverage with respect to the Bonds. In
such event, however, the Rate Covenant will remain in effect. See "SECURITY FOR THE
BONDS-Rate Covenant."
Seismic Considerations
The City, like much of California, is subject to seismic activity that could result in
interference with operation of the Enterprise. There are several major active fault zones
transecting the County that could cause "strong ground motion" at the site of the various
facilities constituting the Enterprise during their useful life. If there were to be an occurrence of
severe seismic activity in the area of the City, there could be an interruption in the service
provided by the Enterprise resulting in a temporary reduction in the amount of Net Revenues
available to pay the Installment Payments and, therefore, the principal of and interest on the
Bonds when due.
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a
secondary market exists, that any Bonds can be sold for any particular price. Occasionally,
because of general market conditions or because of adverse history or economic prospects
connected with a particular issue, secondary marketing practices in connection with a particular
issue are suspended or terminated. Additionally, prices of issues for which a market is being
made will depend upon then-prevailing circumstances. Such prices could be substantially
different from the original purchase price.
APPROVAL OF LEGAL PROCEEDINGS
The legality and enforceability of the Bonds is subject to the approval of Quint &
Thimmig LLP, San Francisco, California, acting as Bond Counsel. Certain disclosure matters
will be passed upon for the City and the Authority by Quint &Thimmig LLP, San Francisco,
California, acting as Disclosure Counsel. Certain legal matters will be passed upon for the City
and the Authority by Woodruff, Spradlin & Smart, P.C., Costa Mesa, California. Certain legal
matters will be passed on for the Underwriter by Stradling Yocca Carlson & Rauth, A
Professional Corporation, Newport Beach, California.
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LITIGATION
At the time of delivery of and payment for the Bonds, the City and the Authority will
certify that there is no action, suit, proceedings, inquiry or investigation, at law or in equity,
before or by any court, regulatory agency, public board or body, pending or, to the knowledge
of the City and the Authority, threatened against the City or the Authority affecting the
existence of the City or the Authority or the titles of its officers to their respective offices or
seeking to restrain or to enjoin the sale or delivery of the Bonds, the application of the proceeds
thereof in accordance with the Indenture, or in any way contesting or affecting the validity or
enforceability of the Bonds, the Indenture or the Installment Sale Agreement or any action of the
City or the Authority contemplated by any of said documents, or in any way contesting the
completeness or accuracy of this Official Statement or any amendment or supplement thereto,
or contesting the powers of the City or the Authority with respect to the Bonds or any action of
the City or the Authority contemplated by any of said documents, nor to the knowledge of the
City or the Authority, is there any basis therefor.
RATINGS
Standard & Poor's Credit Ratings Services, A Division of The McGraw-Hill Companies,
Inc. ("S&P"), has assigned the rating of " " to the Bonds. Such rating reflects only the views
of such organization and an explanation of the significance of such rating may be obtained from
S&P at 55 Water Street, New York, NY 10041. There is no assurance that such rating will
continue for any given period of time or that it will not be revised downward or withdrawn
entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any downward revision
or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
FINANCIAL ADVISOR
The City has retained Fieldman, Rolapp & Associates, Irvine, California, as financial
advisor (the "Financial Advisor") in connection with the authorization and delivery of the
Bonds. The fees of the Financial Advisor are contingent upon the sale and delivery of the Bonds.
The Financial Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of Bond Owners and beneficial owners of the
Bonds to provide certain financial information and operating data relating to the Enterprise by
not later than nine months following the end of the City's fiscal year (currently ending June 30)
(the "Annual Report"), commencing with the report for the fiscal year ended June 30, 2011, and
to provide notices of the occurrence of certain enumerated events, if material. The Annual
Report and the notices of material events will be filed by the City with the Municipal Securities
Rulemaking Board through the Electronic Municipal Access (EMMA) System. The specific
nature of the information to be contained in the Annual Report or the notices of material events
is summarized below under the caption APPENDIX D-FORM OF CONTINUING
DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the
Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The City did not provide, in a timely
manner, all of the annual financial and operating data in its annual filings for the fiscal years
ending June 30, 2006 through June 30, 2010, as required under the continuing disclosure
certificate for the 2003 Bonds. The City did not file in a timely manner the notices regarding the
downgrade in rating changes, by Moody's Investors Service, Inc. and S&P, respectively, to the
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municipal bond insurer that insured the 2003 Bonds. As of the date of this Official Statement,
the City has completed necessary filings to comply with the Rule and the City's continuing
disclosure certificate for the 2003 Bonds.
TAX MATTERS
Federal tax law contains a number of requirements and restrictions which apply to the
Bonds, including investment restrictions, periodic payments of arbitrage profits to the United
States, requirements regarding the proper use of bond proceeds and the facilities financed
therewith, and certain other matters. The Authority and the City have covenanted to comply
with all requirements that must be satisfied in order for the interest on the Bonds to be
excludable from gross income for federal income tax purposes. Failure to comply with certain of
such covenants could cause interest on the Bonds to become includable in gross income for
federal income tax purposes retroactively to the date of issuance of the Bonds.
Subject to the Authority's and the City's compliance with the above referenced
covenants, under present law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest
on the Bonds is excludable from the gross income of the owners thereof for federal income tax
purposes, and is not included as an item of tax preference in computing the federal alternative
minimum tax for individuals and corporations, but interest on the Bonds is taken into account,
however, in computing an adjustment used in determining the federal alternative minimum tax
for certain corporations.
In rendering its opinion, Bond Counsel will rely upon certifications of the Authority and
the City with respect to certain material facts within the Authority's and the City's knowledge
Bond Counsel's opinion represents its legal judgment based upon its review of the law and the
facts that it deems relevant to render such opinion and is not a guarantee of a result.
The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an
alternative minimum tax ("AMT") for corporations in addition to the corporate regular tax in
certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable
income ("AMTI"), which is the corporation's taxable income with certain adjustments. One of
the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is
an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an
amount equal to its AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" would include certain tax exempt interest,
including interest on the Bonds.
Ownership of the Bonds may result in collateral federal income tax consequences to
certain taxpayers, including, without limitation, corporations subject to the branch profits tax,
financial institutions, certain insurance companies, certain S corporations, individual recipients
of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have
incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Prospective
purchasers of the Bonds should consult their tax advisors as to applicability of any such
collateral consequences.
The issue price (the "Issue Price") for each maturity of the Bonds is the price at which a
substantial amount of such maturity of the Bonds is first sold to the public. The Issue Price of a
maturity of the Bonds may be different from the price set forth, or the price corresponding to
the yield set forth, on the cover page hereof.
Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale,
redemption or otherwise), purchase Bonds in the initial public offering, but at a price different
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from the Issue Price, or purchase Bonds subsequent to the initial public offering, should consult
their own tax advisors.
If a Bond is purchased at any time for a price that is less than the Bond's stated
redemption price at maturity (the "Reduced Issue Price"), the purchaser will be treated as
having purchased a Bond with market discount subject to the market discount rules of the Code
(unless a statutory de minimis rule applies). Accrued market discount is treated as taxable
ordinary income and is recognized when a Bond is disposed of (to the extent such accrued
discount does not exceed gain realized) or, at the purchaser's election, as it accrues. Such
treatment would apply to any purchaser who purchases a Bond for a price that is less than its
Revised Issue Price. The applicability of the market discount rules may adversely affect the
liquidity or secondary market price of such Bond. Purchasers should consult their own tax
advisors regarding the potential implications of market discount with respect to the Bonds.
An investor may purchase a Bond at a price in excess of its stated principal amount.
Such excess is characterized for federal income tax purposes as "bond premium" and must be
amortized by an investor on a constant yield basis over the remaining term of the Bond in a
manner that takes into account potential call dates and call prices. An investor cannot deduct
amortized bond premium relating to atax-exempt bond. The amortized bond premium is
treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it
reduces the investor's basis in the Bond. Investors who purchase a Bond at a premium should
consult their own tax advisors regarding the amortization of bond premium and its effect on the
Bond's basis for purposes of computing gain or loss in connection with the sale, exchange,
redemption or early retirement of the Bond.
There are or may be pending in the Congress of the United States legislative proposals,
including some that carry retroactive effective dates, that, if enacted, could alter or amend the
federal tax matters referred to above or affect the market value of the Bonds. It cannot be
predicted whether or in what form any such proposal might be enacted or whether, if enacted,
it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should
consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond
Counsel expresses no opinion regarding any pending or proposed federal tax legislation.
The Internal Revenue Service (the "Service") has an ongoing program of auditing tax
exempt obligations to determine whether, in the view of the Service, interest on such tax exempt
obligations is includable in the gross income of the owners thereof for federal income tax
purposes. It cannot be predicted whether or not the Service will commence an audit of the
Bonds. If an audit is commenced, under current procedures the Service may treat the Issuer as a
taxpayer and the Bondholders may have no right to participate in such procedure. The
commencement of an audit could adversely affect the market value and liquidity of the Bonds
until the audit is concluded, regardless of the ultimate outcome.
Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt
obligations, including the Bonds, are in certain cases required to be reported to the Service.
Additionally, backup withholding may apply to any such payments to any Bond owner who
fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and
Certification, or a substantially identical form, or to any Bond owner who is notified by the
Service of a failure to report any interest or dividends required to be shown on federal income
tax returns. The reporting and backup withholding requirements do not affect the excludability
of such interest from gross income for federal tax purposes.
In the further opinion of Bond Counsel, interest on the Bonds is exempt from California
personal income taxes.
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Ownership of the Bonds may result in other state and local tax consequences to certain
taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences
arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax
advisors regarding the applicability of any such state and local taxes.
The complete text of the final opinion that Bond Counsel expects to deliver upon the
issuance of the Bonds is set forth in APPENDIX E-FORM OF OPINION OF BOND COUNSEL.
UNDERWRITING
The Bonds will be purchased by , as underwriter (the "Underwriter"), at
an aggregate purchase price of $ (consisting of the $ aggregate principal
amount of the Bonds, less $ of original issue discount, less $ of
Underwriter's discount).
The initial public offering prices stated on the cover of this Official Statement may be
changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to
certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks
acting as agent and others at prices lower than said public offering prices.
OTHER INFORMATION
All summaries and explanations of the Act, the Indenture, the Installment Sale
Agreement and the other documents referred to herein are qualified in their entirety by
reference to the Act and such documents, and references herein to the Bonds are qualified in
their entirety by reference to the form thereof included in the Indenture.
Any statements in this Official Statement involving matters of opinion are intended as
such and not as representations of fact. This Official Statement is not to be construed as a
contract or agreement between the Authority and the purchasers or owners of the Bonds.
Copies of the Indenture and the Installment Sale Agreement are available for inspection
at the Principal Corporate Trust Office of the Trustee.
MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion,
assumptions, projections, anticipated events or estimates, whether or not expressly stated, they
are set forth as such and not as representations of fact, and actual results may differ
substantially from those set forth herein. Neither this Official Statement nor any statement
which may have been made verbally or in writing is to be construed as a contract with the
owners of the Bonds.
The summaries of certain provisions of the Bonds, statutes and other documents or
agreements referred to in this Official Statement do not purport to be complete, and reference is
made to each of them for a complete statement of their provisions. Copies are available for
review by making requests to the City.
The Appendices are an integral part of this Official Statement and must be read together
with all other parts of this Official Statement. The audited financial statements of the City,
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including a summary of significant accounting policies, for the fiscal year ended June 30, 2010,
are contained in Appendix B.
The execution and delivery of this Official Statement have been duly authorized by the
Authority and the City.
TUSTIN PUBLIC FINANCING
AUTHORITY
By
Executive Director
By
CITY OF TUSTIN
City Manager
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APPENDIX A
GENERAL INFORMATION ABOUT THE CITY OF TUSTIN
The information in this sectiofi of the Official Statement is presented as general background data. The
Bonds are payable solely from the revenues of the Cih~'s Water Fund and other sources as described in the Official
Statement. the taxing power of the City, t{1e State of California, or arty political subdivision thereof is not pledged to
the payment of the Boilds.
General
The City covers approximately 11.8 square miles in central the County. The City is bounded by
the cities of Orange to the north, Santa Ana to the west and Irvine to the south. It has a temperate climate,
with a mean average temperature of h3 degrees and average annual rainfall of 13 inches.
In 1868 Columbus Tustin, the City's Founder and namesake, purchased with a partner 1,300 acres
of Rancho Santiago de Santa Ana, originally with a Spanish land grant. Tustin started "Tustin City" on
his portion of the property. The orange industry began in Tustin City in 1875, when the first sizeable
grove was planted. The City was soon surrounded by orange, walnut and apricot orchards. Between 1900
and 1950 the production of oranges gradually became the City's major agricultural crop, and processing
citrus fruits was the City's most important industry. The rate of agriculture in the City has diminished
since the early 1960's as the City has diversified its economic base.
The City provides a range of municipal services to its residents with afull-time permanent staff
of approximately 288 employees. The City has its own police force and the Orange County Fire
Department provides fire protection services on a contractual basis. Street sweeping, park maintenance
and building inspection are provided by the City. Trash collection is a contracted service and
maintenance of sewer mains is currently provided by the Orange County Sanitation District. The City
cooperates with the County in the provisions and maintenance of flood control facilities. Water services
are provided within portions of the City, including the Town Center and South Central Project Area by
the City of Tustin Water Corporation. Water and sewer services are provided in the easterly portions of
the City (i.e., Tustin Ranch) and MCAS Tustin Project Area by the Irvine Ranch Water District.
Municipal Government
The City is a general law city and was incorporated in 1927. The City has acouncil-manager form
of municipal government. The City Council is composed of five members elected biannually at large to
four-year alternating terms. The Mayor is selected by the City Council from among its members. The City
Manager is appointed by the City Council and serves as the administrative head of the City. The City
Manager implements City Council directives and policies and manages the operational functions of the
City. The City staff is organized into departments, which provide police, community development,
maintenance, general administration, community service and capital improvements. The City employs a
staff of approximately 273 full-time employees under the direction of the City Manager. All full-time City
employees are covered by the Public Employee's Retirement System, which is administered by the State.
The table below sets out the current City Council members and their incumbency dates.
Name Position Term Expires
Jerry Amante Mayor November 2012
John Nielsen Mayor Pro Tem November 2012
Rebecca "Beckie" Gomez Council Member November 2014
Deborah Gavello Council Member November 2012
Al Murray Council Member November 2014
Appendix A
Page 7
Population
The City grew along with all of the County during the population boom of the 1960's. From a
population of 2,006 in the 1960 census, the City expanded to 21,178 in 1970. By the year 2000, the City's
population had exceeded 65,000 and has continued to grow in the past decade at a compound rate of
1.06°/~.
The following table represents the population for the City and for Orange County for the years
1990 and 2000, and the anmial estimates for years 2001 through 2010:
Population
City Percent County of Percent
Year of Tustin Change Orange Change
1990 50,800 - 2,398,400 --
2000 67,504 32.88% 2,846,289 18.67`%
2001 68,366 1.27 2,890,353 1.55
2002 69,126 1.11 2,938,436 1.66
2003 69,753 0.91 2,979,989 1.41
2004 70,291 0.77 3,015,950 1.21
2005 70,524 0.33 3,043,669 0.92
2006 71,383 1.22 3,061,535 0.59
2007 71,931 0.77 3,077,656 0.53
2008 73,670 2.42 3,104,046 0.86
2009 74,736 1.45 3,134,858 0.99
2010 75,773 1.39 3,166,461 1.01
Source: California State Department of Finance, Demographic Research Unit.
Appendix A
Pnge 2
Employment
The following table summarizes the labor force, employment and unemployment figures over the
past five years for the City, Orange County, the State of California and the nation as a whole.
Civilian Labor Force, Employment and Unemployment
Annual Averages
Civilian
Year Area Labor Force Employed Unemployed
2006 City of Tustin 41,900 40,500 1,400
Orange County 1,601,800 1,547,300 54,400
California 17,686,700 16,821,300 865,400
United States 151,427,583 144,427,000 7,000,583
2007 City of Tustin 42,100 40,400 1,600
Orange County 1,609,400 1,547,000 62,400
California 17,928,700 16,970,200 958,500
United States 153,167,750 146,093,917 7,073,833
2008 City of Tustin 42,200 40,100 2,200
Orange County 1,6"17,200 1,532,300 84,900
California 18,191,000 16,883,400 1,307,600
United States 154,287,000 145,362,000 8,924,000
2009 City of Tustin 41,500 37,800 3,600
Orange County 1,587,900 1,446,900 111,000
California 18,204,200 16,141,500 2,062,700
United States 154,142,000 139,877,000 14,265,000
2010 City of Tustin 41,200 37,400 3,900
Orange County 1,580,100 1,428,900 151,200
California 18,176,200 15,916,300 2,259,900
United States 153,888,667 139,063,917 14,824,750
Unemployment
Rate
3.3°i~
3.4
4.9
4.6
3.8`%,
3.9
5.3
4.6
5.2°, i~
5.3
7.2
5.8
~„
8.7 ,o
8.9
11.3
9.3
9.4`%
9.6
"12.4
9.6
Source: California Department of Employment Development (March 2010 Benchmark); United States Bureau of
Labor Statistics.
Appendix A
Page 3
T}1e following table lists the major employers in the City as of calendar year 2009.
CITY OF TUSTIN
Major Employers
No. of "4> of Total
Employer Employees Employment
ABM Industries 1,300 3.53°0
Tustin Unified School District 1,004 2J3%
Rockwell Collins Filter Products 600 1.63°%
Big Lots 500 1.36°%
Ricoh Electronics 500 1.36%
Cherokee International 350 0.95°4>
City of TListin 307 0.83`%
Microvention [nc 300 0.82°%
Toshiba America Medical Systems 300 0.82`%
Warner Systems Inc 280 0.76°4~
RAJ Manufacturing Inc 260 0.71°i~
6alboa Water Group 253 0.69%~
Costco 250 0.68°%
Kleen Impressions 250 0.68%
Tustin Hospital 245 0.67"~
Southern California Pipeline 235 0.64°%
Home Depot 203 0.55%,
IlealthSouth 200 0.54°~
Logomark Inc 200 0.54",%
Red Robin Gourmet Burgers 200 0.54`%
Source: City of Tustin Comprehensive Annual Financial Report.
Appendix A
Page 4
The table below summarizes the State Department of Employment's estimated average annual
employment of wage and salary workers in the Santa Ana-Anaheim-Irvine labor market area between
2006 and 2010. Services, retail trade and manufacturing are the principal sources of employment. These
figures are county-wide statistics and may not necessarily accu rately reflect employment trends in the
city.
SANTA ANA ANAHEIM IRVI NE MD
(Orange County)
Industry Employment & Labor Force - by Annual Average
March 2010 Benchmark
(in thousands)
2006 2007 2008 2009 2010
Total, All Industries 1,524,300 1,520,500 1,486,200 1,375,900 1,356,700
Total Farm 5,300 5,000 4,600 3,800 3,800
Total Nonfarm 1,518,900 1,515,500 1,481,600 1,372,100 1,352,900
Goods Producing 289,900 284,000 265,900 229,500 217,800
Mining and Logging 600 600 600 500 500
Construction 106,600 103,100 91,200 74,200 67,100
Manufacturing 182,700 180,400 174,100 154,800 150,200
Service Providing 1,229,000 1,231,500 1,215,700 1,142,700 1,135,200
Trade, Transportation & Utilities 272,800 277,000 271,600 249,500 244,200
Wholesale Trade 83,700 86,900 86,700 79,400 77,400
Retail Trade 160,800 161,200 155,600 142,300 140,100
Information 31,900 31,200 30,100 27,300 25,000
Financial Activities 138,200 127,700 113,100 105,100 103,600
Professional & Business Services 274,500 273,300 266,600 2~-0,200 242,800
Educational & Health Services 137,700 142,600 150,700 152,100 156,000
Leisure & Hospitality 169,600 172,900 176,400 169,100 168,700
Other Services 47,700 47,400 -16,500 -I2,600 -k2,400
Government 156,700 159,400 160,800 156,600 152,500
Source: California State Board of Equalization.
Tutals may not add due to independent rounding.
Appendix A
Page 5
Income
The following chart shows the yearly median household effective buying income and
the total effective buying income for the City, the County, the State of California and the United
States from 2005 through 2009.
CITY OF TUSTIN
Effective Buying Income
For Calendar Years 2005 through 2009
Area
Year
2005
2006
2007
2008
2009
Source: Neilsen Claritas
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Total
Effective
Buying lncome
(000's omitted)
$ 1,585,433
67,941,889
720,798,106
5,894,663,364
$ 1,717,303
71,826,783
764,120,963
6,107,092,244
$ 1,858,733
77,614,985
814,894,438
6,300,794,040
$ 1,901,250
78,347,278
832,531,445
6,443,994,426
$ 1,904,143
79,478,835
844,823,319
6,571,536,768
Median
Household
Effective
buying Income
$50,466
53,099
44,681
-I0,529
$52,701
55,.370
46,275
41,255
$56,126
58,727
I8,203
41,792
$56,337
58,979
48,952
42,403
$57,325
61,470
-I9,736
43,252
Appendix A
Page 6
Construction Activity
The following is a summary of the vahiation of building permits issued in the City for the past
five years.
CITY OF TUSTIN
Building Permit Valuation
($OOOs)
2005 2006 2007 2008 2009
Residential
Single Family $59,904 $133,864 $61,427 $28,672 $12,918
Mu16-Family 0 8,034 0 5,533 "1,330
Alteration/Additions 3,010 5,146 4,940 3,913 3,046
Total $62,914 $147,034 $66,366 $38,118 $17,294
Non-Residential ~"
New Commercial $ 1,591 $25,641 $12,279 $ 1,840 $ 0
New Industry 0 992 1,106 0 0
Other 3,079 5,128 2,429 2,731 2,331
Alteration/Additions 16,675 16,508 30,447 12,693 11,836
Total $21,345 $48,270 $46,261 $17,264 $14,167
Single Family Units 308 648 307 152 73
Multi Family Units 0 106 0 41 9
Total 308 754 307 193 82
Source: Construction Industry Research Board, "Building Permit Summary."
(1) Includes churches and religious buildings, hospitals and i nstitutional bui ldings, schools and educational
buildings, residential garages, public works and utilities buildings and non-residential alterations and
additions. Totals may not add due to rou nding.
l~ppendix A
Page 7
Taxable Transactions
tables.
A five-year history of taxable transactions for the County and the City are shown in the following
ORANGE COUNTY
Taxable Transactions
Calendar Years 2005 through 2009
(in thousands of dollars)
Type of Business
Retail Stores
Apparel
General Merchandise
Specialty Stores
Food Stores
Eating & Drinking Places
Household
Bldg Materials
Auto Dealers & Suppliers
Service Stations
Other Retail Stores
Retail Stores Total
Business and Personal Services
All Other Outlets
Total All Outlets
2005
~ 2,062,892
5,467,357
6,028,089
1,716,228
4,798,676
2,269,650
3,000,086
11,283,156
1,046,700
2006 2007 2008
$ 2,152,410
5,741,912
6,514,211
1,781,284
5,051,841
2,202,194
3,029,741
11,490,939
1,109,919
37,672,834
2,938,129
14,452,283
$55,063,246
39,074,451
2,987,539
15,140,757
$ 2,217,996 $ 2,340,116
5,856,810
1,815,201
5,296,863
2,079,957
2,798,938
7,366,864
4,102,725
7,452,873
38,988,227
2,968,831
1.5,336,413
5,493,287
1,745,903
5,245,480
1,900,534
2,370,154
5,804,517
4,626,569
6,242,035
35,768,595
2,828,005
15,010,229
$57,202,747 $57,293,471 $53,606,829
Source: State Board of Equalization
2009 "'
Retail and Food Services
Motor vehicle and parts dealers $ 4,902,480
Furniture and home furnishings stores 850,889
Electronics and appliance stores 1,978,869
Bldg matl and garden equip and supplies 2,039,686
Food and beverage stores 1,894,642
Health and personal care stores 784,067
Gasoline stations 3,383,678
Clothing and clothing accessories stores 2,742,626
Sporting goods, hobby, book and music stores 1,074,579
General merchandise stores 4,376,154
Miscellaneous store retailers 1,625,880
Nonstore retailers 484,692
Food services and drinking places 5,024,379
Total retail and food services 31,162,619
All Other Outlets 14,550,164
Total All Outlets $45,712,784
Source: State Board of Equalization
(1) hz early 2007 the Board of Equalization (the "BOE") began a process of converting business codes of sales and
use tax permit holders to North American Industry Classification System (NAILS) codes (evidenced by the
elimination of "General Merchandise" and the breakout of "Service Stations" for that year's data). This process
is now complete; over one million permit holders were converted from the previous business coding system to
the NAILS codes. Beginning in 2009, BOE reports summarize taxable sales and permits using the NAILS
codes. As a result of the coding change, however, industry-level data for 2009 are not comparable to that of
prior years. Categories at the County level, particularly, were significantly altered; for this reason 2009 County
data are shown in this separate table.
Appendix A
Page 8
CITY OF TUSTIN
Taxable Transactions
Calendar Years 2005 through 2009
(in thousands of dollars)
Retail Stores
Apparel stores
General merchandise stores
Food stores
Eating & drinking places
Home furnishings/appliances
Building materials/farm impl
Auto dealers/supplies
Service stations
Other retail stores
Total retail outlets
All other outlets
Total all outlets
2005 2006 2007 2008 2009"
$ 53,843 $ 51,148 $ 65,705 $ 67,409 $ 95,627
139,692 150,321 202,882 263,531 234,341
-13,297 47,589 51,967 55,713 71,396
126,619 132,694 152,829 175,280 165,565
51,721 38,224 33,396 62,537 119,143
91,931 91,129 82,316 76,823 66,179
626,897 611,396 543,102 -102,335 313,105
91,272 101,974 106,334 112,072 91,745
264,432 250,427 259,490 224,785 142,719
1,489,704 1,474,902 1,497,731 1,440,-185 1,299,819
263,385 281,184 327,578 331,956 2-16,317
X1,753,089 $1,756,086 $1,825,309 X1,772,441 $1,546,136
Source: State Board of Equalization. "Taxable Sales in California."
(I) Latest available full-year data.
NOTE: Detail may not compute.
Education
The City is served by the Tustin Unified School District, which operates 18 elementary schools, 5
middle schools, 4 high schools and alternative and adult education programs, totaling over 22,000
students. [n addition, there are 10 private and parochial schools serving the community.
Eight community colleges are located from 5 to 20 miles from the Citv. The Rancho Santiago
Community College District (RSCCD) and South Orange County Community College District (SOCCCD)
operate two facilities with the City; The RSCCCD operates the Regional Law Enforcement Training
Facility and the SOCCCD operates and Advanced Technology Education Campus. Chapman University,
CSU-Fullerton, Concordia College, UC-Irvine among several institutions also offer college and graduate
level courses of study within easy reach of the City.
Health Care
The closest hospital services provided to Tustin are located on the City's northwesterly boundary
within the City of Santa Ana at Western Medical Center. Western Medical Center is a 283-licensed bed
acute care hospital designated as a Level lI trauma center and centrally located in the heart of Orange
County.
The trauma center services are composed of physicians in the specialties of General Surgery,
Emergency Medicine, Anesthesiology, Orthopedic Surgery and Neurosurgery. The Trauma Services
department at Western Medical provides immediate care and on-gonzg follow-up for designated trauma
patients in a collaborative setting. Multidisciplinary practice planning, coordinating and facilitating total
care of all trauma admissions is under the direction of the Trauma Medical Director and the Associate
Medical Director. The program operates 24 hours, 7 days a week and cares for a total spectrum of patients
and of all ages.
Emergency care is also provided for other conditions, including chronic medical problems and
minor injuries and illnesses. The hospital provides emergency services for more than 20,000 patients per
year.
Appendix A
Page 9
Other Community Facilities
In November 2009, the City completed construction of an expanded new 32,000 square foot
Tustin Library. Orange County Public Libraries leases the new Tustin Library from the City and operates
the building through the County's library system services. The system contains over 124,195 volumes,
and a collection of recordings, tapes and films.
Transportation
The Santa Ana Freeway (Interstate 5), a major northwest-southeast corridor, crosses through the
central section of the City, the Costa Mesa Freeway (State Route 55) crosses north-south along the western
edge of the City and the West Leg of the Eastern Transportation Corridor (State Route 267) is located to
the east of the City's boundaries, with a transitional area of the West Leg of the Eastern Transportation
Corridor traversing the southerly portion of the City adjacent to Jamboree Road. The City is also within
minutes of the San Diego Freeway (Interstate 405, traveling north to the Los Angeles international
Airport), the Riverside Freeway (State Route 91, traveling east-west) to the north and the Orange Freeway
(State Route 57, traveling north-south) to the west and the San Joaduin Toll Road.
Air cargo and passenger flight services are provided at several nearby facilities, including John
Wayne Airport in Orange County (2 miles south) and the Ontario International Airport (50 miles
northeast).
The Orange County Transportation Authority (OCTA) also serves the area. Greyhound Bus Lines
provides service to other local areas and additional transcontinental service.
Commercial and passenger rail services are provided by Union Pacific and an Amtrak passenger
station is located approximately two miles from the City. Trucking services are provided through
numerous common and contract carriers.
The Port of Long Beach is approximately 45 miles to the northwest and the Port of Los Angeles is
approximately 50 miles northwest of the City. Both ports are within easy freeway access.
Recreation
The City operates the Clifton C. Miller Community Center, the Tustin Area Senior Center, the
Columbus-Tustin Sports Fields and Gymnasium, and the Tustin Family Youth Center. In addition, there
are more than a dozen parks and recreational facilities located throughout the Citv. City residents are
offered the use of the City's facilities depending on their intended purpose for both active recreational
facilities and passive open space uses such as ball fields, multi-purpose fields and open turf, game courts,
tot lots, and picnic facilities, natural open pace, pedestrian and bicycle paths, community buildings and
on-site parking. The County also currently operates the Peters Canyon Kegional Park within the
northwesterly portion of the City, an 84 acre urban regional park is proposed in the MCAS Tustin Project
Area, and the County maintains a coordinated system of trails including bikeways, equestrian trails and
hiking trails within the City. Tustin also has many private recreational facilities. While some facilities
(e.g., private parks, tennis courts, swimming pools) are available only to residents of a general area or
development, others are available to the public for a fee (the Tustin Ranch Golf Course), In addition, t1,e
City is centrally located for a wide variety of entertainment and recreational activities, including, among
many others, Disneyland and Knott's Berry Farm. The ocean to the south along the Southern California
coastline offer a variety of water sports and the mountains to the north and east provide other kinds of
outdoor recreational activities, inchding hiking, lake recreation, and winter skiing.
Appendix A
Page 10
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR FISCAL YEAR ENDED JUNE 30, 2010
Appendix B
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APPENDIX C
CITY INVESTMENT POLICY
Appendix C
Page 1
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF TUSTIN
STATEMENT OF INVESTMENT POLICY
I. GENERAL
PURPOSE
This statement is intended to provide guidelines for the investment of the City's
temporary idle cash, and to outline the policies for maximizing the efficiency of the City's
Cash Management System. The ultimate goal is to enhance the economic status of the
City while protecting its pooled cash. It is the intent of the City Council that all deposit
and investment activities authorized by this policy shall be at the sole discretion of the
City Treasurer as to selection and appropriateness.
SCOPE
It is intended that this policy cover a!I funds and investment activities under the direct
authority of the City.
OBJECTIVE
The City's Cash Management System is designed to monitor and forecast expenditures
and revenues, thus enabling the City to invest funds to the fullest extent possible. The
City investments meet the criteria established for safety and availability. The investment
portfolio will be diversified to avoid incurring unreasonable risks regarding specific
security types or individual financial institutions.
POLICY
The City of Tustin operates its temporary pooled idle cash investments under the
prudent man rule (Civil Code Sec. 2261; et seq. and Government Code Section
Page 1 of 7
53600.3). The prudent man rule states, in essence, that "in investing....property for the
benefit of another, a trustee shall exercise the judgment and care, under the
circumstances then prevailing, which men of prudence, discretion and intelligence
exercise in the management of their own affairs...." This affords the City a broad
spectrum of investment opportunities so long as the investment is deemed prudent and
allowable under current legislation of the State of California (Government Code Section
53600 et seq.) and the guidelines established by the following prioritized criteria for
selecting investments:
1. Safety. It is the primary duty and responsibility of the City, City Council, City
Treasurer and Director of Finance at all times to protect, preserve and maintain intact
the principal placed in trust with the City on behalf of the citizens of the community.
2. Availability. An adequate percentage of the portfolio shall be maintained in
liquid, short-term securities which can be converted to cash as necessary to meet
disbursement requirements.
3. Yield. Yield is to be a consideration only after the basic requirements of
adequate safety and availability have been met.
Legal Investment Authority. Temporarily idle monies shall be invested in accordance
with State and local laws and regulations and this Statement of Investment Policy.
Statement of Investment Policy. Each year after review and report by the Audit
Commission, the Treasurer shall submit to the City Council a proposed Statement of
Investment Policy for Council consideration and adoption as submitted, or as revised by
the City Council.
Cash Purchase Only. All securities shall be purchased on a delivery vs payment (DVP)
basis only. Securities shall not be purchased on margin, credit or for other than full cash
payment and shall not be pledged as collateral.
Reverse Repurchase Agreements. Funds shall not be invested directly in reverse
repurchase agreements.
Selling Securities Prior to Maturity. Generally, losses will be acceptable on a sale
before maturity if the reinvested proceeds will earn income with a present value greater
than the present value of the income that would have been generated by the old
investment, considering any capital loss or foregone interest on the original investment.
Profits from market volatility of Treasury securities only are acceptable so long as each
holding when repurchased exceeds the original purchase yield. For example, a
Treasury two year note is bought at auction at a 2.04 yield and sold five days later at
Page 2 of 7
1.99. That note could be repurchased at a minimum yield of 2.04.
Performance Standards. The investment portfolio will be designed to obtain amarket-
average rate of return during budgetary and economic cycles, taking into account the
City's investment risk constraints and cash flow needs. The market-average rate of
return is defined as the U.S. Treasury security yield which most closely matches the
portfolio's weighted average maturity (WAM) as stated on the monthly investment
report, using a 12-month moving average.
Quarterly Reports. The Treasurer shall render a quarterly report to the City Council,
City Manager and internal and external auditors, which states its relationship to the
Statement of Investment Policy. Sample attached, Exhibit I.
Required elements of the quarterly report are as follows:
a. Type of investment.
b. Institution.
c. Date of maturity.
d. Par value.
e. Amount of deposit or cost of the security.
f. Rate of interest /discount and yield.
g. Statement relating the report to the Statement of Investment Policy.
h. Statement that there are sufficient funds to meet the next 6 months'
obligations.
i. The current book value.
j. The current market value.
k. Average portfolio life.
I. Average portfolio yield.
m. Current treasury yield that most closely matches average portfolio life.
Reports of the State Treasurer's Local Agency Investment Fund (LAIF) or other qualified
funds shall be accepted in lieu of subparagraphs a. through I. to support City deposits in
the funds. The Treasurer also shall render a monthly report of investment transactions.
Sample attached, Exhibit II.
II. GUIDELINES. The following directions and limitations are established hereby to
direct and control investment activities in such a manner that above-stated goals are
achieved.
Delegation of Authority. California Government Code; Section 53607 provides the
authority for the legislative body of the local agency to invest funds of the local agency
or to delegate that full responsibility to the Treasurer of the local agency. Under City of
Tustin Ordinance No. 832, the City Council has authorized the City Treasurer to invest
Page 3 of 7
City funds in accordance with California Government Code Section 53600; et- seq.
Ethics and Conflicts of Interest. The City Treasurer shall refrain from personal
business activity that could conflict with proper execution of the investment program or
which could impair the ability to make impartial investment decisions. The City
Treasurer is governed by Government Code Section 1090 et- seq.; the Political Reform
Act of 1974 regarding disclosure of material financial interests; disqualification
requirements and the City's gift regulation.
Investment Transactions. Every investment transaction shall be reviewed, authorized
and documented by the Treasurer.
Pooled Cash. Wherever practical, the City's cash shall be consolidated into one bank
account and invested on a pooled basis. Interest earnings shall be allocated according
to each fund's cash balance as required.
Competitive Bids and Offers. Purchase and sale of securities shall be made on the
basis of documented competitive offers and bids whenever practical. Documented
opinions of reasonableness are acceptable substitutes if necessary.
Cash Forecast. The cash flow for the City shall be analyzed with the receipt of
revenues and maturity of investments scheduled so that adequate cash will be available
to meet disbursement requirements.
Investment Limitations. Security purchases, deposits and holdings shall be
maintained within statutory limits imposed by the California Government Code 53601 et
seq. and shall include only the following:
a. Negotiable certificates of deposit (NCDs) of global banks only with highest short-
term ratings.
b. Prime quality Commercial Paper, highest letter and numerical short term debt
ratings by Moody's or Standard and Poors; and Al or P1 or equivalent rating if
any of other debt; but not to exceed twenty-five (25) percent of invested funds at
the time of purchase and limited to a maximum maturity of ninety (90) days.
Average weighted maturity shall not exceed 31 days if Commercial Paper
exceeds fifteen {15) percent of total portfolio assets.
c. Government-sponsored pools, such as California State Treasurer's Local
Agency Investment Fund (LAIF), and Mutual Fundsif in the judgment of the
Treasurer, they meet MTA of US&C suggested due diligence standards, or are
Page 4 of 7
rated in the highest category by a nationally recognized rating service.
d. Commercial Bank Time Drafts (Bankers Acceptances), highest letter and
numerical short term debt ratings by Moody's or Standard and Poors; and Al or
P1 or equivalent rating if any of other debt; but not in excess of twenty-five (25)
percent of invested funds at the time of purchase with a maximum maturity of
one hundred and eighty (180) days.
e. Corporate notes of a maximum maturity of five (5) years remaining to stated final
maturity, issued by corporations organized and operating within the U.S. or by
depository institutions licensed by the U.S. or any State, and operating within the
U.S. Notes eligible for investment under this subdivision shall have a long term
debt rating of AA or its equivalent by Moody's or Standard and Poors.
Purchases may not exceed ten (10) percent of invested funds at the time of
purchase.
f. Municipal Securities. If appropriate, City Treasurer may invest in City
obligations, as well as other suitable local and State of California securities.
Such investments of other than City securities shall be rated not less than A by
Moody's or Standard & Poor's and shall not exceed ten percent (10%) of total
portfolio and five percent (5%) of any one issuer's securities. Maximum City
exposure to a single issuer shall not exceed 10% for State of California
securities and 5% for all other local agency securities.
g. Federal Agency bonds or notes, but not in excess of fifty (50) percent of invested
funds at time of purchase with a maximum maturity of five (5) years remaining to
stated final maturity.
h. U.S. Treasury securities not exceeding five (5) years to final maturity.
i. Investment Contracts. Bond proceeds may be placed in investment contracts if
authorized by borrowing documents. Guarantors of such contracts shall have at
least an AA rating by two major investment services. Contracts shall contain
market value protection in case of downgrading by including delivery of cash or
Treasury securities, at the election of the City.
j. Mutual Funds. If deemed appropriate by the Treasurer after due diligence similar
to Investment Limitations (subparagraph c.)-
k. Repurchase Agreements. If deemed appropriate by Treasurer after due diligence
similar to Investment Limitations subparagraphs a. and c.
Page 5 of 7
Li uidi The marketability (salability) of a security shall be considered at the time of
purchase since the security may have to be sold at a later date to meet an unanticipated
cash demand.
Maturity Limitations. As a general rule, intermediate-term maturities shall not
represent a significant percentage of the total portfolio. Unless previously authorized by
City Council, no investment may have a term final stated maturity longer than five (5)
years. At the time of purchase, holdings with maturities greater than one (1) year shall
not exceed thirty-five (35) percent of the total portfolio.
Collateral. Collateral requirements are addressed in California Government Code
Section 53652. All active and inactive deposits must be secured at all times with eligible
securities in securities pools pursuant to Sections 53656 and 53657. Eligible securities
held as collateral shall have a market value in excess of the total amount of all deposits
of a depository as follows:
--government securities at least 110 percent.
--mortgage backed securities, at least 150 percent.
Authorized Broker/Dealers. Investments shall be transacted only through Authorized
Broker/Dealers which have been reviewed and approved by the Treasurer for reliability,
credit worthiness and trustworthiness.
Diversification. The portfolio shall consist of various types of securities approved by
statute and this Statement of Investment Policy, as well as varied issuers and maturities.
Safekeeping. Securities purchased from broker/dealers shall be held in third party
safekeeping by the trust department of the local agency's bank, or by other third party
trustee designated by the Treasurer. Said securities shall be held in the name of the
City with the trustee executing agreements and confirmations of investment transactions
as directed by the City Treasurer.
III. STRATEGY. Strategy refers to the plan to manage financial resources in the most
advantageous manner.
Economic Forecasts. The Treasurer periodically may obtain economic forecasts from
economists and financial experts through bankers and broker/dealers in order to assist
in the formulation of investment plans.
Implementing Investment Strategy. The Treasurer shall execute investment
transactions which conform to current and anticipated cash requirements, interest rate
trends, and stated investment strategy.
Page 6 of 7
Relationships. The Treasurer shall maintain a close working relationship with the
departments of the City to anticipate and accommodate disbursements of City funds.
For liquidity planning purposes, Department Heads shall apprise the Treasurer when
large expenditures (over $500,000} are anticipated.
Preserve Portfolio Value. The Treasurer shall develop an investment strategy that
maintains earnings consistent with defined "Performance Standards" (page 2) and
preserves the value of the City's portfolio.
Internal Controls. The Finance Department shall establish a system of internal
controls which shall be reviewed annually, with the independent Auditor. The controls
shall be designed to prevent losses of public funds arising from fraud, employee error,
misrepresentation by third parties, unanticipated changes in financial markets, or
imprudent action by employees and officers of the City of Tustin. The Finance
Department will maintain the City's Investment Records in compliance with Government
Accounting Standards Board Rule 31 (GASB 31).
The City attempts to invest 100% of all available funds through daily and projected cash
flow determinations and after consideration of bank requirements for clearings and
services. Management of idle cash and investment transactions is the responsibility of
the City Treasurer. The City's investment philosophy is to insure that money is always
safe and available when needed.
The City Treasurer shall annually review the City's Investment Policy with the City of
Tustin Audit Commission. Proposed amendments will be brought to the City Council for
final action upon the recommendation of the City Treasurer.
Adopted by the City Council:
Page 7 of 7
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APPENDIX D
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[TO COME]
Appendix D
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX E
FORM OF FINAL OPINION OF BOND COUNSEL
[Letterhead of Quint & Thimmig LLP]
Board of Directors of the
Tustin Public Financing Authority
300 Centennial Way
Tustin, California 92780
OPINION: $ " Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A
Members of the Board of Directors:
We have acted as bond counsel in connection with the delivery by the Tustin Public Financing
Authority (the "Authority") of $ * aggregate principal amount of the bonds of the Authority
designated the "Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A" (the 'Bonds"),
pursuant to the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of Title
1 of the California Government Code (the "Law"), and pursuant to an indenture of trust, dated as of May
1, 2011 (the "indenture"), by and between the Authority and The Bank of New York Mellon Trust
Company, N.A., as trustee, and a resolution of the governing body of the Authority adopted on May 3,
2011. The Bonds are secured by Revenues as defined in the Indenture, including installment payments
(the "Installment Payments") made by the City of Tustin (the "City") under an installment sale
agreement, dated as of May 1, 2011 (the "Installment Sale Agreement"), by and between the Authority, as
seller, and the City, as purchaser. We have examined the Law and such certified proceedings and other
papers as we deem necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the
Authority and the City contained in the Indenture and the Installment Sale Agreement and in the
certified proceedings, and upon other certifications furnished to us, without undertaking to verify the
same by independent investigation.
Based upon our examination we are of the opinion, under existing law, that:
1. The Authority is a joint exercise of powers agency and public entity duly organized and
existing under the laws of the State of California, with power to enter into the Indenture, to perform the
agreements on its part contained therein and to issue the Bonds.
2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable
in accordance with their terms and payable solely from the sources provided therefor in the Indenture.
3. The Indenture has been duly authorized, executed and delivered by the Authority and
constitutes a legal, valid and binding obligation of the Authority enforceable against the Authority in
accordance with its terms.
4. The Indenture establishes a valid first and exclusive lien on and pledge of the Revenues (as
such term is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in
accordance with the terms of the Indenture.
5. The Installment Sale Agreement has been duly authorized, executed and delivered by the
Authority and constitutes a legal, valid and binding obligation of the Authority enforceable against the
Authority in accordance with its terms.
" Preliminary, subject to change.
Appendix E
Page 1
6. The City is a municipal corporation duly organized and existing tinder the laws of the State of
California, with power to enter into the Installment Sale Agreement and to perform the agreements on its
part contained therein.
7. The Installment Sale Agreement has been duly authorized, executed and delivered by the City
and constihites a legal, valid and binding obligation of the City enforceable against the City in accordance
with its terms.
S. The Installment Sale Agreement establishes a valid first and exclusive lien on and pledge of the
Net Revenues (as such term is defined in the Indenture) and other funds pledged thereby for the security
of the Installment Sale Agreement, in accordance with the terms of the Installment Sale Agreement.
9. Subject to the Authority's and the City's compliance with certain covenants, interest on the
Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not
included as an item of tax preference in computing the alternative minimum tax for individuals and
corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in
computing an adjustment used in determining the federal alternative minimum tax for certain
corporations. Failure to comply with certain of such covenants could cause interest on the Bonds to be
includable in gross income for federal income tax purposes retroactively to the date of issuance of the
Bonds.
10. Interest on the Bonds is exempt from personal income taxation imposed by the State of
California.
Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we
express no opinion regarding any such collateral consequences arising with respect to the Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture and the
Installment Sale Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the
exercise of judicial discretion in accordance with general principles of equity.
With respect to the opinions expressed herein, the enforceability of the Installment Sale
Agreement is subject to the limitations on the imposition of certain fees and charges by the City related to
its municipal water system under Articles XII1C and XIIID of the California Constitution. In addition, the
rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights
heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance
with general principles of equity.
In rendering this opinion, we have relied upon certifications of the Authority, the City and others
with respect to certain material facts. Our opinion represents our legal judgment based upon such review
of the ]aw and the facts that we deem relevant to render our opinion and is not a guarantee of a result.
This opinion is given as of the date hereof and we assume no obligation to revise or supplement this
opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in
law that may hereafter occur.
Respectfully submitted,
appendix E
Page 2
APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and
delivered by the CITY OF TUSTIN (the "City") in connection with the issuance of by the Tustin Public
Financing Authority (the "Authority") of its $ Tustin Public Financing Authority Water
Revenue Bonds, 2011 Series A (the "Bonds"). The Bonds are being issued pursuant to an Indenture of
Tnist, dated as of May 1, 2011 (the "Indenture"), by and between the Authority and The Bank of New
York Mellon Trust Company, N.A., as trustee (the "Trustee"). The Bonds shall be secured by a pledge,
charge and lien upon Net Revenues (as such term is defined in the Indenture). Pursuant to Section 5.6 of
that certain Installment Sale Agreement, dated as of May 1, 2011, by and between the Authority and the
City, the Agency covenants and agrees as follows:
Section 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any
capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the
following capitalized terms shall have the following meanings when used in this Disclosure Certificate:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Ozvner" shall mean any person who (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for
federal income tax purposes.
"Dissemination Agent" shall mean Applied Best Practices, LLC, or any successor Dissemination
Agent designated in writing by the City and which has filed with the City a written acceptance of such
designation. In the absence of such a designation, the City shall act as the Dissemination Agent.
"FNMA" or "Electronic Municipal Market Access" means the centralized on-line repository for
documents to be filed with the MSRB, such as official statements and disclosure information relating to
municipal bonds, notes and other securities as issued by state and local governments.
"Listed Events" shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure
Certificate.
"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the
Securities and Exchange Commission as the sole repository of disclosure information for purposes of the
Rule, or any other repository of disclosure information which may be designated by the Securities and
Exchange Commission as such for purposes of the Rule in the future.
"Participating Underwriter" shall mean any original underwriter of the Bonds required to comply
with the Rule in connection with offering of the Bonds.
"Rifle" shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City for the benefit of the owners and Beneficial Owners of the Bonds and in order to
assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-
12(b)(5).
* Preliminary, subject to change.
Appendix F
Page 1
Section 3. Provision of Annual Reports
(a) Delivery of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later
than nine months after the end of the City's fiscal year (which currently ends on June 30), commencing
with the report for the 2010-ll Fiscal Year, which is due not later than March 31, 2012, file with EMMA, in
a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent
with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as
a single document or as separate documents comprising a package and may cross-reference other
information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial
statements of the City may be submitted separately from the balance of the Annual Report and later than
the date required above for the filing of the Annual Report if they are not available by that date.
(b) C{ir~nge of Fiscal Year. If the City's fiscal year changes, it shall give notice of such change in the
same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be
made no later than nine months after the end of such new fiscal year end.
(c) Deliver~i/ of Annual Report to Dissemination A~~~ent. Not later than fifteen (15) Business Days prior
to the date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the
Annual Report to EMMA, the City shall provide the Annual Report to the Dissemination Agent (if other
than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the
Dissemination Agent shall notify the City.
(d) Report of Non-Compliance. [f the City is the Dissemination Agent and is unable to file an
Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the
City shall send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the City is not
the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the
date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in
substantially the form attached hereto as Exhibit A.
(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is
other than the City, file a report with the City certifying that the Annual Report has been filed with
EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by
reference the following:
(a) Fincrncinl Statements. Audited financial statements of the City for the preceding fiscal year,
prepared in accordance generally accepted accounting principles. If the City's audited financial
statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a),
the Annual Report shall contain unaudited financial statements in a format similar to the financial
statements contained in the final Official Statement, and the audited financial statements shall be filed in
the same manner as the Annual Report when they become available.
(b) Ot{ier Arniunl Information. To the extent not included in the audited final statements of the
City, the Annual Report shall also include financial and operating data with respect to the City for
preceding fiscal year, as follows:
Appendix F
pane 2
(i) principal amount of the Bonds outstanding.
(ii) Balance in the Reserve Fund (as such term is used in the Indenture) and a
statement of the reserve requirement with respect thereto.
(iii) A statement that the City has complied with its rate covenants with respect to the
Bonds and the 2003 Bonds as disclosed tinder the caption "SECURITY FOR THE
BONDS -Rate Covenants" in the Official Statement.
(iv) An update of the information in the following sections under the caption "THE
ENTERPRISE" in the Official Statement:
(A) "Water Supply-Historic Water Supply° on page _;
(B) "Water Connections-Historic Water Connections by Customer Type" on
page _;
(C) "Water Sales-Water Sales Revenue by Customer Type" on page _;
(D) "Rates" on page _;
(E) "Water Users" on page _; and
(F) "Historical Revenues and Expenditures" on page _.
(c) Cross References. Any or all of the items listed above may be included by specific reference to
other documents, including official statements of debt issues of the City or related public entities, which
are available to the public on EMMA. The City shall clearly identify each such other document so
included by reference.
EMMA
If the document included by reference is a final official statement, it must be available from
(d) Further hiformntlon. In addition to any of the information expressly required to be provided
under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be
necessary to make the specifically required statements, in the light of the circumstances under which they
are made, not misleading.
Section 5. Reporting of Listed Events.
(a) Reportable Events. The City shall, or shall cause the Dissemination Agent (if not the City) to,
give notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt service reserves reflecting financial difficulties.
(3) Unscheduled draws on credit enhancements reflecting financial difficulties.
(4) Substitution of credit or liquidity providers, or their failure to perform.
(5) Defeasances.
(6) Rating changes.
(7) Tender offers.
(S) Bankruptcy, insolvency, receivership or similar event of the obligated person.
(9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
TEB) or other material notices or determinations with respect to the tax status of
the security, or other material events affecting the tax status of the security.
Appendix F
Page 3
(b) Mnterir~l Rcportnble Events. The City shall give, or cause to be given, notice of the occurrence of
any of the following events with respect to the Bonds, if material:
(1) Non-payment related defaults.
(2) Modifications to rights of security holders.
(3) Bond calls.
(4) The release, substitution, or sale of property securing repayment of the securities.
(5) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated
person, other than in the ordinary course of business, the entry into a definitive
agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms.
(h) Appointment of a successor or additional trustee, or the change of name of a
trustee.
(c) Tinre to Disclose. The City shall, or shall cause the Dissemination Agent (if not the City) to, file a
notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely
manner not in excess of 10 business days after the occurrence of Any Listed Event. Notwithstanding the
foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given
under this subsection any earlier than the notice (if any) of the underlying event is given to owners of
affected Bonds under the Indenture.
Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA
under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the
MSRB.
Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure
Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If
such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such
termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent.
(a) Appointment of Disscmif~ntion Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may
discharge any such agent, with or without appointing a successor Dissemination Agent. if the
Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for
the content of any notice or report prepared by the City pursuant to this Disclosure Certificate. It is
understood and agreed that any information that the Dissemination Agent may be instructed to file with
EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no
responsibility with respect to the content of any reports, notices or disclosures provided to it under this
Disclosure Certificate and has no liability to any person, including any Bond owner, with respect to anv
such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may
have any fiduciary or banking relationship with the City shall not be construed to mean that the
Dissemination Agent has actual knowledge of any event or condition, except as may be provided by
written notice from the City.
(b) Compensntion of Dissemiiic~tion Agent. The Dissemination Agent shall be paid compensation by
the City for its services provided hereunder in accordance with its schedule of fees as agreed to between
the Dissemination Agent and the City from time to time and all expenses, legal fees and expenses and
advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners or
beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in
acting or refraining from acting, upon any direction from the City or an opinion of nationally recognized
Appendix F
page 4
bond counsel. The Dissemination Agent may at any time resign by giving written notice of such
resignation to the City. The Dissemination Agent shall not be liable hereunder except for its negligence or
willful misconduct.
(c) Responsibilities of DissemiiTntion A~ont. In addition of the filing obligations of the Dissemination
Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to
provide a request to the City to compile the information required for its Annual Report at least 30 days
prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c)
of Section 3. The failure to provide or receive any such request shall not affect the obligations of the City
under Section 3.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate (and the Dissemination Agent shall agree to
any amendment so requested by the City that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that al]
of the following conditions are satisfied:
(a) Change in Circurnstnnces. if the amendment or waiver relates to the provisions of Sections 3(a),
4 or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a
change in legal requirements, change in law, or change in the identity, nature, or status of an obligated
person with respect to the Bonds, or the type of business conducted.
(b) Compliance as of Issue Dnte. The undertaking, as amended or taking into account such waiver,
would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of
the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances.
(c) Consent o_f Holders; Non-impnirntent Opinion. The amendment or waiver either (i) is approved by
the Bond owners in the same manner as provided in the indenture for amendments to the Indenture with
the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel,
materially impair the interests of the Bond owners or Beneficial Owners.
If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived,
the City shall describe such amendment or waiver in the next following Annual Report and shall include,
as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the
type (or in the case of a change of accounting principles, on the presentation) of financial information or
operating data being presented by the City. In addition, if the amendment relates to the accounting
principles to be followed in preparing financial statements, (i) notice of such change shall be given in the
same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the
change is made should present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financial statements as prepared on the basis of the new accounting principles and those
prepared nn the basis of the former accounting principles.
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. if the City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Certificate, the City shall have no obligation under this Disclosure Certificate to update such information
or include it in any fu hire Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Certificate owner or Beneficial Owner may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause
the City to comply with its obligations under this Disclosure Certificate. The sole remedy under this
Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate
shall be an action to compel performance.
Appendix F
Page 5
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Certificate, and no implied
covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent,
and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and
agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses (including
attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to
the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have the
same rights, privileges and immunities hereunder as are afforded to the Trustee under the Indenture. The
obligations of the City under this Section 12 shall survive resignation or removal of the Dissemination
Agent and payment of the Bonds.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City,
the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time
to time of the Bonds, and shall create no rights in any other person or entity.
Date: [Closing Date]
ACKNOWLEDGED:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Authorized Officer
CITY OF TLISTIN
By
Name
Title
Appendix F
Page 6
EXHIBIT A
NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT
Name of Obligor: City of Tustin
Name of Issue: Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A
Date oflssuance: [Closing Date]
NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-
named Issue as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the
Obligor in connection with the Issue. The Obligor anticipates that the Annual Report will be filed by
Date:
By
APPLIED BEST PRACTICES, LLC, Dissemination
Agent
Authorized Officer
Appendix F
Page 7
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APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The following description of the procedures and record keeping with respect to beneficial
ownership interests in the Bonds, payment of principal, redemption premium, if any, and interest with
respect to the Bonds to The Depository Trust Company ("DTC"), New York, NY, its Participants or
beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other
related transactions by and between DTC, its Participants and the Beneficial Owners is based solely on
the understanding of the Authority of such procedures and record keeping from information provided by
DTC. Accordingly, no representations can be made concerning these matters and neither DTC, its
Participants nor the Beneficial Owners should rely on the foregoing information with respect to such
matters, but should instead confirm the same with DTC or its Participants, as the case may be. The City,
the Authority, the Trustee and the Underwriter understand that the current "Rules" applicable to DTC
are on file with the Securities and Exchange Commission and that the current "Procedures" of DTC to be
followed in dealing with Participants are on file with DTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered
securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may
be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued
for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be
deposited with DTC.
DTC, the world's largest depository, is alimited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues
of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments
(from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also
facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct
Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National
Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTTC is owned by users of its regulated subsidiaries. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,
and clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest
rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcccom and www.dtc.org.
Purchases of the Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual
purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in the Bonds, except in the event that use of the book-entry system for the bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's parhzership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC The deposit of the Bonds with DTC and their
appendix G
Page 1
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may
not be the Beneficial Owners. The Direct and hldirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Trust Agreement. For
example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for
their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and request that copies of notices
be provided directly to them.
Redemption notices shall be sent to DTC, if less than all of the Bonds within a maturity are being
redeemed. DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
each issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments of principal of, premium, if any, and interest on the Bonds will be made to Cede & Co.,
or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to
credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information
from the City, the Authority or the Trustee, on payable date in accordance with their respective holdings
shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of such Participant and not of
DTC, the Trustee, the City or the Authority, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payments of principal of, premium, if any, and interest on the Bonds by Cede
& Co (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City, the Authority or the Trustee, disbursement of such payments to Direct
Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at airy time
by giving reasonable notice to the City, the Authority or the Trustee. Under such circumstances, in the
event that a successor depository is not obtained, Bond certificates are required to be printed and
delivered.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor securities depository). In that event, Bond certificates will be printed and delivered.
The foregoing information concerning DTC and DTC's book-entry system has been provided by
DTC, and neither the Authority nor the Trustee takes any responsibility for the accuracy thereof.
NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH
RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS,
INDIRECT PARTICIPANTS OR 6ENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR
REDEMPTION.
Appendix G
Page 2
hteither the Authority nor the Trustee can give any assurances that DTC, DTC Participants,
Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on
the Bonds paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the
Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner
described in this Official Statement.
h1 the event that the book-entry system is discontinued as described above, the requirements of
the Trust Agreement will apply.
The City, the Authority and the Trustee cannot and do not give any assurances that DTC, the
Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the
bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or
other notices, to the beneficial Owners, or that they will do so on a timely basis or will serve and act in the
manner described in this Official Statement. Neither the Authority nor the Trustee are responsible or
liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial
Owner with respect to the Bonds or an error or delay relating thereto.
Appendix G
Page 3
THIS PAGE INTENTIONALLY LEFT BLANK
Quint & Thimmig LLP
03/18/11
0=4/08/11
04/22/11
INDENTURE OF TRUST
Dated as of May 1, 2011
by and between the
TUSTIN PUBLIC FINANCING AUTHORITY
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
~ ---
Tustin Public Financing Authority
Water Revenue Bonds, 2011 Series A
20027.07
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Section 1..01. Definitions ...................................................................................... ..................................................3
Section 1.02. Interpretation ................................................................................. ................................................13
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds ................................................................ ................................................14
Section 2.02. Terms of the Bonds ....................................................................... ................................................14
Section 2.03. Transfer of Bonds .......................................................................... ................................................15
Section 2.04. Exchange of Bonds ........................................................................ ................................................ "15
Section 2.05. Registration Books ......................................................................... ................................................15
Section 2.06. Form and Execution of Bonds ..................................................... ................................................15
Section 2.07. Temporary Bonds .......................................................................... ................................................15
Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen ............................. ................................................16
Section 2.09. CUSIP Numbers ............................................................................ ................................................16
Section 2.10. Book-Entry System ........................................................................ ................................................16
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; ADDITIONAL BONDS
Section 3.01. Issuance of the Bonds ...................................................................................................................19
Section 3.02. Application of Proceeds of the Bonds ........................................................................................19
Section 3.03. Establishment and Application of Costs of Issuance Fund .....................................................19
Section 3.04. Project Fund ...................................................................................................................................19
Section 3.05. Validity of Bonds ...........................................................................................................................19
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption ...................................................................................................................20
Section 4.02. Selection of Bonds for Redemption ............................................................................................21
Section 4.03. Notice of Redemption ...................................................................................................................21
Section 4.04. Partial Redemption of Bonds .......................................................................................................22
Section 4.05. Effect of Redemption ....................................................................................................................22
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Pledge and Assignment; Bond Fund .......................................... ................................................23
Section 5.02. Allocation of Revenues ................................................................. ................................................23
Section 5.03. Application of Interest Account .................................................. ................................................24
Section 5.04. Application of Principal Account ............................................... ................................................24
Section 5.05. Application of Sinking Account .................................................. ................................................24
Section 5.06. Application of Reserve Account ................................................. ................................................24
Section 5.07. Application of Redemption Fund ............................................... ................................................25
Section 5.08. lnvestments .................................................................................... ................................................25
Section 5.09. Valuation and Disposition of lnvestments ................................ ................................................26
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment .........................................................................................................................27
Section 6.02. Extension. of Payment of Bonds ..................................................................................................27
Section 6.03. Against Encumbrances ........................................................................... ......................................27
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment ................ ......................................27
Section 6.05. Accounting Records and Financial Statements ................................... ......................................27
Section 6.06. No Additional Obligations .................................................................... ......................................27
Section 6.07. Tax Covenants ......................................................................................... ......................................28
Section 6.08. Installment Sale Agreement ................................................................... ......................................28
Section 6.09. Waiver of Laws ........................................................................................ ......................................28
Section 6.10. Continuing Disclosure ............................................................................ ......................................28
Section 6.11. Further Assurances ................................................................................. ......................................28
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default ..................................................................................... ......................................29
Section 7.02. Remedies Upon Event of Default ......................................................... ......................................29
Section 7.03. Application of Revenues and Other Funds After Default ................. ......................................30
Section 7.04. Trustee to Represent Bond Owners ...................................................... ......................................30
Section 7.05. Bond Owners' Direction of Proceedings .............................................. ......................................31
Section 7.06. Limitation on Bond Owners' Right to Sue ........................................... ......................................31
Section 7.07. Absolute Obligation of Authority ......................................................... ......................................31
Section 7.08. Termination of Proceedings ................................................................... ......................................31
Section 7.09. Remedies Not Exclusive ......................................................................... ......................................32
Section 7.10. No Waiver of Default .............................................................................. ......................................32
Section 7.11. Parties Interested Herein ........................................................................ ......................................32
ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee ................................................................................ ...............................33
Section 8.02. Acceptance of Trustee .................................................................................... ...............................33
Section 8.03. Fees, Charges and Expenses of Trustee ...................................................... ...............................36
Section 8.04. Notice to Bond Owners of Default .............................................................. ...............................36
Section 8.05. Intervention by Trustee ................................................................................. ...............................37
Section 8.06. Removal of Trustee ........................................................................................ ...............................37
Section 8.07. Resignation by Trustee .................................................................................. ...............................37
Section 8.08. Appointment of Successor Tnistee .............................................................. ...............................37
Section 8.09. Merger or Consolidation ............................................................................... ...............................37
Section 8.10. Concerning any Successor Trustee .............................................................. ...............................38
Section 8.11. Appointment of Co-Trustee .......................................................................... ...............................38
Section 8.12. Indemnification; Limited Liability of Trustee ............................................ ...............................38
ARTICLE IX
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 9.01. Amendments Permitted ................................................................................ ...............................40
Section 9.02. Effect of Supplemental Indenture ................................................................ ...............................41
Section 9.03. Endorsement of Bonds; Preparation of New Bonds ................................. ...............................47
Section 9.04. Amendment of Particular Bonds ................................................................. ...............................41
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture .................................................................................................................42
Section 10.02. Discharge of Liability on Bonds ..................................................................................................42
Section 10.03. Deposit of Money or Securities with Trustee ............................................................................42
Section 10.04. Unclaimed Funds ..........................................................................................................................43
-ii-
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues ........................................................ ......................44
Section 11.02. Limitation of Rights to Parties and Bond Owners .............................................. ......................44
Section 11.03. Funds and Accounts ............................................................................................... ......................44
Section 11.04. Waiver of Notice; Requirement of Mailed Notice .............................................. ......................44
Section 11.05. Destruction of Bonds .............................................................................................. ......................44
Section 1L06. Severability of Invalid Provisions ......................................................................... ......................44
Section 11.07. Notices ...................................................................................................................... ......................45
Section 11.08. Evidence of Rights of Bond Owners ..................................................................... ......................45
Section 11.09. Disqualified Bonds .................................................................................................. ......................46
Section 11.10. Money Held for Particular Bonds ......................................................................... ......................46
Section 11.11. Waiver of Personal Liability .................................................................................. ......................46
Section 11.12. Successor Is Deemed Included in All References to Predecessor .................... ......................46
Section 11.13. Execution in Several Counterparts ....................................................................... ......................4h
Section 11.14. Governing Law ........................................................................................................ ......................46
EXHIBITA FORM OF BOND
-i i i-
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, made and entered into and dated as of May 1, 2011, is by
and between the TUSTIN PUBLIC FINANCING AUTHORITY, a joint exercise of powers
authority duly organized and existing under and by virtue of the laws of the State of California
(the "Authority"), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a
national banking association organized and existing under the laws of the United States of
America with a corporate trust office in Los Angeles, California, being qualified to accept and
administer the trusts hereby created (the "Trustee");
WITNESSETH:
WHEREAS, the Authority is a joint powers authority duly organized and existing under
and pursuant to that certain Joint Exercise of Powers Agreement, dated May 1, 1995, by and
between the City of Tustin (the "City") and the Tustin Community Redevelopment Agency;
WHEREAS, under Article 4 (commencing with section 6584) of Chapter 5 of Division 7
of Title 1 of the California Government Code (the "Bond Law") the Authority is authorized to
borrow money for the purpose of financing the acquisition of bonds, notes and other obligations
of, or for the purpose of making loans to, public entities including the City, and to provide
financing for public capital improvements of public entities including the City;
WHEREAS, the City has determined that, due to prevailing financial market conditions,
it is in the best interests of the City to finance the acquisition and construction of certain
improvements and facilities (the "Project") which will constitute part of the City's municipal
water enterprise (the "Enterprise");
WHEREAS, for the purpose of raising funds necessary to provide such financial
assistance to the City, the Authority proposes to authorize the issuance of its revenue bonds
under the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of
Title 1 of the California Government Code (the "Act"), designated as the Tustin Public
Financing Authority Water Revenue Bonds, 2011 Series A (the "Bonds"), all pursuant to and
secured by this Indenture of Trust;
WHEREAS, in order to provide for the repayment of the Bonds, the Authority will sell
the Project to the City pursuant to an installment sale agreement, under which the City will
agree to make installment payments to the Authority which will be calculated to be sufficient to
enable the Authority to pay the principal of and interest and premium (if any) on the Bonds
when due and payable;
WHEREAS, the Authority has determined that in order to provide for the authentication
and delivery of the Bonds, to establish and declare the terms and conditions upon which the
bonds are to be issued and secured and to secure the payment of the principal thereof and
interest and premium (if any) thereon, the Authority has authorized the execution and delivery
of this Indenture; and
WHEREAS, the Authority hereby certifies that all acts and proceedings required by law
necessary to make the Bonds, when executed by the Authority, authenticated and delivered by
the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority,
and to constitute this Indenture a valid and binding agreement for the uses and purposes herein
set forth in accordance with its terms, have been done and taken, and the execution and
delivery of this Indenture have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding under this Indenture, according to their tenor, and to secure the
performance and observance of all the covenants and conditions therein and herein set forth,
and to declare the terms and conditions upon and subject to which the Bonds are to be issued
and received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the owners thereof, and for other
valuable considerations, the receipt whereof is hereby acknowledged, the Authority does
hereby covenant and agree with the Trustee, for the benefit of the respective owners from time
to time of the Bonds, as follows:
-~-
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this
Section 1.01 shall, for all purposes of this Indenture and of any indenture supplemental hereto
and of any certificate, opinion or other document herein mentioned, have the meanings herein
specified, to be equally applicable to both the singular and plural forms of any of the terms
herein defined. In addition, all capitalized terms used herein and not otherwise defined in this
Section 1.01 shall have the respective meanings given such terms in the Installment Sale
agreement.
"Acquisition n~id Construction" means, with respect to any portion of the Project, the
acquisition, construction, improvement, equipping, renovation, remodeling or reconstruction
thereof.
"Act" means Articles 1 through 4 (commencing with section 6500) of Chapter 5, Division
7, Title 1 of the California Government Code, as in existence on the Closing Date or as thereafter
amended from time to time.
"Additional Payments" means the payments so designated and required to be paid by the
City pursuant to Sections 4.9, 4.10 and 4.11 of the Installment Sale Agreement.
"Agency" means the Tustin Community Redevelopment Agency, a public body
corporate and politic organized under the laws of the State, and any successor thereto.
"A~~~reenierzt" means that certain Joint Exercise of Powers Agreement, dated May 1, 1995,
by and between the City and the Agency, creating the Authority, together with any
amendments thereof and supplements thereto.
"Authority" means the Tustin Public Financing Authority, a joint powers authority duly
organized and existing under the laws of the State.
"Authorized Representative" means: (a) with respect to the Authority, its Chairman, Vice
Chairman, Executive Director, Assistant Executive Director, Treasurer or any other person
designated as an Authorized Representative of the Authority by a Written Certificate of the
Authority signed by its Chairman and filed with the City and the Trustee; and (b) with respect
to the City, its Mayor, City Manager, Treasurer, Finance Director or any other person
designated as an Authorized Representative of the City by a Written Certificate of the City
signed by its Mayor and filed with the Trustee.
"Bonrd of Directors" means the governing body of the Authority.
"Bond Counsel" means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of
attorneys appointed by or acceptable to the Authority of nationally-recognized experience in
the issuance of obligations the interest on which is excludable from gross income for federal
income tax purposes under the Code.
"Bond Fund" means the fund by that name established and held by the Trustee pursuant
to Section 5.01.
"Bond Lc~w" means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article
~ (commencing with section 6584) of Chapter 5 of Division 7 of Title 1 of the California
-3-
Government Code, as in existence on the Closing Date or as thereafter amended from time to
time.
"Bond Year" means each twelve-month period extending from April 2 in one calendar
year to April 1 of the succeeding calendar year, both dates inclusive; provided that the first
Bond Year shall begin on the Closing Date and shall end on Apri11, 2012.
"Bonds" means the $ aggregate principal amount of Tustin Public Financing
Authority Water Revenue Bonds, 2011 Series A, authorized by and at any time Outstanding
pursuant to the Bond Law and this Indenture.
"Business Day" means any day, other than a Saturday or Sunday or a day on which
commercial banks in New York, New York, Los Angeles, California, or San Francisco,
California, or the Trust Office, are required or authorized by law to close or a day on which the
New York Stock Exchange is closed.
"City" means the City of Tustin, a municipal corporation organized under the laws of
the State.
"Closing Date" means May 25, 2011, being the date of delivery of the Bonds to the
Original Purchaser.
"Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of
the Bonds or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the date of issuance of the Bonds, together with applicable proposed,
temporary and final regulations promulgated under the Code.
"Completion Date" means, with respect to any component of the Project, the date on
which the Authority files a Written Certificate with the City and the Trustee stating that the
Acquisition and Construction of such component of the Project have been completed pursuant
to Article III.
"Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate
executed by the City and dated the Closing Date, as originally executed and as it may be
amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means all expenses incurred in connection with the authorization,
issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds,
including but not limited to all compensation, fees and expenses (including but not limited to
fees and expenses for legal counsel) of the Authority, initial fees and expenses of the Trustee
and its counsel, title insurance premiums, appraisal fees, compensation to any financial
consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency
fees, costs of preparation and reproduction of documents and costs of printing.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee pursuant to Section 3.03.
"County" means the County of Orange, a public body corporate and politic organized
under the laws of the State.
"Debt Service" means, during any period of computation, the amount obtained for such
period by totaling the following amounts:
--t-
(a) The principal components of the Installment Payments and of payments with respect
to Parity Obligations coming due and payable by their terms in such period; and
(b) The interest component of the Installment Payments and of payments with respect to
Parity Obligations which would be due during such period on the aggregate principal amount
of the Installment Payments and payments with respect to Parity Obligations that would be
unpaid in such period if the Installment Payments and payments with respect to Parity
Obligations are retired as scheduled, but deducting and excluding from such aggregate amount
the amount of Installment Payments and payments with respect to Parity Obligations no longer
unpaid.
"Defensc~nce Obligations" means (a) cash, (b) direct non-callable obligations of the United
States of America, (c) securities fully and unconditionally guaranteed as to the timely payment
of principal and interest by the United States of America, to which direct obligation or
guarantee the full faith and credit of the United States of America has been pledged, (d) Refcorp
interest strips, (e) CATS, TIGRS, STRPS, and (f) defeased municipal bonds rated AAA by S&P or
Aaa by Moody's (or any combination of the foregoing).
"Engineer's Report" means a report prepared and signed by an Independent Engineer.
"Enterprise" means any and all facilities, properties and improvements at any time
controlled or operated by the City used or pertaining to the supply of water, consisting of the
entire water production and distribution enterprise of the City, including all additions,
extensions, expansions, improvements and betterments thereto and equippings thereof and any
necessary lands, rights of way and other real and personal property useful in connection
therewith, but exclusive of any portion of the existing system not required for the continued
operation thereof; provided, however, that to the extent the City is not the sole owner of an
asset or property, or lessee thereof from the City, only the City's ownership interest in such
asset or property or leasehold interest therein from the City, shall be considered a part of the
Enterprise.
"Event of Default" means, (a) with respect to the Bonds, any of the events described in
Section 7.01 of this Indenture, and (b) with respect to the Installment Sale Agreement, any of the
events described in Section 8.1 of the Installment Sale Agreement.
"Fair Market Value" means the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm's length transaction (determined as of the
date the contract to purchase or sell the investment becomes binding) if the investment is traded
on an established securities market (within the meaning of section 1273 of the Code) and,
otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length
transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired
in accordance with applicable regulations under the Code, (ii) the investment is an agreement
with specifically negotiated withdrawal or reinvestment provisions and a specifically
negotiated interest rate (for example, a guaranteed investment contract, a forward supply
contract or other investment agreement) that is acquired in accordance with applicable
regulations under the Code, (iii) the investment is a United States Treasury Security--State and
Local Government Series that is acquired in accordance with applicable regulations of the
United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment
Fund of the State but only if at all times during which the investment is held its yield is
reasonably expected to be equal to or greater than the yield on a reasonably comparable direct
obligation of the United States.
-5-
"Fiscal Year" means any twelve-month period extending from July 1 in one calendar year
to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month
period selected and designated by the Authority as its official fiscal year period.
"Gover~iment Obligations" means, with respect to the Bonds: (a) direct obligations (other
than an obligation subject to variation in principal repayment) of the United States of America
("U.S. Treasury Obligations"), (b) obligations fully and unconditionally guaranteed as to timely
payment of principal and interest by the United States of America, (c) obligations fully and
unconditionally guaranteed as to timely payment of principal and interest by any agency or
instrumentality of the United Sates of America when such obligations are backed by the full
faith and credit of the United States of America, or (d) evidence of ownership of proportionate
interests in future interest and principal payments on obligations described above held by a
bank or trust company as custodian, under which the owner of the investment is the real party
in interest and has the right to proceed directly and individually against the obligator and the
underlying government obligations are not available to any person claiming through the
custodian or to whom the custodian may be obligated.
"Gross Reve~iues" means all gross charges received for, and all other gross income and
revenues derived by the City from, the operation of the Enterprise or otherwise arising from. the
Enterprise, including but not limited to (a) all fees and charges received by the City for the
services of the Enterprise, (b) charges received by the City for water connections, and (c) all
receipts derived from the investment of such income or revemies.
"Indenture" means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the
provisions hereof.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants, appointed and paid by the Authority or the City, and who, or each of whom
(a) is in fact independent and not under domination of the Authority or the City; (b) does not
have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not
connected with the Authority or the City as an officer or employee of the Authority or the City
but who may be regularly retained to make annual or other audits of the books of or reports to
the Authority or the City.
"Independent Counsel" means an attorney duly admitted to the practice of law before the
highest court of the state in which such attorney maintains an office and who is not an
employee of the Authority, the Trustee or the City.
"Independent Engineer" means any registered engineer or firm of such registered
engineers, of national reputation, appointed by the City and who, or each of whom: (a) is
judged by the City to have experience in matters relating to the engineering matters relating to
water system enterprises; (b) is in fact independent and not under domination of the Authority
or the City; (c) does not have any substantial interest, direct or indirect, with the Authority or
the City other than as purchaser of the Bonds or any Parity Obligations; and (d) is not connected
with the Authority or the City as an officer or employee of the Authority or the City, but who
maybe regularly retained to make reports to the Authority or the City.
"I~zformntion Serz~ices° means the Electronic Municipal Market Access System (referred to
as "EMMA"), a facility of the Municipal Securities Rulemaking Board, (at
http://emma.msrb.org); provided, however, in accordance with then current guidelines of the
Securities end Exchange Commission, shall mean such other organizations providing
information with respect to the Bonds shall mean such other organizations providing;
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information with respect to the redemption of bonds as the Authority may designate in a
Written Certificate of the Authority delivered to the Trustee.
°Installment Payment Date" means the twenty-fifth (25th) day of each March and
September during the Term of the Installment Sale Agreement, commencing September 25,
201.1.
"Installment Payments" means the amounts payable by the City pursuant to Section 4.4 of
the Installment Sale Agreement, including any prepayments thereof pursuant to Article IX of
the Installment Sale Agreement.
"Irlstalhnent Sale Agreement" means that certain Installment Sale Agreement by and
between the Authority as seller and the City as purchaser of the Project, dated as of May 1, 201.1,
as originally executed and as it may from time to time be supplemented, modified or amended
in accordance with the terms thereof and of this Indenture.
"hiterest Account" means the account by that name established in the Bond Fund
pursuant to Section 5.02.
"Interest Payment Date" means each April 1 and October 1, commencing October 1, 2011.
"Maintenance and Operation Costs" means (a) the reasonable and necessary costs of
maintaining and operating the Enterprise, calculated based upon accounting principles
consistently applied, including (among other things) the reasonable expenses of management,
personnel, services, equipment, repair and other expenses necessary to maintain and preserve
the Enterprise in good repair and working order, and reasonable amounts for administration,
overhead, insurance, taxes (if any) and other similar costs, and (b) all costs of water purchased
or otherwise acquired for delivery by the Enterprise (including any interim or renewed
arrangement therefor), but excluding in all cases depreciation and obsolescence charges or
reserves therefor and amortization of intangibles or other bookkeeping entries of a similar
nature.
"Maximum Aggregate Annual Debt Service" means, as of the date of calculation, the
maximum amount of Debt Service for the current or any future Bond Year with respect to the
Installment Sale Agreement and all Parity Obligations outstanding.
"Mood y's" means Moody's Investors Service, its successors and assigns.
"Net Revenues" means, for any period, an amount equal to all of the Gross Revenues
received during such period minus the amount required to pay all Maintenance and Operation
Costs becoming payable during such period.
"Original Purchaser" means the original purchaser of the Bonds upon their delivery by
the Trustee on the Closing Date.
"Outstanding," when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 11.10) all Bonds theretofore, or thereupon being,
authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore
canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to
which all Iiability of the Authority shall have been discharged in accordance with Section 10.02,
including Bonds (or portions thereof) described in Section 11.10; and (c) Bonds for the transfer
or exchange of or in lieu of or in substitution for which other Bonds shall have been
authenticated and delivered by the Trustee pursuant to this Indenture.
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"Owner," whenever used herein with respect to a Bond, means the person in whose
name the ownership of such Bond is registered on the Registration Books.
"Parity Obli~ntioris" means any leases, loan agreements, installment sale agreements,
bonds, notes, interest rate swap agreements, currency swap agreements, forward payment
agreements, futures, or contracts providing for payments based on levels of, or changes in,
interest rates, currency exchange rates, stock or other indices, or contracts to exchange cash
flows or a series of payments, or contracts, including, without limitation, interest rate floors or
caps, options, puts or calls to hedge payment, currency, rate, spread, or similar exposure (except
termination payments relating thereto which shall be payable on a subordinate basis) or other
obligations of the City payable from and secured by a pledge of and lien upon any of the Net
Revenues on a parity with the Installment Payments, entered into or issued pursuant to and in
accordance with Section 4.8 of the Installment Sale Agreement. For all purposes, the 2003 Bonds
shall constitute Parity Obligations.
"Participating Underwriter" shall have the meaning ascribed thereto in the Contimiing
Disclosure Certificate.
"Permitted Investments" means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein,
but only to the extent that the same are acquired at Fair Market Value (provided the Trustee
may rely upon the Request of the Authority directing investment under the Indenture as a
determination that such investment is a Permitted Investment):
(a) Government Obligations.
(b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
any of the following federal agencies and provided such obligations are backed by the full faith
and credit of the United States of America (stripped securities are only permitted if they have
been stripped by the agency itself):
1. U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
2. U.S. Farmers Home Administration (FmHA)
Certificates of Beneficial Ownership
3. Federal Financing Bank
4.:Federal Housing Administration Debentures (FHA)
5. General Services Administration
Participation Certificates
6. Government National Mortgage Association (GNMA or Ginnie Mae)
GNMA-guaranteed mortgage-backed bonds
GNMA-guaranteed pass-through obligations
7. U.S. Maritime Administration
Guaranteed Title XI financing
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U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds - U.S. government guaranteed public
housing notes and bonds
(c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
any of the following federal agencies which are not backed by the full faith and credit of the
United States of America (stripped securities are only permitted if they have been stripped by
the agency itself):
1. Federal Home Loan Bank S, s
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
Participation Certificate
Senior debt obligations
3. Federal National Mortgage Association (FNMA or Fannie Mae)
Mortgage-backed securities and senior debt obligations
4. Student Loan Marketing Association (SLMA or Sallie Mae)
Senior debt obligations
5. Resolution Funding Corp. (REFCORP) obligations
6. Farm Credit System
Consolidated systemwide bonds and notes
(d) Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Federal Securities Act of 1933, which invest solely in
Federal Securities, if rated by S&P, having a rating at the time of investment of AAAm-G; and if
rated by Moody's having a rating at the time of investment of Aaa, including funds for which
the Trustee, its parent holding company, if any, or any affiliates or subsidiaries provide
investment advisory or other management services.
(e) Certificates of deposit secured at all times by collateral described in (a) and/or (b)
above. Such certificates must be issued by commercial banks or savings and loan associations
(including the Trustee or its affiliates). The collateral must be held by a third party and the
Bondholders must have a perfected first security interest in the collateral.
(f) Certificates of deposit, savings accounts, deposit accounts or money market deposits
which are fully insured by FDIC or secured at all times by collateral described in (a) and/or (b)
above.
(g) Commercial paper rated, at the time of purchase, "Prime-1" by Moody's and "A-1"
or better by S&P.
(h) Federal funds or bankers acceptances with a maximum term of 180 days of any bank
which has an unsecured, uninsured and unguaranteed obligation rating at the time of
investment of "Prime-1" or better by Moody's and "A-1" or better by S&P.
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(i) The Local Agency Investment Fund of the State, created pursuant to 16429.1 of the
California Government Code.
(j) The County pooled investment fund.
(k) Municipal obligations rated "A" or higher by S&P.
(1) Other forms of investments that satisfy the City's Statement of Investment Policy as of
the time of investment.
"Plans and Specifications" means, with respect to the Project or any component thereof,
the plans and specifications relating thereto filed by the City with the Authority pursuant to
Section 3.2 of the Installment Sale Agreement, as such plans and specifications may be revised
from time to time by the City pursuant to Section 3.2 of the Installment Sale Agreement.
"Principal Account" means the account by that name established in the Bond Fund
pursuant to Section 5.02.
"Project" means the land, improvements and other property described more fully in
Exhibit B attached to the Installment Sale Agreement and by this reference incorporated herein,
as such description may be amended by the City from time to time pursuant to and in
accordance with Section 3.2 of the Installment Sale Agreement. The precise identification of the
Project or any component thereof shall be determined by reference to the Plans and
Specifications therefor.
"Project Costs" means, with respect to any Project, all costs of the Acquisition and
Construction thereof which are paid from moneys on deposit in the Project Fund, including but
not limited to:
(a) all costs required to be paid to any person under the terms of any agreement for or
relating to the Acquisition and Construction of such Project;
(b) obligations incurred for labor and materials in connection with the Acquisition and
Construction of such Project;
(c) the cost of performance or other bonds and any and all types of insurance that may
be necessary or appropriate to have in effect in connection with the Acquisition and
Construction of such Project;
(d) all costs of engineering and architectural services, including the actual out-of-pocket
costs for test borings, surveys, estimates, plans and specifications and preliminary
investigations therefor, development fees, sales commissions, and for supervising construction,
as well as for the performance of all other duties required by or consequent to the proper
Acquisition and Construction of such Project;
(e) any sums required to reimburse the Authority or the City for advances made for any
of the above items or for any other costs incurred and for work done which are properly
chargeable to the Acquisition and Construction of such Project;
(f) all financing costs incurred in connection with the Acquisition and Construction of
such Project, including but not limited to Costs of Issuance and other costs incurred in
connection with the Installment Sale Agreement and the financing of the Project; and
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(g) the interest components of the Installment Payments during the period of
Acquisition and Construction of such Project, to the extent not paid from the proceeds of the
Bonds deposited in the Interest Account pursuant to this Indenture.
"Project Fund" means the fund by that name established pursuant to Section 3.04.
"Qualified Reserve Fund Credit Instrtu~ient" means one or more letters of credit or other
forms of guarantee from a financial institution the long-term unsecured obligations of which are
rated at the time of purchase not less than "Aaa" by Moody's and "AAA" by S&P or surety
bonds or bond insurance policies issued by companies the long-term obligations of which are
rated at the time of purchase not less than "Aaa" by Moody's and "AAA" by S&P, in lieu of or
in substitution for all or any portion of the moneys then constituting the Reserve Requirement.
Any such letter of credit, surety bond, bond insurance policy or other form of guarantee shall
provide that the Trustee is entitled to draw amounts thereunder when required for the
purposes of making transfers from the Reserve Account to the Installment Payment Account in
the event of a deficiency in any such account. Upon deposit by the Authority with the Trustee of
any such letter of credit, surety bond, bond insurance policy or other form of guarantee, the
Trustee shall withdraw from the Reserve Account and transfer to the City for deposit in the
Project Fund moneys in an amount equal to the maximum limits or principal amount, as
applicable, of such letter of credit, surety bond, bond insurance policy or other form of
guarantee.
"Record Dczte" means, with respect to any Interest Payment Date, the fifteenth (15th)
calendar day of the month preceding such Interest Payment Date.
"Redemption Fund" means the fund by that name established pursuant to Section 5.07.
"Registration Books" means the records maintained by the Trustee pursuant to Section
2.05 for the registration and transfer of ownership of the Bonds.
"Reserve Account" means the account by that name in the Bond Ftmd established
pursuant to Section 5.02.
"Reserve Requirement" means, as of the Closing Date, an amount equal to the least of (a)
maximum amount of annual Debt Service coming due and payable in the current or any future
Bond Year, (b) 125"/, of average annual Debt Service, and (c) 10% of the par amount of the
Bonds.
"Revenues" means (a) all amounts received by the Authority or the Trustee pursuant or
with respect to the Installment Sale Agreement, including, without limiting the generality of the
foregoing, all of the Installment Payments (including both timely and delinquent payments, any
late charges, and whether paid from any source) and prepayments, and (b) all interest, profits or
other income derived from the investment of amounts in any fund or account established
pursuant to this Indenture; but excluding any Additional Payments.
"S£~P" means Standard & Poor's Ratings Services, A Division of the McGraw-Hill
Companies, Inc., and its successors.
"Securities Depositories" means The Depository Tnist Company, 55 Water Street, 50th
Floor, New York, NY 10041-0099, Attention: Call Notification Department, Fax (212) 855-7232;
and, in accordance with then current guidelines of the Securities and Exchange Commission,
such other addresses and/or such other securities depositories as the Authority may designate
in a Written Certificate of the Authority delivered to the Trustee.
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"Serial Bonds" means the Bonds maturing on April 1 in each of the years ,through
inclusive.
"Sinking Account" means the account by that name established in the Bond Fund
pursuant to Section 5.02.
"State" means the State of California.
"Subordinate Debt" means any obligations of the City payable from and secured by a
pledge of and lien upon any of the Net Revenues subordinate to the Installment Payments and
any Parity Obligations, entered into or issued pursuant to and in accordance with Section 4.8 of
the Installment Sale Agreement.
"Supplemental Indenture" means any indenture hereafter duly authorized and entered
into between the Authority and the Trustee, supplementing, modifying or amending this
Indenture; but only if and to the extent that such Supplemental Indenture is specifically
authorized hereunder.
"Tenn Bonds" means the Bonds maturing on April 1, ,and April 1,
"Term of t{ie Installment Sale Agreement" means the time during which the Installment
Sale Agreement is in effect, as provided in Section 4.2 of the Installment Sale Agreement.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national
banking association organized and existing under the laws of the United States of America, or
its successor, as Trustee hereunder as provided in Section 8.01.
"Trust Office" means the corporate trust office of the Trustee at 700 South Flower Street,
Suite 500, Los Angeles, California 90017-4104, or at such other or additional offices as may be
specified in writing to the Authority and the City, except that with respect to presentation of
Bonds for payment or for registration of transfer and exchange such term shall mean the office
or agency of the Trustee at which, at any particular time, its corporate trust agency business
shall be conducted.
"2003 Bonds" means $14,355,000 City of Tustin 2003 Refunding Water Revenue Bonds, of
which $11,165,000 is currently outstanding.
"2003 Indenture" means that certain indenture, dated as of September 1, 2003, by and
between the City and the Trustee, as trustee thereunder, pursuant to which the 2003 Bonds were
issued.
"Water Fund" means the City's existing water enterprise fund, established and held by
the City with respect to the Enterprise.
"Written Certificate," "Written Request" and "Written Requisition" of the Authority or the
City mean, respectively, a written certificate, request or requisition signed in the name of the
Authority or the City by its Authorized Representative. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a single instrument with
any other instrument, opinion or representation, and the two or more so combined shall be read
and construed as a single instrument.
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Section 1.02. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall include
the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely for
convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture; the words "herein," "hereof,"
"hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
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ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds. The Authority hereby authorizes the issuance
hereunder of the Bonds, which shall constitute special obligations of the Authority, for the
purpose of providing funds to enable the City to finance the acquisition and construction of the
Project. The Bonds are hereby designated the "Tustin Public Financing Authority Water
Revenue Bonds, 2011 Series A." The aggregate principal amount of Bonds initially issued and
Outstanding under this Indenture shall equal dollars ($ ). This
[ndenture constitutes a continuing agreement with the Trustee and the Owners from time to
time of the Bonds to secure the full payment of the principal of and interest and premium (if
any) on all the Bonds, subject to the covenants, provisions and conditions herein contained.
Section 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form
without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds shall
mature on April 1 in each of the years and in the amounts set forth below and shall bear interest
on each Interest Payment Date at the rates set forth below:
Maturity Date Principal Interest
A rill Amount Rate
Interest on the Bonds shall be payable semi-annually calculated based on a 360-day year
of twelve (12) thirty-day months on each Interest Payment Date to the person whose name
appears on the Registration Books as the Owner thereof as of the Record Date immediately
preceding each such Interest Payment Date, such interest to be paid by check of the Trustee
mailed on the applicable Interest Payment Date by first class mail to the Owner at the address of
such Owner as it appears on the Registration Books; provided however, that payment of
interest may be by wire transfer in immediately available funds to an account in the United
States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or
more who shall furnish written ~~ire instructions to the Trustee at least five (5) days before the
applicable Record Date. Subject to Section 2.10, principal of any Bond and any premium upon
redemption shall be paid by check of the Trustee upon presentation and surrender thereof at the
Trust Office. Principal of and interest and premium (if any) on the Bonds shall be payable in
lawful money of the United States of America.
Each Bond shall be dated the Closing Date and shall bear interest from the Interest
Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated
after a Record Date and nn or before the following Interest Payment Date, in which event it
shall bear interest from such Interest Payment Date, or (b) unless it is authenticated on or before
September 15, 2011, in which event it shall bear interest from the Closing Date; provide~~, hozuev~ r,
that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond
-1-1-
shall bear interest from the Interest Payment Date to which interest has previously been paid or
made available for payment thereon.
Section 2.03. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred on the Registration Books by the person in whose name it is registered, in person or
by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by
delivery of a written instrument of transfer, duly executed in a form approved by the Trustee.
Transfer of any Bond shall not be permitted by the Trustee during the period established by the
Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption
pursuant to Article IV. Whenever any Bonds or Bonds shall be surrendered for transfer, the
Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or
Bonds for a like aggregate principal amount and of like maturity. The Trustee may require the
Bond Owner requesting such transfer to pay any tax or other governmental charge required to
be paid with respect to such transfer.
Section 2.04. Exchange of Bonds. Any Bond may be exchanged at the Trust Office for a
like aggregate principal amount of Bonds of other authorized denominations and of like
maturity. Exchange of any Bond shall not be permitted during the period established by the
Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption
pursuant to Article IV. The Trustee shall require the Bond Owner requesting such exchange to
pay any tax or other governmental charge required to be paid with respect to such exchange.
Section 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Trust
Office, sufficient records for the registration and transfer of ownership of the Bonds, which shall
at all reasonable times with reasonable prior notice be open to inspection during regular
business hours by the Authority, the City and the Owners; and, upon presentation for such
purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or
transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as
hereinbefore provided.
Section 2.06. Form and Execution of Bonds. The Bonds shall be signed in the name and
on behalf of the Authority with the manual or facsimile signatures of its Chairman or its
Executive Director and attested with the manual or facsimile signature of its Secretary or any
assistant duly appointed by the Board of Directors, under the printed seal of the Authority, and
shall be delivered to the Trustee for authentication by it. In case any officer of the Authority
who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed
shall have been authenticated or delivered by the Trustee or issued by the Authority, such
Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication,
delivery and issue, shall be as binding upon the Authority as though the individual who signed
the same had continued to be such officer of the Authority. Also, any Bond may be signed on
behalf of the Authority by any individual who on the actual date of the execution of such Bond
shall be the proper officer although on the nominal date of such Bond such individual shall not
have been such officer.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or
obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of
the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly
authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.07. Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by
the Authority, shall be in fully registered form without coupons and may contain such reference
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to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be
executed by the Authority and authenticated by the Trustee upon the same conditions and in
substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds
it will execute and deliver definitive Bonds as promptly thereafter as practicable, and thereupon
the temporary Bonds may be surrendered, for cancellation, at the Trust Office and the Trustee
shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate
principal amount of definitive Bonds of authorized denominations. Until so exchanged, the
temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds
authenticated and delivered hereunder.
Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the
Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so
mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and
delivered to, or upon the order of, the Authority. If any Bond shall be lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence
be satisfactory to it and indemnity satisfactory to it shall be given, the Authority, at the expense
of the Owner of such lost, destroyed or stolen Bond, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for
the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been
called for redemption, instead of issuing a substitute Bond, the Trustee may pay the same
without surrender thereof). The Authority may require payment by the Owner of a sum not
exceeding the actual cost of preparing each new Bond issued under this Section 2.08 and of the
expenses which may be incurred by the City, the Authority and the Trustee in the premises.
Any Bond issued under the provisions of this Section 2.08 in lieu of any Bond alleged to be lost,
destroyed or stolen shall constitute an original additional contractual obligation on the part of
the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time
enforceable by anyone, and. shall be entitled to the benefits of this Indenture with all other
Bonds secured by this Indenture.
Section 2.09. CUSIP Numbers. The Trustee and the Authority shall not be liable for any
defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption
notice. The Trustee may, in its discretion, include in any redemption notice a statement to the
effect that the CUSIP numbers on the Bonds have been assigned by an independent service and
are included in such notice solely for the convenience of the Owners and that neither the
Trustee nor the Authority shall be liable for any inaccuracies in such numbers.
Section 2.10. Book-Entry, stem. Notwithstanding any provision of this Indenture to the
contrary:
(a) At the request of the Original Purchaser, the Bonds shall be initially issued registered
in the name of "Cede & Co.," as nominee of The Depository Trust Company, the depository
designated by the Original Purchaser, and shall be evidenced by one securities certificate
maturing on each of the maturity dates set forth in Section 2.02 hereof to be in a denomination
corresponding to the total principal therein designated to mature on such date. Registered
ownership of such Bonds, or any portions thereof, may not thereafter be transferred except:
(i) to any successor of The Depository Tnlst Company or its nominee, or of any
substitute depository designated pursuant to paragraph (ii) of this subsection (a)
("substitute depository"); provided that any successor of The Depository Trust
Company or substitute depository shall be qualified under any applicable laws to
provide the service proposed to be provided by it;
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(ii) to any substitute depository designated in a written request of the
Authority, upon (A) the resignation of The Depository Trust Company or its successor
(or any substitute depository or its successor) from its functions as depository or (B) a
determination by the Authority that The Depository Trust Company or its successor is
no longer able to carry out its functions as depository; provided that any such
substitute depository shall be qualified under any applicable laws to provide the
services proposed to be provided by it; or
(iii) to any person as provided below, upon (A) the resignation of The
Depository Trust Company or its successor (or any substitute depository or its
successor) from its functions as depository or (B) a determination by the Authority that
The Depository Trust Company or its successor is no longer able to carry out its
functions as depository; provided that no substitute depository which is not objected
to by the Authority or the Trustee can be obtained.
(b) In the case of any transfer pursuant to paragraph (i) or paragraph (ii) of subsection
(a) of this Section 2.10, upon receipt of all Outstanding Bonds by the Trustee, together with a
written request of an Authorized Representative of the Authority to the Trustee, a single new
Bond shall be issued, authenticated and delivered for each maturity of such Bond then
outstanding, registered in the name of such successor or such substitute depository or their
nominees, as the case may be, all as specified in such written request of an Authorized
Representative of the Authority. In the case of any transfer pursuant to paragraph (iii) of
subsection (a) of this Section 2.10, upon receipt of all Outstanding Bonds by the Trustee together
with a written request of an Authorized Representative of the Authority, new Bonds shall be
issued, authenticated and delivered in such denominations and registered in the names of such
persons as are requested in a written request of the Authority provided the Trustee shall not be
required to deliver such new Bonds within a period less than sixty (60) days from the date of
receipt of such a written request of an Authorized Representative of the Authority.
(c) In the case of partial redemption or an advance refunding of any Bonds evidencing
all of the principal maturing in a particular year, The Depository Trust Company shall, at the
Authority's expense, deliver the Bonds to the Trustee for cancellation and re-registration to
reflect the amounts of such reduction in principal.
(d) The Authority and the Trustee shall be entitled to treat the person in whose name
any bond is registered as the absolute Owner thereof for all purposes of this Indenture and any
applicable laws, notwithstanding any notice to the contrary received by the Trustee or the
Authority; and the Authority and the Trustee shall have no responsibility for transmitting
payments to, communication with, notifying or otherwise dealing with any beneficial owners of
the Bonds. Neither the Authority nor the Trustee will have any responsibility or obligations,
legal or otherwise, to the beneficial owners or to any other party including The Depository
Trust Company or its successor (or substitute depository or its successor), except for the
registered owner of any Bond.
(e) So long as all outstanding Bonds are registered in the name of Cede & Co. or its
registered assign, the Authority and the Trustee shall reasonably cooperate with Cede & Co., as
sole registered Owner, or its registered assign in effecting payment of the principal and
redemption premium, if any, and interest due with respect to the Bonds by arranging for
payment in such manner that funds for such payments are properly identified and are made
immediately available on the date they are due.
(f) So long as all Outstanding Bonds are registered in the name of Cede & Co. or its
registered assigns (hereinafter, for purposes of this paragraph (f), the "Owner"):
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(i) All notices and payments addressed to the Owners shall contain the Bonds'
CUSIP number.
(ii) Notices to the Owner shall be forwarded in the manner set forth in the form
of blanket issuer letter of representations (prepared by The Depository Tnist Company)
executed by the Authority and received and accepted by The Depository Tnist
Company.
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ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; ADDITIONAL BONDS
Section 3.01. Issuance of the Bonds. At any time after the execution of this Indenture, the
Authority may execute and the Trustee shall authenticate and, upon the Written Request of the
Authority, deliver Bonds in the aggregate principal amount of dollars
($ )•
Section 3.02. Application of Proceeds of the Bonds. The proceeds received from the sale
of the Bonds ($ ), being the principal amotmt of the Bonds of $ ,less
underwriter's discount of $ ,plus net original issue premium of $ ,shall be
deposited in trust with the Trustee as follows:
(a) The Trustee shall deposit the amount of $ in the Costs of Issuance Fund;
(b) The Trustee shall deposit the amount of $ in the Reserve Account which
amount is equal to the Reserve Requirement; and
(c) The Trustee shall transfer the remaining balance of such proceeds, in the amount of
$ , to the City for deposit in the Project Fund to be applied as provided in Section
3.04.
The Trustee may, in its discretion, establish a temporary fund or account to facilitate the
foregoing transfers.
Section 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee shall
establish, maintain and hold in trust a separate fund designated as the "Costs of Issuance
Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee
to pay the Costs of Issuance upon submission of Written Requisitions of the Authority stating
the person to whom payment is to be made, the amount to be paid, the purpose for which the
obligation was incurred and that such payment is a proper charge against said fund. On
November 25, 2011, or upon the earlier Written Request of the Authority, all amounts
remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the City for
deposit in the Project Fund and the Costs of Issuance Fund shall be closed.
Section 3.04. Project Fund.
(a) The City shall establish, maintain and hold in trust a separate fund to be known as
the "Project Fund." There shall be deposited in the Project Fund the amounts indicated in
Section 3.02(d) of this Indenture.
(b) Moneys in the Project Fund shall be used by the City solely for the payment of the
Project Costs.
Section 3.05. Validity of Bonds. The validity of the authorization and issuance of the
Bonds is not dependent on and shall not be affected in any way by any proceedings taken by
the Authority or the Trustee with respect to or in connection with the Installment Sale
Agreement. The recital contained in the Bonds that the same are issued pursuant to the
Constitution and laws of the State shall be conclusive evidence of their validity and of
compliance with the provisions of law in their issuance.
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ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption.
(a) Si~iking Account Redemption.
(i) Term Bonds Maturing on April 1, ____. The Term Bonds maturing on April
1, ____ (the "____ Term Bonds") are subject to mandatory redemption, in part by lot,
from Sinking Account payments set forth in the following schedule on April 1, ____,
and on April 1 in e~rch year thereafter to and including April 1, ____, at a redemption
price equal to the principal amount thereof to be redeemed (without premium),
together with interest accrued thereon to the date fixed for redemption; provided,
however, that if some but not all of the ____ Term Bonds have been optionally
redeemed pursuant to subsection (b) below, the total amount of Sinking Account
payments to be made subsequent to such redemption shall be reduced in an amount
equal to the principal amount of the ____ Term Bonds so redeemed by reducing each
such future Sinking Account payment as shall be determined by the City and, in lieu of
such determination, on a pro rata basis (as nearly as practicable) in integral multiples of
$5,000, as shall be designated pursuant to written notice filed by the Authority with the
Trustee.
Redemption Date Principal
A rill Amount
t Maturity.
(ii) Term Bonds Maturing on April 1, ____. The Term Bonds maturing on
April 1, ____ (the "____ Term Bonds") are subject to mandatory redemption, in part
by lot, from Sinking Account payments set forth in the following schedule on April 1,
____, and on April 1 in each year thereafter to and inchtding April 1, ____, at a
redemption price equal to the principal amount thereof to be redeemed (without
premium), together with interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the ____ Term Bonds have been
optionally redeemed pursuant to subsection (b) below, the total amount of Sinking
Account payments to be made subsequent to such redemption shall be reduced in an
amount equal to the principal amount of the ____ Term Bonds so redeemed by
reducing each such future Sinking Account payment as shall be determined by the City
and, in lieu of such determination, on a pro rata basis (as nearly as practicable) in
integral multiples of $5,000, as shall be designated pursuant to written notice filed by
the Authority with the Trustee.
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Redemption Date Principal
A rill Amount
t Maturity.
(b) Optional Redemption. The Bonds maturing on or before April 1, ,shall not be
subject to optional redemption prior to maturity. The Bonds maturing on or after April 1, ,
shall be subject to redemption, at the option of the City on any date on or after April 1, , as
a whole or in part, by such maturities as shall be determined by the City, and by lot within a
maturity, from any available source of funds, from prepayments of the Installment Payments
made at the option of the City pursuant to Section 9.2 of the Installment Sale Agreement, at a
redemption price equal to the principal amount of the Bonds to be redeemed, together with
accrued interest thereon to the date fixed for redemption, without premium.
(c) Purc{lnse of Bonds In Lieu of Redemption. In lieu of redemption of Bonds as provided in
paragraphs (a) and (b) of this Section 4.01, amounts held by the Trustee for such redemption
may also be used on any Interest Payment Date, upon receipt by the Trustee at least ninety (90)
days prior to the next scheduled Interest Payment Date of the written request of an Authorized
Representative of the City, for the purchase of Bonds at public or private sale as and when and
at such prices (including brokerage, accrued interest and other charges) as the City may in its
discretion direct, but not to exceed the redemption price which would be payable if such Bonds
were redeemed; provided, however, that no Bonds shall be purchased in lieu of redemption with a
trade settlement date less than seventy-five (75) days prior to the relevant redemption date.
Such purchases may be affected through the investment department of the Trustee or of an
affiliate of the Trustee. The aggregate principal amount of Bonds of the same maturity
purchased in lieu of redemption pursuant to this paragraph shall not exceed the aggregate
principal amount of Bonds of such maturity which would otherwise be subject to such
redemption.
Section 4.02. Selection of Bonds for Redemption. The Trustee shall select the Bonds to be
redeemed from all Bonds or such given portion thereof not previously called for redemption by
lot within a maturity. For purposes of such selection, the Trustee shall treat each Bond as
consisting of separate $5,000 portions and each such portion shall be subject to redemption as if
such portion were a separate Bond. No Bonds selected for redemption may be transferred.
Section 4.03. Notice of Redemption. Notice of redemption shall be mailed by first class
mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before any
redemption date, to the respective Owners of any Bonds designated for redemption at their
addresses appearing on the Registration Books, to the Securities Depositories and to the
Information Services. Each notice of redemption shall state the date of the notice, the
redemption date, the place or places of redemption, whether less than all of the Bonds (or all
Bonds of a single maturity) are to be redeemed, the CUSIP numbers and Bond numbers of the
Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case
of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to
be redeemed. Each such notice shall also state that on the redemption date there will become
due and payable on each of said Bonds the redemption price thereof, and that from and after
such redemption date interest thereon shall cease to accrue, and shall require that such Bonds
be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect
the proceedings for such redemption or the cessation of accrual of interest from and after the
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redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of
the Authority, for and on behalf of the Authority.
Notice of any redemption of Bonds (other than redemptions pursuant to Section 4.01(b))
shall either (i) explicitly state that the proposed redemption is conditioned on there being on
deposit in the applicable fund or account on the redemption date sufficient money to pay the
full redemption price of the Bonds to be redeemed, or (ii) be sent only if sufficient money to pay
the full redemption price of the Bonds to be redeemed is on deposit in the applicable fund or
account.
Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in
part only, the Authority shall execute and the Trustee shall authenticate and deliver to the
Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized
denominations equal in aggregate principal amount to the unredeemed portion of the Bonds
surrendered.
Section 4.05. Effect of Redemption. Notice of redemption having been duly given as
aforesaid, and moneys for payment of the redemption price of, together with interest accrued to
the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being
held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions
thereof) so called for redemption shall become due and payable, interest on the Bonds so called
for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to
any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights
in respect thereof except to receive payment of the redemption price thereof.
All Bonds redeemed pursuant to the provisions of this Article shall be canceled by the
Trustee upon surrender thereof and destroyed.
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ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Pledge and Ass~nment; Bond Fund.
(a) Subject only to the provisions of this Indenture permitting the application thereof for
the purposes and on the terms and conditions set forth herein, all of the Revenues and any other
amounts (including proceeds of the sale of the Bonds) held in any fund or account established
pursuant to this Indenture are hereby pledged to secure the payment of the principal of and
interest on the Bonds in accordance with their terms and the provisions of this Indenture. Said
pledge shall constitute a lien on and security interest in such assets and shall attach, be
perfected and be valid and binding from and after the Closing Date, without any physical
delivery thereof or further act.
(b) The Authority hereby transfers in trust, grants a security interest in and assigns to
the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues
and all of the rights of the Authority in the Installment Sale Agreement (other than the rights of
the Authority under Sections 4.9, 6.3 and 8.4 thereof). The Trustee shall be entitled to and shall
collect and receive all of the Revenues, and any Revenues collected or received by the Authority
shall be deemed to be held, and to have been collected or received, by the Authority as the
agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee
also shall be entitled to and shall, subject to the provisions of Article VIII, take all steps, actions
and proceedings which the Trustee determines to be reasonably necessary in its judgment to
enforce, either jointly with the Authority or separately, all of the rights of the Authority and all
of the obligations of the City under the Installment Sale Agreement.
The assignment of the Installment Sale Agreement to the Trustee is solely in its capacity
as Trustee under this Indenture and the duties, powers and liabilities of the Trustee in acting
thereunder shall be subject to the provisions of this Indenture, including, without limitation, the
provisions of Article VIII hereof. The Trustee shall not be responsible for any representations,
warranties, covenants or obligations of the Authority.
(c) Subject to Section 5.08, all Revenues shall be promptly deposited by the Trustee upon
receipt thereof in a special fund designated as the "Bond Fund" which the Trustee shall
estaUlish, maintain and hold in trust; except that all moneys received by the Trustee and
required hereunder or under the Installment Sale Agreement to be deposited in the Redemption
Fund shall be promptly deposited in such Fund. All Revenues deposited with the Trustee shall
be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture.
(d) The Trustee shall provide written notice to the City, at least ten Business Days
preceding each Interest Payment Date, of the amount of Revenues, derived from Installment
Payments as required by the Installment Sale Agreement, due to the Trustee on such Interest
Payment Date, taking into account any investment earnings which shall be applied as a credit
against such required payment. If, on the 5th Business Day preceding each Interest Payment
Date, the Trustee is not in receipt of the total amount due to the Trustee on such Interest
Payment Date, the Trustee shall provide a second similar notice to the City and promptly notify
the Director of Finance/City Treasurer by telephone. Notwithstanding the foregoing, the failure
of the Trustee to provide either of such notices shall in no way relieve the City of its obligation
to make all Installment Payments as required by the Installment Sale Agreement.
Section 5.02. Allocation of Revenues. On each date on which principal of or interest on
the Bonds becomes due and payable, the Trustee shall transfer from the Bond Fund and deposit
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into the following respective accounts (each of which the Trustee shall establish and maintain
within the Bond Fund), the following amounts in the following order of priority, the
requirements of each stub account (including the making up of any deficiencies in any such
account resulting from lack of Revenues sufficient to make any earlier required deposit) at the
time of deposit to be satisfied before any transfer is made to any account subsequent in priority:
(a) The Trustee shall deposit in the Interest Account an amount required to cause the
aggregate amount on deposit in the Interest Account to be at least equal to the amount of
interest becoming due and payable on such date on all Bonds then Outstanding.
(b) The Trustee shall deposit in the Principal Account an amount required to cause the
aggregate amount on deposit in the Principal Account to equal the principal amount of the
Bonds coming due and payable on such date.
(c) The Trustee shall deposit in the Sinking Account an amount equal to the aggregate
principal amount of the Term Bonds required to be redeemed on such date, if any, pursuant to
Section 4.01(a).
(d) The Trustee shall deposit in the Reserve Account an amount, if any, required to
cause the amount on deposit in the Reserve Account to be equal to the Reserve Requirement.
Section 5.03. Application of Interest Account. All amounts in the Interest Account shall
be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as
it shall become due and payable (including accrued interest on any Bonds purchased or
redeemed prior to maturity pursuant to this Indenture).
Section 5.04. Application of Principal Account. All amounts in the Principal Account
shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at
their respective maturity dates.
Section 5.05. Application of Sinking Account. All moneys on deposit in the Sinking
Accotmt shall be used and withdrawn by the Trustee for the sole purpose of redeeming or
purchasing (in lieu of redemption) Term Bonds pursuant to Section 4.01(a).
Section 5.06. Application of Reserve Accotmt. All amounts in the Reserve Accotmt shall
be used and withdrawn by the Trustee solely for the purpose of (a) paying interest on or
principal of the Bonds, when due and payable to the extent that moneys deposited in the
Interest Account or Principal Account, respectively, are not sufficient for such purpose, (b)
paying the redemption price of any Term Bonds to be redeemed pursuant to Section 4.01(a) in
the event that amounts on deposit in the Sinking Account are not sufficient for such purpose,
and (c) making the final payments of principal of and interest on the Bonds. On the date on
which all Bonds shall be retired hereunder or provision made therefor pursuant to Article X, all
moneys then on deposit in the Reserve Account shall be withdrawn by the Trustee and paid to
the City as a refund of overpaid Installment Payments. In the event of any deficiency in the
Reserve Account (whether due to a payment therefrom or due to the fluctuation in market
value of securities credited thereto, or otherwise) as of the fifteenth (15th) day of the month
preceding any Interest Payment Date, the Trustee shall promptly notify the City in writing of
the amount of such deficiency.
At any time, moneys on deposit in the Reserve Account may be substituted by the
Authority with a Qualified Reserve Fund Credit Instrument, in an amount equal to the Reserve
Requirement, upon presentation to the Trustee of such Qualified Reserve Fund Credit
Instrument. Upon such substitution, the Trustee shall transfer amounts on deposit in the
Reserve Account to the City for deposit in Project Fund, prior to the Completion Date, and
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thereafter to the Bond Fund up to an amount equal to the maximum limits or principal amount,
as applicable, of such letter of credit, surety bond, bond insurance policy or other form of
guarantee.
Section 5.07. Application of Redemption Fund. The Trustee shall establish and maintain
the Redemption Fund, amounts in which shall be used and withdrawn by the Trustee solely for
the purpose of paying the principal of the Bonds to be redeemed pursuant to Section 4.01(b);
provided, however, that at any time prior to giving notice of redemption of any such Bonds, the
Trustee may apply such amounts to the purchase of Bonds at public or private sale, as and
when and at such prices (including brokerage and other charges, but excluding accrued interest,
which is payable from the Interest Account) as shall be directed pursuant to a Written Request
of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed
the redemption price then applicable to the Bonds.
Section 5.08. Investments. All moneys in any of the funds or accounts established with
the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted
Investments. Such investments shall be directed by the Authority pursuant to a Written Request
of the Authority filed with the Trustee at least two (2) Business Days in advance of the making
of such investments. In the absence of any such directions from the Authority, the Trustee shall
invest any such moneys in the money market fund set forth in the letter of authorization and
direction executed by the Authority and delivered to the Trustee. If no specific money market
fund had been specified by the Authority, the Trustee shall make a request to the Authority for
investment directions and, if no investment directions are provided, such amount shall be held
in cash, uninvested until specific investment directions are provided by the Authority to the
Trustee. Permitted Investments purchased as an investment of moneys in any fund shall be
deemed to be part of such fund or account. To the extent investments are registrable, such
investments shall be registered in the name of the Trustee.
All interest or gain derived from the investment of amounts in Project Fund shall be
retained therein. All interest or gain derived from the investment of amounts in Costs of
Issuance Fund shall be retained therein. All interest or gain derived from the investment of
amounts in Reserve Account, unless required to increase the amount therein to the Reserve
Requirement, shall be transferred when received to the Interest Account. All interest or gain
derived from the investment of amounts in Interest Account shall be retained therein. All
interest or gain derived from the investment of amounts in any other funds or accounts
established hereunder shall be transferred to the City for deposit in the Project Fund.
For purposes of acquiring any investments hereunder, the Trustee may commingle
funds held by it hereunder. The Trustee or an affiliate may act as principal or agent in the
acquisition or disposition of any investment and may impose its customary charges therefor.
The Trustee shall incur no liability for losses arising from any investments made pursuant to
this Section 5.08.
Such investments shall be valued by the Trustee not less often than quarterly, at the
market value thereof, exclusive of accrued interest. Deficiencies in the amount on deposit in any
fund or account resulting from a decline in market value shall be restored no later than the
succeeding valuation date. Investments purchased with funds on deposit in the Reserve
Account shall have a term to maturity of not greater than five years.
The Authority acknowledges that to the extent regulations of the Comptroller of the
Currency or other applicable regulatory entity grant the Authority the right to receive
brokerage confirmations of security transactions as they occur, the Authority will not receive
such confirmations to the extent permitted by law. The Trustee will furnish the Authority with
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account transaction statements as provided herein which shall include detail for all investment
transactions made by the Trustee hereunder.
The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection
with any investments made by the Trustee hereunder.
Section 5.09. Valuation and Disposition of Investments. All moneys held by the Trustee
shall be held in trust, but need not be segregated from other funds unless specifically required
by this Indenture. Except as specifically provided in this Indenture, the Trustee shall not be
liable to pay interest on any moneys received by it, but shall be liable only to account to the
Authority for earnings derived from funds that have been invested.
The Authority covenants that all investments of amounts deposited in any fund or
account created by or pursuant to this Indenture, or otherwise containing gross proceeds of the
Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and
valued (as of the date that valuation is required by this Indenture or the Code) at Fair Market
Value.
Investments in the Reserve Fund shall be valued at fair market value and the Trustee
shall be deemed to have complied with such valuation to the extent it utilized an automated
pricing service through its trust accounting system. Investments in funds or accounts (or
portions thereof) that are subject to a yield restriction under applicable provisions of the Code
and (unless valuation is undertaken at least annually) investments in the Reserve Account shall
be valued by the Authority at their present value (within the meaning of section 148 of the
Code).
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ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid
the principal of and interest and premium (if any) on all the Bonds in strict conformity with the
terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but
only out of Revenues and other assets pledged for such payment as provided in this Indenture.
Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right
of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such
issuance shall not be deemed to constitute an extension of maturity of the Bonds.
Section 6.03. Against Encumbrances. The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets
pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the
pledge and assignment created by this Indenture. Subject to this limitation, the Authority
expressly reserves the right to enter into one or more other indentures for any of its corporate
purposes, and reserves the right to issue other obligations for such purposes.
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is
duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to
pledge and assign the Revenues and other assets purported to be pledged and assigned,
respectively, under this Indenture in the manner and to the extent provided in this Indenture.
The Bonds and the provisions of this Indenture are and will be the legal, valid and binding
special obligations of the Authority in accordance with their terms, and the Authority and the
Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by
law, defend, preserve and protect said pledge and assignment of Revenues and other assets and
all the rights of the Bond Owners under this Indenture against all claims and demands of all
persons whomsoever.
Section 6.05. Accounting Records and Financial Statements. The Trustee shall at all times
keep, or cause to be kept, proper books of record and account, prepared in accordance with
corporate trust industry standards, in which complete and accurate entries shall be made of all
transactions made by it relating to the proceeds of Bonds, the Revenues, the Installment Sale
Agreement and all funds and accounts established pursuant to this Indenture. Such books of
record and account shall be available for inspection by the Authority and the City, during
business hours and under reasonable circumstances. The Trustee shall deliver a monthly
accounting of all funds and accounts except for any fund or account which has a balance of
$0.00 and has not had any activity since the last reporting date. The Trustee shall establish such
other funds and accounts as it deems necessary to carry out its duties tinder this Indenture.
Section 6.06. No Additional Obli atg ions. The Authority covenants that no additional
bonds, notes or other indebtedness shall be issued or incurred which are payable out of the
Revenues in whole or in part.
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Section 6.07. Tax Covenants.
(a) No Arbitrage. The Authority shall not take, or permit to be taken by the Trustee, the
City or otherwise, any action with respect to the proceeds of the Bonds which, if such action had
been reasonably expected to have been taken, or had been deliberately and intentionally taken,
on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds"
within the meaning of section 148 of the Code.
(b) Rebate Requirement. The Authority shall cause the City to take any and all actions
necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess
investments earnings, if any, to the federal government, to the extent that such section is
applicable to the Bonds.
(c) Private Activity Bond Limitation. The Authority shall assure that the proceeds of the
Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(c)
of the Code or the private loan financing test of section 141(b) of the Code.
(d) Federal Guarantee Pro{libitiori. The Authority shall not take any action or permit or
suffer any action to be taken if the result of the same would be to cause any of the Bonds to be
"federally guaranteed" within the meaning of section 149(b) of the Code.
(e) Maintenafzce of Tax Exemption. The Authority shall take any and all actions necessary
to assure the exclusion of interest on the Bonds from the gross income of the Owners of the
Bonds to the same extent as such interest is permitted to be excluded from gross income under
the Code as in effect on the date of issuance of the Bonds.
Section 6.08. Installment Sale Agreement. The Trustee shall promptly collect all amounts
due from the City pursuant to the Installment Sale Agreement. Subject to the provisions of
Article VIII, the Trustee shall enforce, and take all steps, actions and proceedings which the
Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder
as assignee of the Authority and for the enforcement of all of the obligations of the City under
the Installment Sale Agreement.
Section 6.09. Waiver of Laws. The Authority shall not at any time insist upon or plead in
any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law
now or at any time hereafter in force that may affect the covenants and agreements contained in
this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby
expressly waived by the Authority to the extent permitted by law.
Section 6.10. Continuing Disclosure. Pursuant to Section 5.6 of the Installment Sale
Agreement, the City has undertaken all responsibility for compliance with continuing
disclosure requirements and the Authority shall have no liability to the holders of the Bonds or
any other person with respect to such disclosure matters. Notwithstanding any other provision
of this Indenture, failure of the City to comply with the Continuing Disclosure Certificate shall
not be considered an Event of Default, however, any Participating Underwriter or any holder or
beneficial owner of the Bonds may take such actions as may be necessary and appropriate to
compel performance, including seeking mandate or specific performance by court order.
Section 6.11. Further Assurances. The Authority will make, execute and deliver any and
atl such further indentures, instruments and assurances as may be reasonably necessary or
proper to carry out the intention or to facilitate the performance of this Indenture and for the
better assuring and confirming unto the Owners of the Bonds of the rights and benefits
provided in this Indenture.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default. The following events shall be Events of Default
hereunder:
(a) Default in the due and punctual payment of the principal of any Bonds when and as
the same shall become due and payable, whether at maturity as therein expressed, by
proceedings for redemption, by acceleration, or otherwise.
(b) Default in the due and punctual payment of any installment of interest on any Bonds
when and as the same shall become due and payable.
(c) Default by the Authority in the observance of any of the other covenants, agreements
or conditions on its part in this Indenture or in the Bonds contained, if such default shall have
continued for a period of thirty (30) days after written notice thereof, specifying such default
and requiring the same to be remedied, shall have been given to the Authority by the Trustee;
~roviclecl, however, that if in the reasonable opinion of the Authority the default stated in the
notice can be corrected, but not within such thirty (30) day period, such default shall not
constitute an Event of Default hereunder if the Authority shall commence to cure such default
within such thirty (30) day period and thereafter diligently and in good faith cure such failure
in a reasonable period of time.
(d) The occurrence and continuation of an event of default under and as defined in the
Installment Sale Agreement.
Section 7.02. Remedies Upon Event of Default. If any Event of Default shall occur, then,
and in each and every such case during the continuance of such Event of Default, the Trustee
may, and shall at the written direction of the Owners of not less than a majority in aggregate
principal amount of the Bonds at the time Outstanding, upon notice in writing to the Authority
and the City, declare the principal of all of the Bonds then Outstanding, and the interest accrued
thereon, to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or in the Bonds
contained to the contrary notwithstanding.
Any such declaration is subject to the condition that if, at any time after such declaration
and before any judgment or decree for the payment of the moneys due shall have been obtained
or entered, the Authority or the City shall deposit with the Trustee a sum sufficient to pay all
the principal of and installments of interest on the Bonds payment of which is overdue, with
interest on such overdue principal at the rate borne by the respective Bonds to the extent
permitted by law, and the reasonable fees, charges and expenses (including those of its
attorneys) of the Trustee, and any and all other Events of Default known to the Trustee (other
than in the payment of principal of and interest on the Bonds due and payable solely by reason
of such declaration) shall have been made good or cured to the satisfaction of the Trustee or
provision deemed by the Trustee to be adequate shall have been made therefor, then, and in
every such case, the Owners of not less than a majority in aggregate principal amount of the
Bonds then Outstanding, by written notice to the Authority, the City and the Trustee, or the
Trustee if such declaration was made by the Trustee, may, on behalf of the Owners of all of the
Bonds, rescind and annul such declaration and its consequences and waive such Event of
Default; but no such rescission and annulment shall extend to or shall affect any subsequent
Event of Default, or shall impair or exhaust any right or power consequent thereon.
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Section 7.03. Application of Revenues and Other Funds After Default. If an Event of
Default shall occur and be continuing, all Revenues and any other funds then held or thereafter
received by the Trustee under any of the provisions of this Indenture shall be applied by the
Trustee as follows and in the following order:
(a) To the payment of any expenses necessary in the opinion of the Trustee to protect the
interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of
the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about
the performance of its powers and duties under this Indenture;
(b) To the payment of the principal of and interest then due on the Bonds (upon
presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment
if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this
Indenture, as follows:
First: To the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installments, and, if the amount
available shall not be sufficient to pay in full any installment or installments maturing
on the same date, then to the payment thereof ratably, according to the amounts due
thereon, to the persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid principal of
any Bonds which shall have become due, whether at maturity or by acceleration or
redemption, with interest on the overdue principal at the rate borne by the respective
Bonds (to the extent permitted by law), and, if the amount available shall not be
sufficient to pay in full all the Bonds, together with such interest, then to the payment
thereof ratably, according to the amounts of principal due on such date to the persons
entitled thereto, without any discrimination or preference.
Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably
appointed (and the successive respective Owners of the Bonds, by taking and holding the same,
shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful
attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on
their behalf such rights and remedies as may be available to such Owners under the provisions
of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and
continuance of an Event of Default or other occasion giving rise to a right in the Trustee to
represent the bond Owners, the Trustee in its discretion may, and upon the written request of
the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and
upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights
or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings
as it shall deem most effectual to protect and enforce any such right, at law or in equity, either
for the specific performance of any covenant or agreement contained herein, or in aid of the
execution of any power herein granted, or for the enforcement of any other appropriate legal or
equitable right or remedy vested in the Trustee or in such Owners under the Bonds, this
Indenture or any other law; and upon instituting such proceeding, the Trustee shall be entitled,
as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged
under this Indenture, pending such proceedings. All rights of action tinder this Indenture or the
Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of
any of the Bonds or the production thereof in any proceeding relating thereto, and any such
suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee
Eor the benefit and protection of all the Owners of such Bonds, subject to the provisions of this
Indenture.
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Section 7.05. Bond Owners' Direction of Proceedings. Anything in this Indenture to the
contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds
then Outstanding shall have the right, by an instrument or concurrent instruments in writing
executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable
satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee
hereunder, provided that such direction shall not be otherwise than in accordance with law and
the provisions of this Indenture, and that the Trustee shall have the right to decline to follow
any such direction which in the opinion of the Trustee would expose it to liability.
Section 7.06. Limitation on Bond Owners' Right to Sue. Notwithstanding any other
provision hereof, no Owner of any Bonds shall have the right to institute any suit, action or
proceeding at law or in equity, for the protection or enforcement of any right or remedy under
this Indenture, the Installment Sale Agreement or any other applicable law with respect to such
Bonds, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of
an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds
then Outstanding shall have made written request upon the Trustee to exercise the powers
hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such
Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall
have failed to comply with such request for a period of sixty (60) days after such written request
shall have been received by, and said tender of indemnity shall have been made to, the Trustee;
and (e) no direction inconsistent with such written request shall have been given to the Trustee
during such sixty (60) day period by the Owners of a majority in aggregate principal amount of
the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder or under law; it being understood and intended that no one or more Owners
of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce
any right under the Bonds, this Indenture, the Installment Sale Agreement or other applicable
law with respect to the Bonds, except in the manner herein provided, and that all proceedings at
law or in equity to enforce any such right shall be instituted, had and maintained in the manner
herein provided and for the benefit and protection of all Owners of the Outstanding Bonds,
subject to the provisions of this Indenture.
Section 7.07. Absolute Obligation of Authority. Nothing in Section 7.06 or in any other
provision of this Indenture or in the Bonds contained shall affect or impair the obligation of the
Authority, which is absolute and unconditional, to pay the principal of and interest and
premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of
maturity, or upon call for redemption, as herein provided, but only out of the Revenues and
other assets herein pledged therefor, or affect or impair the right of such Owners, which is also
absolute and unconditional, to enforce such payment by virtue of the contract embodied in the
Bonds.
Section 7.08. Termination of Proceedings. In case any proceedings taken by the Trustee
or any one or more Bond Owners on account of any Event of Default shall have been
discontinued or abandoned for any reason or shall have been determined adversely to the
Trustee or the Bond Owners, then in every such case the Authority, the Trustee and the Bond
Owners, subject to any determination in such proceedings, shall be restored to their former
positions and rights hereunder, severally and respectively, and all rights, remedies, powers and
duties of the Authority, the Trustee and the Bond Owners shall continue as though no such
proceedings had been taken.
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Section 7.09. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative
and in addition to any other remedy given hereunder or now or hereafter existing at law or in
equity or otherwise.
Section 7.10. No Waiver of Default. No delay or omission of the Trustee or of any Owner
of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein; and every power and remedy given by this Indenture to the
Trustee or the Owners of the Bonds may be exercised from time to time and as often as may be
deemed expedient.
Section 7.11. Parties Interested Herein. Nothing in this Indenture expressed or implied is
intended or shall be construed to confer upon, or to give to, any person or entity, other than the
City, the Authority or the Trustee, their officers, employees and agents, and the Owners any
right, remedy or claim under or by reason of this Indenture, or any covenant, condition or
stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture
contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the
City, the Authority or the Trustee, their officers, employees and agents, and the Owners.
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ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee. The Bank of New York Mellon Trust Company,
N.A., a national banking association organized and existing under and by virtue of the laws of
the United States of America, is hereby appointed Trustee by the Authority for the purpose of
receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use
and apply the same as provided in this Indenture. The Authority agrees that it will maintain a
Trustee having a corporate trust office in the State, with (or if a member of a bank holding
company system, its parent holding company shall have) a combined capital and surplus of at
least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or
State authority, so long as any Bonds are Outstanding. If such national banking association,
bank or trust company publishes a report of condition at least annually pursuant to law or to
the requirements of any supervising or examining authority above referred to, then for the
purpose of this Section 8.01 the combined capital and surplus of such national banking
association, bank or trust company shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
The Trustee is hereby authorized to pay the principal of and interest and maturity
amount and redemption premium (if any) on the Bonds when duly presented for payment at
maturity, or on redemption or purchase prior to maturity, and to cancel all Bonds upon
payment thereof. The Trustee shall keep accurate records of all funds administered by it and of
all Bonds paid and discharged.
Section 8.02. Acceptance of Trustee. The Trustee hereby accepts the trusts imposed upon
it by this Indenture, and agrees to perform said trusts, but only upon and subject to the
following express terms and conditions:
(a) The Trustee, prior to the occurrence of an Event of Default and after curing of all
Events of Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of Default hereunder has
occurred (which has not been cured or waived), the Trustee may exercise such of the rights and
powers vested in it by this Indenture, and shall use the same degree of care and skill and
diligence in their exercise, as a prudent person would use in the conduct of its own affairs.
(b) The Trustee may execute any of the trusts or powers hereof and perform the duties
required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to
advice of counsel concerning all matters of trust and its duty hereunder. The Trustee shall not
be responsible for any misconduct or negligence on the part of any agent, receiver or attorney
appointed with due care by it hereunder. The Trustee may conclusively rely upon an opinion of
counsel as full and complete protection for any action taken or suffered by it hereunder.
(c) The Trustee shall not be responsible for any recital herein, or in the Bonds, or for any
of the supplements thereto or instruments of further assurance, or for the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby and the Trustee shall
not be bound to ascertain or inquire as to the observance or performance of any covenants,
conditions or agreements on the part of the Authority hereunder.
(d) Except as provided in Section 3.02, the Trustee shall not be accountable for the use of
any proceeds of sale of the Bonds delivered hereunder. The Trustee may become the Owner of
bonds secured hereby with the same rights which it would have if not the Trustee; may acquire
and dispose of other bonds or evidences of indebtedness of the Authority with the same rights
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it would have if it were not the Trustee; and may act as a depository for and permit any of its
officers or directors to act as a member of, or in any other capacity with respect to, any
committee formed to protect the rights of Owners of Bonds, whether or not such committee
shall represent the Owners of the majority of the Bonds.
(e) The Trustee shall be protected in acting, in good faith and without negligence, upon
any notice, request, consent, certificate, order, affidavit, letter, telegram, requisition, facsimile
transmission, electronic mail or other paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons. Any action taken or
omitted to be taken by the Trustee in good faith and without negligence pursuant to this
Indenture upon the request or authority or consent of any person who at the time of making
such request or giving such authority or consent is the Owner of any Bond, shall be conclusive
and binding upon all future Owners of the same Bond and upon Bonds issued in exchange
therefor or in place thereof. The Trustee shall not be bound to recognize any person as an
Owner of any Bond or to take any action at his request unless the ownership of such Bond by
such person shall be reflected on the Registration Books.
(f) As to the existence or non-existence of any fact or as to the sufficiency or validity of
any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a Written
Certificate of the Authority as sufficient evidence of the facts therein contained and prior to the
occurrence of an Event of Default hereunder of which the Trustee has been given notice or is
deemed to have notice, as provided in Section 8.02(h) hereof, shall also be at liberty to accept a
Written Certificate of the Authority to the effect that any particular dealing, transaction or
action is necessary or expedient, but may at its discretion secure such further evidence deemed
by it to be necessary or advisable, but shall in no case be bound to secure the same.
(g) The permissive right of the Trustee to do things enumerated in this Indenture shall
not be construed as a duty and it shall not be answerable for other than its negligence or willful
misconduct. The immunities and exceptions from liability of the Trustee shall extend to its
officers, directors, employees and agents.
(h) The Trustee shall not be required to take notice or be deemed to have notice of any
Event of Default hereunder, under the Installment Sale Agreement, except failure by the
Authority to make any of the payments to the Trustee required to be made by the Authority
pursuant hereto or failure by the Authority to file with the Trustee any document required by
this Indenture to be so filed subsequent to the issuance of the Bonds, unless the Trustee shall be
specifically notified in writing of such default by the Authority, and all notices or other
instruments required by this Indenture to be delivered to the Trustee must, in order to be
effective, be delivered at the Trust Office of the Trustee, and in the absence of such notice so
delivered the Trustee may conclusively assume there is no Event of Default hereunder except as
aforesaid.
(i) At any and all reasonable times the Trustee and its duly authorized agents, attorneys,
experts, accountants and representatives, shall have the right (but not any duty) fully to inspect
all books, papers and records of the Authority pertaining to the Bonds, and to make copies of
any of such books, papers and records such as may be desired but which is not privileged by
statute or by law.
(j) The Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the premises hereof.
(k) Notwithstanding anything elsewhere in this Indenture with respect to the execution
of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever
within the purview of this Indenture, the Trustee shall have the right, but shall not be required,
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to demand any showings, certificates, opinions, appraisals or other information, or corporate
action or evidence thereof, as may be deemed desirable for the purpose of establishing the right
of the Authority to the execution of any Bonds, the withdrawal of any cash, or the taking of any
other action by the Trustee.
(1) Before taking any action under Article VII hereof or this Article VIII at the request or
direction of the Owners, the Trustee may require payment or reimbursement of its fees and
expenses, including fees and expenses of counsel and receipt of an indemnity bond satisfactory
to it from the Owners to protect it against all liability, except liability which is adjudicated to
have resulted from its own negligence or willful misconduct in connection with any action so
taken. Before being required to take any action, the Trustee may require an opinion of
Independent Counsel acceptable to the Trustee, which opinion shall be made available to the
other parties hereto upon request, which counsel may be counsel to any of the parties hereto, or
a verified certificate of any party hereto, or both, concerning the proposed action. If it does so in
good faith, the Trustee shall be absolutely protected in relying thereon.
(m) All moneys received by the Trustee shall, until used or applied or invested as herein
provided, be held in trust for the purposes for which they were received but need not be
segregated from other funds except to the extent required by law.
(n) The Trustee shall not be liable for any error of judgment made in good faith by a
responsible officer, unless it shall be provided that the Trustee was negligent in ascertaining the
pertinent facts.
Whether or not therein expressly so provided, every provision of this Indenture, the
Installment Sale Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Article.
The Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, coupon or other paper or document.
(o) The Trustee shall have no responsibility for or liability in connection with assuring
that all of the procedures or conditions to closing set forth in the contract for purchase of the
Bonds have been met on the closing date or, that all documents required to be delivered on the
Closing Date to the parties are actually delivered, except its own responsibility to receive the
proceeds of the sale, deliver the Bonds or other certificates expressly required to be delivered by
it and its counsel.
The Trustee may assume that parties to the contract for purchase of the Bonds have
waived their rights to receive documents or to require the performance of procedures if the
parties to whom such documents are to be delivered or for whom such procedures are to be
performed do not require delivery or performance on or prior to the Closing Date.
(p) The Trustee shall have no responsibility with respect to any information, statement
or recital in any official statement, offering memorandum or any other disclosure material
prepared or distributed with respect to the Bonds.
(q) The Trustee shall not be considered in breach of or in default in its obligations
hereunder or progress in respect thereto in the event of enforced delay ("unavoidable delay") in
the performance of such obligations due to unforeseeable causes beyond its control and without
its fault or negligence, including, but not limited to, Acts of God or of the public enemy or
terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to
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procure or general sabotage or rationing of labor, equipment, facilities, sources of energy,
material or supplies in the open market, litigation or arbitration involving a party or others
relating to zoning or other governmental action or inaction pertaining to the project, malicious
mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors
due to such causes or any similar even and/or occurrences beyond the control of the Trustee.
(r) Whenever in the administration of the trusts imposed upon it by this Trust
Agreement the Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate of the Authority or City, and such certificate shall be full
warrant to the Trustee for any action taken or suffered in good faith under the provisions of this
Indenture in reliance upon such certificate, but in its discretion the Trustee may, in lieu thereof,
accept other evidence of such matter or may require such additional evidence as it may deem
reasonable.
(s) The Trustee agrees to accept and act upon instructions or directions pursuant to this
Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods, provided, however, that, the Trustee shall have received an incumbency
certificate listing persons designated to give such instructions or directions and containing
specimen signatures of such designated persons, which such incumbency certificate shall be
amended and replaced whenever a person is to be added or deleted from the listing. If the
Authority elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar
electronic method) and the Trustee in its discretion elects to act upon such instructions, the
Trustee's understanding of such instructions shall be deemed controlling. The Trustee shall not
be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's
reliance upon and compliance with such instructions notwithstanding such instructions conflict
or are inconsistent with a subsequent written instruction. The Authority agrees to assume all
risks arising out of the use of such electronic methods to submit instructions and directions to
the Trustee, including without limitation the risk of the Trustee acting on unauthorized
instructions, and the risk of interception and misuse by third parties.
(t) The Trustee shall not be liable in connection with the performance of its duties
hereunder, except for its own negligence or willful misconduct.
Section 8.03. Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to
payment and reimbursement for reasonable fees for its services rendered hereunder and all
advances, counsel fees (including expenses) and other expenses reasonably and necessarily
made or incurred by the Trustee in connection with such services. Upon the occurrence of an
Event of Default hereunder, but only upon an Event of Default, the Trustee shall have a first
lien with right of payment prior to payment of any Bond upon the amounts held hereunder for
the foregoing fees, charges and expenses incurred by it respectively.
Section 8.04. Notice to Bond Owners of Default. If an Event of Default hereunder occurs
with respect to any Bonds of which the Trustee has been given or is deemed to have notice, as
provided in Section 8.02(h) hereof, then the Trustee shall immediately give written notice
thereof, by first-class mail to the Owner of each such Bond, unless such Event of Default shall
have been cured before the giving of such notice; provided, however, that unless such Event of
Default consists of the failure by the Authority to make any payment when due, the Trustee
shall, within thirty (30) days of the Trustee's knowledge thereof, give such notice to the Bond
Owners unless the Trustee in good faith determines that it is in the best interests of the Bond
Owners not to give such notice.
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Section 8.05. Intervention by Trustee. In any judicial proceeding to which the Authority
is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the
interests of the Owners of any of the Bonds, the Trustee may intervene on behalf of such Bond
Owners, and subject to Section 8.02(1) hereof, shall do so if requested in writing by the Owners
of at least twenty-five percent (25%) of the Bonds.
Section 8.06. Removal of Trustee. The Owners of a majority of the Bonds may at any
time, and the Authority may, so long as no Event of Default shall have occurred and then be
continuing, remove the Trustee initially appointed, and any successor thereto, by an instrument
or concurrent instruments in writing delivered to the Trustee, whereupon the Authority (with
the written consent of the City) or such Owners, as the case may be, shall appoint a successor or
successors thereto; provided that any such successor shall be a bank or trust company meeting
the requirements set forth in Section 8.01.
Section 8.07. Resignation by Trustee. The Trustee and any successor Trustee may at any
time give written notice of its intention to resign as Trustee hereunder, such notice to be given
to the Authority and the City by first class mail. Upon receiving such notice of resignation, the
Authority (with the written approval of the City) shall promptly appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee shall become
effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the
Authority shall cause notice thereof to be given by first class mail, postage prepaid, to the Bond
Owners at their respective addresses set forth on the Registration Books.
Section 8.08. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 8.06 or 8.07, respectively, and if the Owners shall
not have approved a successor Trustee, then, with the prior written consent of the City, the
Authority shall promptly appoint a successor Trustee. In the event the Authority shall for any
reason whatsoever fail to appoint a successor Trustee within sixty (h0) days following the
delivery to the Trustee of the instrument described in Section 8.06 or within sixty (60) days
following the receipt of notice by the Authority pursuant to Section 8.07, the Trustee may, at the
expense of the Authority, apply to a court of competent jurisdiction for the appointment of a
successor Trustee meeting the requirements of Section 8.01 hereof. Any such successor Trustee
appointed by such court shall become the successor Trustee hereunder notwithstanding any
action by the Authority purporting to appoint a successor Trustee following the expiration of
such ninety-day period.
Within sixty (60) days following the appointment of a successor Trustee hereunder, the
former Trustee shall deliver to such successor Trustee (a) all funds and accounts held by the
former Trustee hereunder, and (b) any and all information and documentation as may be
required or reasonably requested by the Authority or such successor Trustee in connection with
the transfer to such successor Trustee of all the duties and functions of the Trustee hereunder.
The Authority shall pay the reasonable costs and expenses of such former Trustee incurred in
connection with such transfer.
Section 8.09. Merger or Consolidation. Any company into which the Trustee may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which the
Trustee may sell or transfer all or substantially all of it corporate trust business, provided that
such company shall meet the requirements set forth in Section 8.01, shall be the successor to the
Trustee and vested with all of the title to the trust estate and all of the trusts, powers,
discretions, immunities, privileges and all other matters as was its predecessor, without the
execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
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Section 8.10. Concerning any Successor Trustee. Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor and also to the Authority
an instrument in writing accepting such appointment hereunder and thereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessors; but such
predecessor shall, nevertheless, on the Request of the Authority, or of the Trustee's successor,
execute and deliver an instrument transferring to such successor all the estates, properties,
rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall
deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should
any instrument in writing from the Authority be required by any successor Trustee for more
fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested
or intended to be vested in the predecessor Trustee, any and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Authority.
Section 8.11. Appointment of Co-Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the law of the State)
denying or restricting the right of banking corporations or associations to transact business as
Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture,
and in particular in case of the enforcement of the rights of the Trustee on default, or in the case
the Trustee deems that by reason of any present or future law of any jurisdiction it may not
exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that the Trustee appoint an additional
individual or institution as a separate co-trustee. The following provisions of this Section 8.11
are adopted to these ends.
In the event that the Trustee appoints an additional individual or institution as a
separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action,
immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised
by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest
in such separate or co-trustee but only to the extent necessary to enable such separate or co-
trustee to exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable
by either of them.
Should any instrument in writing from the Authority be required by the separate trustee
or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming
to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments
in writing shall, on request, be executed, acknowledged and delivered by the Authority. In case
any separate trustee or co-trustee, or a successor to either, shall become incapable of acting,
resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of
such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by
the Trustee until the appointment of a new trustee or successor to such separate trustee or co-
trustee.
Section 8.12. Indemnification; Limited Liability of Trustee. The Authority further
covenants and agrees to indemnify and save the Trustee and its officers, directors, agents and
employees, harmless against any loss, expense, including legal fees and expenses, and liabilities
which it may incur arising out of or in the exercise and performance of its powers and duties
hereunder, including the reasonable costs and expenses of defending against anv claim of
liability or arising out of any untrue statement or alleged untrue statement of any material fact
or omission or alleged omission to state a material fact necessary to make the statements made,
in light of the circumstances under which they were made, not misleading in any official
statement or other disclosure utilized in connection with the sale of the Bonds, but excluding
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any and all losses, expenses and liabilities which are due to the negligence or misconduct of the
Trustee, its officers, directors, agents or employees. No provision in this Indenture shall require
the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder
if repayment of such funds or adequate indemnity against such liability or risk is not assured to
it. The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance
with the direction of the Owners of at least a majority of the principal amount of the Bonds
relating to the time, method and place of exercising any trust or power or conducting any
proceeding or remedy available to the Trustee under this Indenture of for any special, indirect,
consequential or punitive damages. The obligations of the Authority hereunder and Section 8.03
shall survive the resignation or removal of the Trustee, or the discharge of this Indenture.
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ARTICLE IX
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 9.01. Amendments Permitted.
(a) This Indenture and the rights and obligations of the Authority and of the Owners of
the Bonds and of the Trustee may be modified or amended from time to time and at any time by
an indenture or indentures supplemental thereto, which the Authority and the Trustee may
enter into. No such modification or amendment shall (i) extend the fixed maturity of any Bonds,
or reduce the amount of principal thereof or extend the time of payment, or change the method
of computing the rate of interest thereon, or extend the time of payment of interest thereon,
without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid
percentage of Bonds the consent of the Owners of which is required to effect any such
modification or amendment, or permit the creation of any lien on the Revenues and other assets
pledged Linder this Indenture prior to or on a parity with the lien created by this Indenture
except as permitted herein, or deprive the Owners of the Bonds of the lien created by this
Indenture on such Revenues and other assets (except as expressly provided in this Indenture),
without the consent of the Owners of all of the Bonds then Outstanding. It shall not be
necessary for the consent of the Bond Owners to approve the particular form of any
Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance
thereof.
(b) This Indenture and the rights and obligations of the Authority, of the Trustee and the
Owners of the Bonds may also be modified or amended from time to time and at any time by a
Supplemental Indenture, which the Authority and the Trustee may enter into without the
consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the
provisions of such Supplemental Indenture shall not materially adversely affect the interests of
the Owners of the Bonds, including, without limitation, for any one or more of the following
purposes:
(i) to add to the covenants and agreements of the Authority in this Indenture
contained other covenants and agreements thereafter to be observed, to pledge or assign
additional security for the Bonds (or any portion thereof), or to surrender any right or
power herein reserved to or conferred upon the Authority;
(ii) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained
in this Indenture, or in regard to matters or questions arising under this Indenture, as
the Authority may deem necessary or desirable;
(iii) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or
any similar federal statute hereafter in effect, and to add such other terms, conditions
and provisions as maybe permitted by said act or similar federal statute;
(iv) to modify, amend or supplement this Indenture in such manner as to cause
interest on the Bonds to remain excludable from gross income under the Code; or
(v) to facilitate the issuance of Parity Obligations by the City pursuant to the
Installment Sale Agreement.
-~40-
(c) The Trustee may in its discretion, but shall not be obligated to, enter into any such
Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which
materially adversely affects the Trustee's own rights, duties or immunities tinder this Indenture
or otherwise.
(d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall
be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such
Supplemental Indenture has been adopted in compliance with the requirements of this
Indenture and that the adoption of such Supplemental Indenture will not, in and of itself,
adversely affect the exclusion from gross income for purposes of federal income taxes of interest
on the Bonds.
(e) Notice of any modification hereof or amendment hereto shall be given by the
Authority to each rating agency which then maintains a rating on the Bonds, at least fifteen (15)
days prior to the effective date of the related Supplemental Indenture.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental
Indenture pursuant to this Article IX, this Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and obligations under this
Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such modification and
amendment, and all the terms and conditions of any such Supplemental Indenture shall be
deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after
the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so
determines shall, bear a notation by endorsement or otherwise in form approved by the
Authority and the Trustee as to any modification or amendment provided for in such
Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds
Outstanding at the time of such execution and presentation of his Bonds for the purpose at the
Trust Office or at such additional offices as the Trustee may select and designate for that
purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall
so provide, new Bonds so modified as to conform, in the opinion of the Authority and the
Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be
prepared and executed by the Authority and authenticated by the Trustee, and upon demand
on the Owners of any Bonds then Outstanding shall be exchanged at the Trust Office, without
cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such
Bonds, in equal aggregate principal amount of the same series and maturity.
Section 9.04. Amendment of Particular Bonds. The provisions of this Article IX shall not
prevent any Bond Owner from accepting any amendment as to the particular Bonds held by
him.
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ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be paid
by the Authority in any of the following ways, provided that the Authority also pays or causes
to be paid any other sums payable hereunder by the Authority:
(a) by paying or causing to be paid the principal of and interest and premium (if any) on
such Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or securities in
the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or
(c) by delivering to the Trustee, for cancellation by it, all of such Bonds.
If the Authority shall also pay or cause to be paid all other sums payable hereunder by
the Authority, then and in that case, at the election of the Authority (evidenced by a Written
Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to
discharge all such indebtedness and this Indenture), and notwithstanding that any of such
Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues
and other assets made tinder this Indenture with respect to such Bonds and all covenants,
agreements and other obligations of the Authority under this Indenture with respect to such
Bonds shall cease, terminate, become void and be completely discharged and satisfied. In such
event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the
Authority all such instruments as maybe necessary or desirable to evidence such discharge and
satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or
securities or other property held by it pursuant to this Indenhire which are not required for the
payment or redemption of any of such Bonds not theretofore surrendered for such payment or
redemption.
Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in
trust, at or before maturity, of money or securities in the necessary amount (as provided in
Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity
or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in Article IV or
provision satisfactory to the Trustee shall have been made for the giving of such notice, then all
liability of the Authority in respect of such Bonds shall cease, terminate and be completely
discharged, and the Owners thereof shall thereafter be entitled only to payment out of such
money or securities deposited with the Trustee as aforesaid for their payment, subject, however,
to the provisions of Section 10.04.
The Authority may at any time surrender to the Trustee for cancellation by it any Bonds
previously issued and delivered, which the Authority may have acquired in any manner
whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid
and retired.
Section 10.03. Deposit of Money or Securities with Trustee. Whenever in this Indenture it
is provided or permitted that there be deposited with or held in trust by the Trustee money or
securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be
deposited or held may include money or securities held by the Trustee in the funds and
accounts established pursuant to this Indenture and shall be:
--t2-
(a) lawful money of the United States of America in an amount equal to the principal
amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of
Bonds which are to be redeemed prior to maturity and in respect of which notice of such
redemption shall have been given as provided in Article IV or provision satisfactory to the
Trustee shall have been made for the giving of such notice, the amount to be deposited or held
shall be the principal amount of such Bonds and all unpaid interest thereon to the redemption
date; or
(b) Defeasance Obligations, the principal of and interest on which when due will, in the
written opinion of an Independent Accountant filed with the City, the Authority and the
Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on
the Bonds to be paid or redeemed, as such principal, interest and premium become due,
provided that in the case of Bonds which are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice;
provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms
of this Indenture or by Written Request of the Authority) to apply such money to the payment
of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the
Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that
such Bonds have been discharged in accordance with this Indenture (which opinion may rely
upon and assume the accuracy of the Independent Accountant's opinion referred to above).
Section 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture, and
subject to applicable provisions of State law, any moneys held by the Trustee in trust for the
payment of the principal of, or interest on, any Bonds and remaining unclaimed for a period
ending on the earlier of 10 days prior to the date unclaimed funds would escheat to the state or
(a) two (2) years after the principal of all of the Bonds has become due and payable (whether at
maturity or upon call for redemption or by acceleration as provided in this Indenture), if such
moneys were so held at such date, or (b) two (2) years after the date of deposit of such moneys if
deposited after said date when all of the Bonds became due and payable, shall be repaid to the
Authority free from the trusts created by this Indenture, and all liability of the Trustee with
respect to such moneys shall thereupon cease; provided, however, that before the repayment of
such moneys to the City as aforesaid, the Trustee may (at the cost of the City) first mail to the
Owners of Bonds which have not yet been paid, at the addresses shown on the Registration
Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the
Bonds so payable and not presented and with respect to the provisions relating to the
repayment to the Authority of the moneys held for the payment thereof.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything in
this Indenture or in the Bonds contained, the Authority shall not be required to advance any
moneys derived from any source other than the Revenues and other assets pledged under this
Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the
principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless,
the Authority may, but shall not be required to, advance for any of the purposes hereof any
funds of the Authority which may be made available to it for such purposes.
Section 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any
person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or
equitable right, remedy or claim under or in respect of this Indenture or any covenant,
condition or provision therein or herein contained; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the
Trustee, the City and the Owners of the Bonds.
Section 11.03. Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Trustee may be established and maintained in the
accounting records of the Trustee, either as a fund or an account, and may, for the purposes of
such records, any audits thereof and any reports or statements with respect thereto, be treated
either as a fund or as an account; but all such records with respect to all such funds and
accounts shall at all times be maintained in accordance with corporate trust industry standards
to the extent practicable, and with due regard for the requirements of Section 6.05 and for the
protection of the security of the Bonds and the rights of every Owner thereof.
Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this
Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such case the giving
or receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. Whenever in this Indenture any notice shall be required to be given
by mail, such requirement shall be satisfied by the deposit of such notice in the United States
mail, postage prepaid, by first class mail.
Section 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for
the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee may,
upon Written Request of the Authority, in lieu of such cancellation and delivery, destroy such
Bonds (in the presence of an officer of the Authority, if the Authority shall so require) as may be
allowed by law, and deliver a certificate of such destruction to the Authority.
Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions shall be deemed severable from
the remaining provisions contained in this Indenture and stub invalidity, illegality or
unenforceability shall not affect any other provision of this Indenture, and this Indenture shall
be construed as if such invalid or illegal or unenforceable provision had never been contained
herein. The Authority hereby declares that it would have entered into this Indenture and each
and every other Section, paragraph, sentence, clause or phrase hereof and authorized the
issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections,
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paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.
Section 11.07. Notices. All written notices to be given under this Indenture shall be given
by first class mail or personal delivery to the party entitled thereto at its address set forth below,
or at such address as the party may provide to the other party in writing from time to time.
Notice shall be effective either (a) upon transmission by facsimile transmission or other form of
telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c)
in the case of personal delivery to any person, upon actual receipt. The Authority, the City or
the Trustee may, by written notice to the other parties, from time to time modify the address or
number to which communications are to be given hereunder.
If to the Authority: Tustin Public Financing Authority
c/o City of Tustin
X00 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
Fax: (714) 838-1602
if to the City: City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
Fax: (714) 838-1602
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017-4104
Attention: Corporate Trust Department
Phone: (213) 630-6407
Fax: (213) 630-6215
The City, the Authority and the Trustee, by notice given hereunder, may designate
different addresses to which subsequent notices, certificates or other communications will be
sent.
Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bond Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable by delivery,
shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee and the Authority if made in the manner provided in this Section 11.08.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of
any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying
that the person signing such request, consent or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution duly sworn to before such
notary public or other officer.
The ownership of Bonds shall be proved by the Registration Books.
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Any request, consent, or other instrument or writing of the Owner of any Bond shall
bind every future Owner of the same Bond and the Owner of every Bond issued in exchange
therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or
the Authority in accordance therewith or reliance thereon.
Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or
held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or
by any person directly or indirectly controlling or controlled by, or tinder direct or indirect
common control with, the Authority or the City or any other obligor on the Bonds, shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination.
Bonds so owned which have been pledged in good faith may be regarded as Outstanding for
the purposes of this Section 11.09 if the pledgee shall establish to the satisfaction of the Trustee
the pledgee's right to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authority or
the City or any other obligor on the Bonds. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon
request of the Trustee, the Authority and the City shall specify in a certificate to the Trustee
those Bonds disqualified pursuant to this Section 11.09 and the Trustee may conclusively rely
on such certificate.
Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for the
payment of the interest or principal due on any date with respect to particular Bonds (or
portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and
pending such payment, be set aside on its books and held in trust by it for the Owners of the
Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without
any liability for interest thereon.
Section 11.11. Waiver of Personal Liability. No member, officer, agent or employee of the
Authority shall be individually or personally liable for the payment of the principal of or
interest or premium (if any) on the Bonds or be subject to any personal liability or accountability
by reason of the issuance thereof; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law or by this
Indenture.
Section 11.12. Successor Is Deemed Included in All References to Predecessor. Whenever
in this indenture either the Authority or the Trustee is named or referred to, such reference shall
be deemed to include the successors or assigns thereof, and all the covenants and agreements in
this Indenture contained by or on behalf of the Authority or the Trustee shall bind and inure to
the benefit of the respective successors and assigns thereof whether so expressed or not.
Section 11.13. Execution in Several Counterparts. This Indenture may be executed in any
number of counterparts and each of such counterparts shall for all purposes be deemed to be an
original; and all such counterparts, or as many of them as the Authority and the Trustee shall
preserve undestroyed, shall together constitute but one and the same instrument.
Section 11.14. Governing Law. This Indenture shall be governed by and construed in
accordance with the laws of the State.
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IN WITNESS WHEREOF, the TUSTIN PUBLIC FINANCING AUTHORITY has caused
this Indenture to be signed in its name by its Executive Director and attested to by its Secretary,
and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., in token of its acceptance
of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by
its officers thereunto duly authorized, all as of the day and year first above written.
TUSTIN PUBLIC FINANCING
AUTHORITY
By
Executive Director
Attest:
Pamela Stoker
Secretary
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By
Teresa Fructuoso
Vice President
-~t7-
Quint & Thimmig LLP
03/18/11
0=k / 22/ 11
EXHIBIT A
FORM OF BOND
UNITED STATESOF AMERICA
STATE OF CALIFORNIA
ORANGE COUNTY
TUSTIN PUBLIC FINANCING AUTHORITY
Water Revenue Bond, 2011 Series A
INTEREST RATE MATURITY DATE ORIGINAL ISSUE DATE CUSIP
___% A ril 1, ____ Ma __, 2011 __
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
DOLLARS
The TUSTIN PUBLIC FINANCING AUTHORITY, a public body corporate and politic,
duly organized and existing under the laws of the State of California (the "Authority"), for
value received, hereby promises to pay to the Registered Owner specified above or registered
assigns (the "Registered Owner"), on the Maturity Date specified above (subject to any right of
prior redemption hereinafter provided for), the Principal Amount specified above, in lawful
money of the United States of America, and to pay interest thereon in like lawful money from
the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of
this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after
the close of business on the fifteenth day of the month preceding such interest payment date, in
which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is
authenticated on or before September 15, 2010, in which event it shall bear interest from the
Original Issue Date specified above; provided, however, that if at the time of authentication of
this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest
Payment Date to which interest has previously been paid or made available for payment on this
Bond, at the Interest Rate per annum specified above, payable semiannually on April 1 and
October 1 in each year, commencing October 1, 2011 (collectively, the "Interest Payment
Dates"), calculated on the basis of a 360-day year composed of twelve 30-day months. Principal
hereof and premium, if any, upon early redemption hereof are payable upon presentation and
surrender hereof at the corporate trust office (the "Trust Office") of The Bank of New York
Mellon Trust Company, N.A., as trustee (the "Trustee"), in Los Angeles, California, or such
other place as designated by the Trustee. Interest hereon is payable by check of the Trustee
mailed on the applicable Interest Payment Date to the Registered Owner hereof at the
Registered Owner's address as it appears on the registration books of the Trustee as of the close
of business on the fifteenth day of the month preceding each Interest Payment Date (a "Record
Date"), or, upon written request filed with the Trustee at least five days prior to such Record
Date by a Registered Owner of at least $1,000,000 in aggregate principal amount of Bonds, by
wire transfer in immediately available funds to an account in the United States designated by
such Registered Owner in such written request.
Exhibit A '?0027.01
Page 1
This Bond is not a debt of the City of Tustin (the "City"), Orange County, the State of
California, or any of its political subdivisions, and neither the City, said County, said State, nor
any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out
of any funds or properties of the Authority other than the Revenues.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the
"Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A " (the "Bonds"), in an
aggregate principal amount of dollars ($ ), all of like tenor and
date (except for such variation, if any, as may be required to designate varying members,
maturities, interest rates or redemption provisions) and all issued pursuant to the provisions of
Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with section 6584) of the California
Government Code (the "Bond Law"), and pursuant to an Indenture of Trust, dated as of May 1,
2011, by and between the Authority and the Trustee (the "Indenture"), and a resolution of the
Board of Directors of the Authority adopted on May 3, 2011, authorizing the issuance of the
Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the
Authority) and all supplements thereto for a description of the terms on which the Bonds are
issued, the provisions with regard to the nature and extent of the Revenues, and the rights
thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and
the rights and obligations of the Authority thereunder, to all of the provisions of which the
Registered Owner of this Bond, by acceptance hereof, assents and agrees.
The Bonds have been issued by the Authority to aid in financing the acquisition and
construction of certain improvements and facilities (the "Project") which will constitute part of
the water enterprise of the City, to be sold to the City by the Authority pursuant to an
Installment Sale Agreement, dated as of May 1, 2011, by and between the Authority as seller
and the City as purchaser (the "Installment Sale Agreement"). The City's obligations under the
Installment Sale Agreement will be on parity as to payment and security with the City's
obligations with respect to its $14,355,000 City of Tustin 2003 Refunding Water Revenue Bonds,
of which $11,165,000 is currently outstanding.
This Bond and the interest and premium, if any, hereon and all other Bonds and the
interest and premium, if any, thereon (to the extent set forth in the Indenture) are special
obligations of the Authority, and are payable from, and are secured by a charge and lien on the
Revemtes as defined in the Indenture, consisting primarily of installment payments to be made
by the City under the Installment Sale Agreement as the purchase price for the Project. As and
to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably
pledged in accordance with the terms hereof and the provisions of the Indenture, to the
payment of the principal of and interest and premium (if any) on the Bonds.
The rights and obligations of the Authority and the owners of the Bonds may be
modified or amended at any time in the manner, to the extent and upon the terms provided in
the Indenture, but no such modification or amendment shall extend the fixed maturity of any
Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the
time of payment, or change the method of computing the rate of interest thereon, or extend the
time of payment of interest thereon, without the consent of the owner of each Bond so affected.
The Bonds maturing on or before April 1, ,shall not be subject to optional
redemption prior to maturity. The Bonds maturing on or after April 1, ,shall be subject to
redemption, at the option of the City on any date on or after April 1, , as a whole or in part,
by such maturities as shall be determined by the City, and by lot within a maturity, from
prepayments of the Installment Payments made at the option of the City pursuant to the
Installment Sale Agreement, from any available source of funds, at a redemption price equal to
Exhibit A
Page 2
the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the
date fixed for redemption, without premium.
The Term Bonds maturing on April 1, (the Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on April 1, ,and on April 1 in each year thereafter to and including
April 1, at a redemption price equal to the principal amount thereof to be redeemed
(without premium), together with interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the Term Bonds have been optionally
redeemed as described below, the total amount of Sinking Account payments to be made
subsequent to such redemption shall be reduced in an amount equal to the principal amount of
the Term Bonds so redeemed by reducing each such future Sinking Account payment as
shall be determined by the City and, in lieu of such determination, on a pro rcztn basis (as nearly
as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice
filed by the Authority with the Trustee.
Redemption Date Principal
A rill Amount
t Maturity.
The Term Bonds maturing on April 1, (the Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on April 1, ,and on April 1 in each year thereafter to and including
April 1, at a redemption price equal to the principal amount thereof to be redeemed
(without premium), together with interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the Term Bonds have been optionally
redeemed as described below, the total amount of Sinking Account payments to be made
subsequent to such redemption shall be reduced in an amount equal to the principal amount of
the Term Bonds so redeemed by reducing each such future Sinking Account payment as
shall be determined by the City and, in lieu of such determination, on a pro rntn basis (as nearly
as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice
filed by the Authority with the Trustee.
Redemption Date Principal
A rill Amount
t Maturity.
As provided in the Indenture, notice of redemption shall be mailed by the Trustee by
first class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption
date to the respective owners of any Bonds designated for redemption at their addresses
appearing on the registration books of the Trustee, but neither failure to receive such notice nor
any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption
or the cessation of accrual of interest thereon from and after the date fixed for redemption.
Exhibit A
Page 3
if this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds
may be declared due and payable upon the conditions, in the manner and with the effect
provided in the Indenture, but such declaration and its consequences may be rescinded and
annulled as further provided in the Indenture.
This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Trust Office of the Trustee or such other place as designated
by the Trustee, but only in the manner, subject to the limitations and upon payment of the
charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon
registration of such transfer, a new Bond or Bonds, of authorized denomination or
denominations, for the same aggregate principal amount and of the same maturity will be
issued to the transferee in exchange herefor. This Bond may be exchanged at the Trust Office of
the Trustee for Bonds of the same tenor, aggregate principal amount, interest rate and maturity,
of other authorized denominations.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute
owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any
notice to the contrary.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the issuer or its agent for registration of
transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
It is hereby certified that all of the things, conditions and acts required to exist, to have
happened or to have been performed precedent to and in the issuance of this Bond do exist,
have happened or have been performed in due and regular time, form and manner as required
by the Bond Law and the laws of the State of California and that the amount of this Bond,
together with all other indebtedness of the Authority, does not exceed any limit prescribed by
the Bond Law or any laws of the State of California, and is not in excess of the amount of Bonds
permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have
been signed by the Trustee.
Exhibit A
Page 4
IN WITNESS WHEREOF, the Tustin Public Financing Authority has caused this Bond to
be executed in its name and on its behalf with the facsimile signature of its Executive Director
and its seal to be impressed hereon and attested to by the facsimile signature of its Secretary, all
as of the Original Issue Date.
By
(SEAL)
Attest:
By
Secretary
TUSTIN PUBLIC FINANCING
AUTHORITY
Executive Director
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
By
This is one of the Bonds described in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
Authorized Signatory
Exhibit A
Page 5
FORM OF ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax tdentification or Social Security Number of Assignee)
the within Bond and do(es) hereby irrevocably constitute(s) and appoint(s)
attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the
premises.
Dated:
Signature Guaranteed:
Notice: Signature guarantee shall be made by a Notice: The signature on this assignment must
guarantor institution participating in the Securities correspond with the name(s) as written on the face of
Transfer Agents Medallion Program or in such other the within Bond in every particular without alteration or
guarantee program acceptable to the Trustee. enlargement or any change whatsoever.
Exhibit A
Page 6
Quint & Thimmig LLP
03/~~/11
0-1/OS/ll
U-t/22/11
INSTALLMENT SALE AGREEMENT
Dated as of May 1, 2011
by and between
TUSTIN PUBLIC FINANCING AUTHORITY, as Seller
and the
CITY OF TUSTIN, as Purchaser
Tustin Public Financing Authority
Water Revenue Bonds, 2011 Series A
20027.01
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions ................................................................................................................................................2
ARTICLE II
COVENANTS AND REPRESENTATIONS
Section 2.1. Covenants and Representations of the City ........................................................................................3
Section 2.2. Covenants and Representations of the Authority ..............................................................................4
ARTICLE lII
ISSUANCE OF BONDS; ACQUISITION AND CONSTRUCTION OF PROJECT
Section 3.1. The Bonds .................................................................................................................................................5
Section 3.2. Plans and Specifications for the Project ...............................................................................................5
Section 3.3. Acquisition and Construction of the Project .......................................................................................5
Section 3.4. Grant of Easements .................................................................................................................................5
Section 3.5. Appointment of City as Agent of Authority .......................................................................................5
ARTICLE IV
SALE OF PROJECT; INSTALLMENT PAYMENTS
Section 4.1. Sale ............................................................................................................................................................7
Section 4.2. Term ..........................................................................................................................................................7
Section 4.3. Title ............................................................................................................................................................7
Section 4.4. Installment Payments .............................................................................................................................7
Section 4.5. Application of Gross Revenues; Pledge and Application of Net Revenues ...................................8
Section 4.6. Special Obligation of the City; Obligations Absolute ........................................................................9
Section 4.7. Rate Covenant ..........................................................................................................................................9
Section 4.8. Limitations on Future Obligations Secured by Net Revenues .......................................................10
Section 4.9. Additional Payments ............................................................................................................................1 "1
Section 4.10. Payment of Rebatable Amounts ........................................................................................................12
ARTICLE V
MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments ..................... ..........................................................13
Section 5.2. Operation of Enterprise ............................................................. ...........................................................13
Section 5.3. Insurance ..................................................................................... ...........................................................13
Section 5.6. Eminent Domain ........................................................................ ...........................................................13
Section 5.5. Records and Accounts ............................................................... ........................................................... "14
Section 5.6. Continuing Disclosure ............................................................... ...........................................................14
Section 5.7. Against Encumbrances .............................................................. ...........................................................14
Section 5.8. Against Competitive Facilities ................................................. ...........................................................14
Section 5.9. Tax Covenants ............................................................................ ...........................................................14
ARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS
Section 6.1. Disclaimer of Warranties ......................................................................................................................lh
Section 6.2. Access to the Enterprise .......................................................................................................................lh
Section 6.3. Release and Indemnification Covenants ............................................................................................1h
Section 6.4. Non-Liability of Authority for Enterprise Obligations ....................................................................16
ARTICLE VII
ASSIGNMENT, SALE AND AMENDMENT
Section 7.1. Assignment by the City ........................................................................................................................17
Section 7.2. Sale or Other Disposition of Enterprise .............................................................................................17
Section 7.3. Amendment of Installment Sale Agreement .....................................................................................17
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default Defined ................................................................................. ...................................18
Section 8.2. Remedies on Default .......................................................................................... ...................................18
Section 8.3. No Remedy Exc]usive ........................................................................................ ...................................19
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses ......................................... ...................................19
Section 8.5. No Additional Waiver Implied by One Waiver ............................................ ..................................."19
Section 8.6. Trustee and Bond Owners to Exercise Rights ................................................ ...................................19
Section 8.7. Rights of the Owners of Parity Obligations .................................................... ...................................19
ARTICLE IX
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 9.1. Security Deposit .....................................................................................................................................21
Section 9.2. Optional Prepayment ...........................................................................................................................21
Section 9.3. Credit for Amounts on Deposit ...........................................................................................................21
ARTICLE X
MISCELLANEOUS
Section 10.1. Further Assurances .............................................................................................................................22
Section 10.2. Notices ..................................................................................................................................................22
Section 10.3. Third Party Beneficiary ......................................................................................................................22
Section 10.4. Governing Law ....................................................................................................................................22
Section 10.5. Binding Effect .......................................................................................................................................22
Section 10.6. Severability of Invalid Provisions .....................................................................................................23
Section 10.7. Article and Section Headings and References ................................................................................23
Section 10.8. Execution of Counterparts .................................................................................................................23
Section 10.9. Waiver of Personal Liability .............................................................................................................23
Section 1.0.10. Limitation of Rights to Parties and Bond Owners ........................................................................23
Section 10.11. Captions ..............................................................................................................................................23
EXHIBIT A SCHEDULE OF INSTALLMENT PAYMENTS
EXHIB[T B DESCRIPTION OF THE PROJECT
-~ i-
INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT, dated as of May 1, 2011, is by and between
the TUSTIN PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and
existing under the laws of the State of California (the "Authority"), and the CITY OF TUSTIN, a
general law city and municipal corporation duly organized and existing under the laws of the
State of California (the "City"),
WITNESSETH:
WHEREAS, the City has, together with the Tustin Community Redevelopment Agency,
duly established the Authority and prescribed its purposes and powers;
WHEREAS, the City has determined that, due to prevailing financial market conditions,
it is in the best interests of the City to finance the acquisition and construction of certain
improvements and facilities (the "Project") which will constitute part of the City's municipal
water enterprise (the "Enterprise");
WHEREAS, for the purpose of raising funds necessary to provide such financial
assistance to the City, the Authority proposes to authorize the issuance of its revenue bonds
tinder the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of
Title 1 of the California Government Code (the "Act"), designated as the Tustin Public
Financing Authority Water Revenue Bonds, 2011 Series A (the "Bonds"), all pursuant to and
secured by that certain Indenture of Trust, dated as of May 1, 2011, by and between the
Authority and The Bank of New York Mellon Trust Company, N.A., as trustee;
WHEREAS, in order to provide for the repayment of the Bonds, the Authority will sell
the Project to the City pursuant to this Installment Sale Agreement, tinder which the City will
agree to make installment payments to the Authority which will be calculated to be sufficient to
enable the Authority to pay the principal of and interest and premium (if any) on the Bonds
when dtie and payable;
WHEREAS, the Authority and the City have duly authorized the execution and delivery
of this Installment Sale Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material
covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind
themselves as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise
defined herein, the capitalized terms in this Installment Sale Agreement shall have the
respective meanings specified in the Indenture.
-2-
ARTICLE II
COVENANTS AND REPRESENTATIONS
Section 2.1. Covenants and Representations of the City. The City makes the following
covenants and representations to the Authority that as of the Closing Date:
(a) The City is a general law city and municipal corporation duly organized and validly
existing under the laws of the State, has full legal right, power and authority to enter into this
Installment Sale Agreement and to carry out and consummate all transactions contemplated
hereby, and by proper action has duly authorized the execution and delivery of this Installment
Sale Agreement.
(b) The representatives of the City executing this Installment Sale Agreement are fully
authorized to execute the same.
(c) This Installment Sale Agreement has been duly authorized, executed and delivered
by the City, and constitutes the legal, valid and binding agreement of the City, enforceable
against the City in accordance with its terms.
(d) The execution and delivery of this Installment Sale Agreement, the consummation of
the transactions herein contemplated and the fulfillment of or compliance with the terms and
conditions hereof, will not conflict with or constitute a violation or breach of or default (with
due notice or the passage of time or both) under any applicable law or administrative rule or
regulation, or any applicable court or administrative decree or order, or any indenture,
mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a
party or by which it, the Enterprise or the Project are otherwise subject or bound, or result in the
creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of the City, which conflict, violation, breach, default, lien,
charge or encumbrance would have consequences that would materially and adversely affect
the consummation of the transactions contemplated by this Installment Sale Agreement, or the
financial condition, assets, improvements or operations of the Enterprise.
(e) No consent or approval of any trustee or holder of any indebtedness of the City or of
the voters of the City, and no consent, permission, authorization, order or license of, or filing or
registration with, any governmental authority, is necessary in connection with the execution
and delivery of this Installment Sale Agreement or the consummation of any transaction herein
contemplated, except as have been obtained or made and as are in full force and effect.
(f) There is no action, suit, proceeding, inquiry or investigation before or by any court or
federal, state, municipal or other governmental authority pending or threatened against or
affecting the City or the Enterprise which, if determined adversely to the City or its interests,
would have a material and adverse effect upon the consummation of the transactions
contemplated by or the validity of this Installment Sale Agreement or upon the financial
condition or operation of the Enterprise, and the City is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state, municipal or
other governmental authority, which default might have consequences that would materially
and adversely affect the consummation of the transactions contemplated by this Installment
Sale Agreement, or the financial conditions or operations of the Enterprise.
(g) The City has heretofore established the Water Fund into which the City deposits and
will continue to deposit all Gross Revenues, and which the City will maintain throughout the
Term of this Installment Sale Agreement.
-3-
(h) Other than the 2003 Bonds, there are no outstanding bonds, notes, loans, leases,
installment sale agreements or other obligations which have any security interest in or claim
upon the Net Revenues, which security interest or claim is superior to or on a parity with the
Installment Payments.
Section 2.2. Covenants and Representations of the Authority. The Authority makes the
following covenants and representations to the City that as of the Closing Date:
(a) The Authority is a joint powers authority, duly organized and existing under the
laws of the State. The Authority has the power to enter into the transactions contemplated by
this Installment Sale Agreement and to carry out its obligations hereunder. By proper action of
its governing body, the Authority has been duly authorized to execute, deliver and duly
perform this Installment Sale Agreement and the Indenture.
(b) To finance the Project Costs, fund the Reserve Account deposit and pay the Costs of
Issuance, the Authority will issue its Bonds, which will mature, bear interest and be subject to
redemption as set forth in the Indenture.
(c) The Bonds will be issued under and secured by the Indenture, and pursuant thereto,
certain of the Authority's interests in this Installment Sale Agreement have been assigned to the
Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds.
(d) The Authority is not in default under any of the provisions of the laws of the State,
which default would affect its existence or its powers referred to in subsection (a) of this Section
2.2.
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ARTICLE III
ISSUANCE OF BONDS; ACQUISITION AND CONSTRUCTION OF
PROJECT
Section 3.1. The Bonds. The Authority has authorized the issuance of the Bonds pursuant
to the Indenture in the aggregate principal amount of dollars ($ ). The
Authority agrees that the proceeds of sale of the Bonds shall be paid to the Trustee on the
Closing Date for deposit pursuant to the terms and conditions of the Indenture. The City hereby
approves the Indenture, the assignment to the Trustee of the rights of the Authority assigned
under and pursuant to the Indenture, and the issuance of the Bonds by the Authority under and
pursuant to the Indenture.
Section 3.2. Plans and Specifications for the Project. Before any payment is made for the
Project or any component thereof from amounts on deposit in the Project Fund, the City shall
have filed with the Authority detailed Plans and Specifications relating thereto. The City may
from time to time file amendments to such Plans and Specifications with the Authority, and
may thereby change or modify the description of the Project or any component thereof.
Section 3.3. Acquisition and Construction of the Project. The Authority hereby agrees
with due diligence to supervise and provide for, or cause to be supervised and provided, for the
Acquisition and Construction of the Project in accordance with Plans and Specifications,
purchase orders, construction contracts and other documents relating thereto and approved by
the City pursuant to all applicable requirements of law. Direct payment of the Project Costs
shall be made from amounts on deposit in the Project Fund, pursuant to Section 3.04 of the
Indenture. All contracts for, and all work relating to, the Acquisition and Construction of the
Project shall be subject to all applicable provisions of law relating to the acquisition and
construction of public works by the City. The Authority expects that the Acquisition and
Construction of the Project will be completed on or before May 25, 2014; ~~rovidecf, {~owez~er, that
the failure to complete any Project by the estimated Completion Date thereof shall not constitute
an Event of Default hereunder or a grounds for termination hereof, nor shall such failure result
in the diminution, abatement or extinguishment of the obligations of the Citv hereunder to pay
the Installment Payments allocable to such Project.
The City shall have the right from time to time in its sole discretion to amend the
description of the Project to be financed and sold by the Authority hereunder. In order to
exercise such right, the City shall file with the Authority and the Trustee an amended Exhibit B
hereto.
Upon the completion of the Acquisition and Construction of the Project, the amounts, if
any, on deposit in the Project Fund shall be transferred by the City to the Trustee for deposit in
the Bond Fund and the City shall close the Project Fund.
Section 3.4. Grant of Easements. The City hereby grants to the Authority all necessary
easements, rights of way and rights of access in and to all real property or interests therein now
or hereafter acquired and owned by the City, as may be necessary or convenient to enable the
Authority to acquire, construct and install the Project thereon or thereabouts. The City
covenants that it will execute, deliver and record any and all additional documents as may be
required to be executed, delivered and recorded to establish such easements, rights of way and
rights of access.
Section 3.5. Appointment of City as Agent of Authority. The Authority hereby appoints
the City as its agent to carry out all phases of the Acquisition and Construction of the Project
-~-
pursuant to and in accordance with the provisions hereof. The City hereby accepts such
appointment and assumes all rights, liabilities, duties and responsibilities of the Authority
regarding the Acquisition and Construction of the Project. The Authority, or the City as agent of
the Authority hereunder, shall enter into, administer and enforce all purchase orders or other
contracts relating to the Acquisition and Construction of the Project. All contracts for, and all
work relating to, the Acquisition and Construction of the Project shall be subject to all
applicable provisions of law relating to the acquisition, construction, improvement, and
equipping of like Project and property by joint powers authorities and by municipal
corporations.
-6-
ARTICLE IV
SALE OF PROJECT; INSTALLMENT PAYMENTS
Section 4.1. Sale. The Authority hereby agrees to sell the Project to the City, and the City
hereby agrees to purchase the Project from the Authority, upon the terms and conditions set
forth in this Installment Sale Agreement.
Section 4.2. Term. The Term of this Installment Sale Agreement shall commence on the
Closing Date, and shall end on the date on which the City shall have paid all of the Installment
Payments and all other amounts due and payable hereunder. The provisions of this Section 4.2
are subject in all respects to any other provisions of this Installment Sale Agreement relating to
the termination hereof with respect to the Project or any portion thereof.
Section 4.3. Title. Upon the Completion Date of each component of the Project, title to
such component shall be deemed conveyed to and vested in the City. The Authority and the
City shall execute, deliver and cause to be recorded any and all documents necessary to convey
such title to the City.
Section 4.4. Installment Payments.
(a) Obligation to Pay. The City agrees to pay to the Authority, its successors and assigns,
but solely from the Net Revenues, as the purchase price of the Project the aggregate principal
amount of dollars ($ ), together with interest on the unpaid principal
balance, payable in Installment Payments coming due and payable in the respective amounts
and on each Installment Payment Date specified in Exhibit A. The Installment Payments shall
be paid by the City to the Trustee, as assignee of the Authority pursuant to the Indenture, in the
amounts and at the times as set forth in Section 4.5(b).
(b) Effect of Prepayment. In the event that the City prepays all remaining Installment
Payments in full pursuant to Article IX, the City's obligations tinder this Installment Sale
Agreement shall thereupon cease and terminate, including but not limited to the City's
obligation to pay Installment Payments therefor under this Section 4.4; provided, {iozvever, that
the City's obligations to compensate and indemnify the Trustee pursuant to Sections 4.9 and 6.3
shall survive such prepayment. In the event that the City prepays the Installment Payments in
part but not in whole pursuant to Section 9.2, the principal component of each succeeding
Installment Payment shall be reduced as provided in such Sections, and the interest component
of each remaining Installment Payment shall be reduced by the aggregate corresponding
amount of interest which would otherwise be payable on the Bonds thereby redeemed pursuant
to the applicable provisions of Section 4.01 of the Indenture.
(c) Rate orz Overdue Paynierits. In the event the City should fail to make any of the
payments required in this Section 4.4 and Section 4.10, the payment in default shall continue as
an obligation of the City until the amount in default shall have been fully paid, and the Citv
agrees to pay the same with interest thereon, from the date of default to the date of payment, at
the rate of ten percent (10%) per annum.
(d) Assigm~ient. The City understands and agrees that all Installment Payments have
been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit
of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority
hereby directs the City, and the City hereby agrees, to pay to the Trustee at its Trust Office, all
amounts payable by the City pursuant to this Section 4.4 and all amounts payable by the Citv
pursuant to Article IX.
-7-
Section 4.5. Application of Gross Revenues; Pledge and Application of Net Re~~enues
(a) Deposits Into Water Fund; Transfers to Make Installment Pai~ments. All of the Gross
Revenues shall be deposited by the City immediately upon receipt in the Water Fund.
Upon receipt of Gross Revenues, the City shall segregate such amounts as shall be
estimated to be required to pay all Maintenance and Operation Costs for the period beginning
on such date and ending on the next anticipated date of receipt of Gross Revenues. Amounts
remaining on deposit in the Water Fund shall be the Net Revenues.
The City covenants and agrees that all Net Revenues will be held by the City in the
Water Fund in trust for the benefit of the Trustee (as assignee of the rights of the Authority
hereunder) and the Bond Owners, and for the benefit of the owners of any Parity Obligations.
(b) Pledge of Net Revenues; Transfers. All of the Net Revenues are hereby irrevocably
pledged, charged and assigned to the punctual payment of the Installment Payments and all
Parity Obligations and, except as otherwise provided herein, the Net Revenues shall not be used
for any other purpose so long as any of the Installment Payments or payments with respect to
any Parity Obligations remain unpaid. Such pledge, charge and assignment shall constitute a
first lien on the Net Revenues for the payment of the Installment Payments and all Parity
Obligations in accordance with the terms hereof.
On or before the fifth Business Day preceding each Interest Payment Date, commencing
September 26, 2011, the City shall withdraw from the Water Fund:
(i) and transfer to the Trustee for deposit in the Bond Fund, an amount (other
than amounts resulting from the prepayment of the Installment Payments pursuant to
Article IX and other than amounts required for payment of principal of or interest on
any Bonds which have matured or been called for redemption but which have not been
presented for payment), equal to the interest component of the Installment Payment
and the interest component of any outstanding Parity Obligations coming due and
payable on the next succeeding Interest Payment Date, and the principal component of
the Installment Payment and the principal component of any outstanding Parity
Obligations coming due and payable on the next succeeding principal payment date, if
any, provided that any amounts on deposit in the Bond Fund shall be credited against
the City's obligation to make such deposits or transfers therein,
(ii) and transfer to the Trustee for deposit in the Reserve Account (and transfer
on a parity to such similar funds or accounts established as reserve funds with respect
to Parity Obligations such amounts as are required for the replenishment thereof), the
amount, if any, required to increase the amount on deposit in the Reserve Account to
the Reserve Requirement and amount, if any, required to increase the amount on
deposit in similar funds or accounts established as reserve funds with respect to Parity
Obligations, the amount, if any, required to increase the amount on deposit therein to
the reserve requirement of such funds or account,
(iii) and pay all other amounts, including Additional Payments, when and as
due and payable tinder this Installment Sale Agreement and under any agreements
relating to Parity Obligations, and
(iv) and pay all amounts when and as due and payable with respect to any
Subordinate Debt.
-8-
(c) Release from Lien. Following the transfers described in paragraph (b) of this Section
-L5, excess Net Revenues shall be released from the lien of this Installment Sale Agreement and
shall be available for any lawful purpose of the City.
Section 4.6. Special Obligation of the City; Obligations Absolute. The City's obligation to
pay the Installment Payments, the Additional Payments, any other amounts coming due and
payable hereunder and payments with respect to Parity Obligations shall be a special obligation
of the City limited solely to the Net Revenues. Under no circumstances shall the City be
required to advance moneys derived from any source of income other than the Net Revenues
and other sources specifically identified herein for the payment of the Installment Payments, the
Additional Payments or payments with respect to Parity Obligations, nor shall any other funds
or property of the City be liable for the payment of the Installment Payments, the Additional
Payments or payments with respect to Parity Obligations and any other amounts coming due
and payable hereunder.
The obligations of the City to make the Installment Payments, the Additional Payments
and payments with respect to Parity Obligations from the Net Revenues and to perform and
observe the other agreements contained herein and under agreements with respect to Parity
Obligations shall be absolute and unconditional and shall not be subject to any defense or any
right of setoff, counterclaim or recoupment arising out of any breach of the City, the Authority
or the Trustee of any obligation to the City or otherwise with respect to the Enterprise, whether
hereunder or otherwise, or out of indebtedness or liability at any time owing to the City by the
Authority or the Trustee. Until such time as all of the Installment Payments, all of the
Additional Payments and all other amounts coming due and payable hereunder shall have been
fully paid or prepaid, the City (a) will not suspend or discontinue payment of any Installment
Payments, Additional Payments, payments with respect to Parity Obligations or such other
amounts, (b) will perform and observe all other agreements contained in this Installment Sale
Agreement, and (c) will not terminate the Term of this Installment Sale Agreement for any
cause, including, without limiting the generality of the foregoing, the occurrence. of any acts or
circumstances that may constitute failure of consideration, eviction or constructive eviction,
destruction of or damage to the Enterprise, failure to complete the Acquisition and Construction
of any Project by the estimated Completion Date thereof, sale of the Enterprise, the taking by
eminent domain of title to or temporary use of any component of the Enterprise, commercial
frustration of purpose, any change in the tax law or other laws of the United States of America
or the State or any political subdivision of either thereof or any failure of the Authority or the
Trustee to perform and observe any agreement, whether express or implied, or any dirty,
liability or obligation arising out of or connected with the Indenture or this Installment Sale
Agreement.
Nothing contained in this Section 4.6 shall be construed to release the Authority or the
Trustee from the performance of any of the agreements on its part contained herein or in the
Indenture, and in the event the Authority or the Trustee shall fail to perform any such
agreements, the City may institute such action against the Authority or the Trustee as the City
may deem necessary to compel performance so long as such action does not abrogate the
obligations of the City contained in the preceding paragraph. The City may, however, at the
City's own cost and expense and in the City's own name or in the name of the Authority
prosecute or defend any action or proceeding or take any other action involving third persons
which the City deems reasonably necessary in order to secure or protect the City's rights
hereunder, and in such event the Authority hereby agrees to cooperate fully with the City and
to take such action necessary to effect the substitution of the City for the Authority in such
action or proceeding if the City shall so request.
Section 4.7. Rate Covenant. The City shall fix, prescribe, revise and collect rates, fees and
charges for the services and facilities furnished by the Enterprise during each Fiscal Year which
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(together with other funds accumulated from Gross Revenues and which are lawfully available
to the City for payment of any of the following amounts during such Fiscal Year) are at least
sufficient, after making allowances for contingencies and error in the estimates, to pay the
Following amounts:
(a) all Maintenance and Operation Costs estimated by the City to become due and
payable in such Fiscal Year;
(b) The Installment Payments and all payments required with respect to Parity
Obligations;
(c) all other payments required for compliance with this Installment Sale Agreement and
the instruments pursuant to which any Parity Obligations shall have been issued; and
(d) all payments required to meet any other obligations of the City which are charges,
Liens, encumbrances upon or payable from the Gross Revenues or the Net Revenues.
In addition, the City shall fix, prescribe, revise and collect rates, fees and charges for the
services and facilities furnished by the Enterprise during each Fiscal Year which are sufficient to
yield Net Revenues, including connection charges together with other funds accumulated in the
City's Water Fund and which are lawfully available to the City for payment of the debt service
on the Bonds, at least equal to one hundred twenty percent (120%) of the amounts payable
under the preceding paragraph (b) in such Fiscal Year.
Section X1.8. Limitations on Future Obligations Secured by Net Revenues.
(a) No Obligations Superior to Installnwnt Payments. In order to protect further the
availability of the Net Revenues and the security for the Installment Payments and any Parity
Obligations, the City hereby agrees that the City shall not, so long as the Installment Payments
are not fully paid or any Parity Obligations are outstanding, issue or incur any obligations
payable from Net Revenues superior to the Installment Payments or such Parity Obligations.
(b) Parity Obligations. The City further covenants that it will not issue or incur any Parity
Obligations unless:
(i) Net Revenues, calculated on sound accounting principles, as shown by the
books of the City for the latest Fiscal Year or any more recent twelve (12) month period
selected by the City ending not more than sixty (60) days prior to the adoption of the
resolution pursuant to which instrument such Parity Obligations are issued or incurred,
as shown by the books of the City, plus, at the option of the City, the additional
allowance described below, shall have amounted to at least 1.20 times Maximum
Aggregate Annual Debt Service immediately subsequent to the incurring of such
additional obligations; provi~~ec~, however, that in the event that such Parity Obligations
are to be incurred solely for the purpose of refunding and retiring any Parity
Obligations then Outstanding, interest and principal payments on the Parity
Obligations to be so refunded and retired from the proceeds of such Parity Obligations
being incurred shall be excluded from the foregoing computation of Maximum Annual
Debt Service; and provided further, that the City may at any time incur Parity
Obligations without compliance with the foregoing conditions if the Annual Debt
Service for each Fiscal Year during which such Parity Obligations are Outstanding will
not be increased by reason of the incurrence of such Parity Obligations.
Either or both of the following items may be added to such Net Revernies for the
purpose of applying the restriction contained herein:
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(A) An allowance for revenues from any additions to or improvements
or extensions of the Enterprise to be constructed with the proceeds of such
Parity Obligations, and also for Net Revenues from anv such additions,
improvements or extensions which have been constructed from any source of
funds but which, during all or any part of such Fiscal Year, were not in service,
all in an amount equal to 70% of the estimated additional average annual Net
Revenues to be derived from such additions, improvements and extensions to be
constructed during the first 36-month period following issuance of the proposed
Parity Obligations, all as shown by the certificate or opinion of a qualified
independent consultant employed by the City, may be added to such Net
Revenues for the purpose of applying the restriction contained in this subsection
(b)(ii) and/or
(B) An allowance for earnings arising from any increase in the charges
made for service from the Enterprise which has become effective prior to the
incurring of such Parity Obligations but which, during all or any part of such
Fiscal Year, was not in effect, in an amount equal to 100% of the amount by
which the Net Revenues would have been increased if such increase in charges
had been in effect during the whole of such Fiscal Year and any period prior to
the incurring of such additional obligations, as shown by the certificate or
opinion of a qualified independent consultant employed by the City.
(ii) So long as the 2003 Bonds remaining outstanding, a reserve fund shall be
funded for such Parity Obligations, and thereafter a reserve fund may be funded for
such Parity Obligations, with cash or Permitted Investments, which is at least equal to
the least of the maximum annual payments to be made with respect to such Parity
Obligations, 125`% of the average annual payments to be made with respect to such
Parity Obligations and 10"/<~ of the principal amount of such Parity Obligations.
(c) Subordinate Debt. The City further covenants that the City shall not issue or incur anv
Subordinate Obligations unless Net Revenues, calculated on sound accounting principles, as
shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month
period selected by the City ending not more than sixty (60) days prior to the adoption of the
resolution pursuant to which instrument such Subordinate Obligations are issued or incurred,
as shown by the books of the City shall, after deducting all amounts required for the payment of
the Bonds and any Parity Obligations, have amounted to at least 1.0 times the sum of the
maximum annual debt service on all Subordinate Obligations outstanding immediately
subsequent to the incurring of such additional obligations. An allowance for earnings arising
from any increase in the charges made for service from the Enterprise which has become
effective prior to the incurring of such additional obligations but which, during all or any part
of such Fiscal Year, was not in effect, may be added in an amount equal to 100%~ of the amount
by which the Net Revenues would have been increased if such increase in charges had been in
effect during the whole of such Fiscal Year and any period prior to the incurring of such
additional obligations, as shown by the certificate or opinion of a qualified independent
consultant employed by the City.
Section 4.9. Additional Payments. In addition to the Installment Payments, the City shall
pay when due all costs and expenses incurred by the Authority to comply with the provisions
of the Indenture, including without limitation all Costs of Issuance (to the extent not paid from
amounts on deposit in the Costs of Issuance Fund or the Project Fund), and shall pay to the
Trustee upon request therefor all compensation for fees due to the Trustee and all of its costs
and expenses payable as a result of the performance of and compliance with its duties
hereunder or under the Indenture or any related documents, together with all amounts required
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to indemnify the Trustee pursuant to Section 6.3 hereof or Section 8.12 of the Indenture, and all
costs and expenses of attorneys, auditors, engineers and accountants. The rights of the Trustee
and the obligations of the City under this Section 4.9 shall survive the termination of this
Installment Sale Agreement.
Section 4.10. Payment of Rebatable Amounts. The City agrees to furnish all information
to, and cooperate fully with, the Authority and its officers, employees, agents and attorneys, in
order to assure compliance with the provisions of Section 6.07(b) of the Indenture. In the event
that the Authority shall determine, pursuant to Section 6.07(b) of the Indenture, that any
amounts are due and payable to the United States of America thereunder and that neither the
Authority nor the Trustee has on deposit an amount of available moneys (excluding moneys on
deposit in the funds and accounts established for the payment of the principal of or interest or
redemption premium, if any, on the Bonds) to make such payment, the Authority shall
promptly notify the City of such fact. Upon receipt of any such notice, the City shall promptly
pay to the Trustee from any source of legally available funds, the amounts determined by the
Authority to be due and payable to the United States of America under such Section 6.07(b).
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ARTICLE V
MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this
Installment Sale Agreement, all improvement, repair and maintenance of the Enterprise shall be
the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of
all utility services supplied to the Enterprise, which may include, without limitation, janitor
service, security, power, gas, telephone, light, heating, water and all other utility services, and
shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of
the Enterprise resulting from ordinary wear and tear.
The City shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the City affecting any Enterprise or the respective
interests or estates therein; provic~ec~, however, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
shall be obligated to pay only such installments as are required to be paid during the Term of
this Installment Sale Agreement as and when the same become due.
The City may, at the City's expense and in its name, in good faith contest any such taxes,
assessments, utility and other charges and, in the event of any such contest, may permit the
taxes, assessments or other charges so contested to remain unpaid during the period of such
contest and any appeal therefrom unless the Authority shall notify the City that, in its opinion,
by nonpayment of any such items, the interest of the Authority hereunder or under the
Indenture will be materially adversely affected, in which event the City shall promptly pay such
taxes, assessments or charges or provide the Authority with full security against any loss which
may result from nonpayment, in form satisfactory to the Authority.
Section 5.2. Operation of Enterprise. The City covenants and agrees to operate or cause
to be operated the Enterprise in an efficient and economical manner and to operate, maintain
and preserve or caused to be operated, maintained and .preserved the Enterprise in good repair
and working order. The City covenants that, in order to fully preserve and protect the priority
and security of the Bonds, the City shall pay from the Gross Revenues and discharge all lawful
claims for labor, materials and supplies furnished for or in connection with the Enterprise
which, if unpaid, may become a lien or charge upon the Gross Revenues or the Net Revenues
prior or superior to the lien granted hereunder, or which may otherwise impair the ability of the
City to pay the Installment Payments in accordance herewith.
Section 5.3. Insurance. The City shall maintain or cause to be maintained, throughout the
Term of this Installment Sale Agreement, but only if and to the extent available at reasonable
cost from reputable insurers, liability and casualty insurance in such amounts and against such
risks as shall be appropriate for water systems of like size and with similar facilities as the
Enterprise. Such insurance may be maintained as part of or in conjunction with any other
insurance carried by the City and may be maintained in whole or in part in the form of self-
insurance by the City or in the form of the participation by the City in a joint powers agency or
other program providing pooled insurance. All amounts collected from insurance against
accident to or destruction of any portion of the Enterprise shall be used to repair, rebuild or
replace such damaged or destroyed portion of the Enterprise. The proceeds of liability
insurance shall be applied toward the extinguishment or satisfaction of the liability with respect
to which such proceeds shall have been paid.
Section 5.4. Eminent Domain. Any amounts received as awards as a result of the i:aking
of all or any part of the Enterprise by the lawful exercise of eminent domain, at the election of
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the City (evidenced by a Written Certificate of the City filed with the Trustee and the Authority)
shall either (a) be used for the acquisition or construction of improvements and extension of the
Enterprise in replacement of the condemned portions thereof, or (b) applied as a credit against
the City's obligation to make the Installment Payments and payments with respect to any Parity
Obligations in accordance with written instructions of the City filed with the Trustee.
Section 5.5. Records and Accounts. The City shall keep proper books of record and
accounts of the Enterprise, separate from all other records and accounts, in which complete and
correct entries shall be made of all transactions relating to the Enterprise. Said books shall, upon
prior request, be subject to the reasonable inspection by the Owners of not less than ten percent
(10%) in aggregate principal amount of the Outstanding Bonds, or their representatives
authorized in writing. The City shall cause the books and accounts of the Enterprise to be
audited annually by an Independent Accountant, not more than one hundred eighty (180) days
after the close of each Fiscal Year, and shall make a copy of such report available for inspection
by the Bond Owners at the office of the Citv.
Section 5.6. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Certificate.
Notwithstanding any other provision of this Installment Sale Agreement, failure of the City to
comply with the Continuing Disclosure Certificate shall not constitute an Event of Default
hereunder; provided, however, that any Participating Underwriter or any Owner or beneficial
owner of the Bonds may take such actions as may be necessary and appropriate to compel
performance by the City of its obligations under this Section 5.6, including seeking mandate or
specific performance by court order.
Section 5.7. Against Encumbrances. The City will not make any pledge of or place any
lien on Gross Revenues or the moneys in the Water Fund except as provided herein. The City
may at any time, or from time to time, execute Parity Obligations as permitted herein or incur
evidences of indebtedness or incur other obligations for any lawful purpose which are payable
from and secured by a pledge of lien on Net Revenues on any moneys in the Water Fund as
may from time to time be deposited therein, provided that such pledge and lien shall be
subordinate in all respects to the pledge of and lien thereon provided herein.
Section 5.8. Against Competitive Facilities. To the extent permitted by law, the City
covenants that it will not acquire, construct, maintain or operate and will not, to the extent
permitted by law and within the scope of its powers, permit any other public or private agency,
corporation, city or political subdivision or any person whomsoever to acquire, construct,
maintain or operate within the City any water system competitive with the Enterprise.
Notwithstanding the foregoing, the City may permit competitive systems where it determines
that provision of water service is either geographically, technically or economically prohibitive
or where provision of such services is more readily obtained from another provider of such
services.
Section 5.9. Tax Covenants.
(a) Private Activity Bond Limitation. The City shall assure that proceeds of the Bonds are
not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the
Code or the private loan financing test of section 141(c) of the Code.
(b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer
any action to be taken if the result of the same would be to cause any of the Bonds to be
"federally guaranteed" within the meaning of section 149(b) of the Code.
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(c) Rebate Requirement. The City shall take any and all actions necessary to assure
compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings,
if any, to the federal government, to the extent that such section is applicable to the Bonds.
(d) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or
otherwise, any action with respect to the proceeds of the Bonds which, if such action had been
reasonably expected to have been taken, or had been deliberately and intentionally taken, on
the Closing Date would have caused the Bonds to be "arbitrage bonds" within the meaning of
section 148 of the Code.
(e) Maintenance of Tn~-Exemption. The City shall take all actions necessary to assure the
exclusion of interest with respect to the Bonds from the gross income of the Owners of the
Bonds to the same extent as such interest is permitted to be excluded from gross income under
the Code as in effect on the Closing Date.
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ARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS
Section 6.1. Disclaimer of Warranties. The Authority and the Trustee make no warranty
or representation, either express or implied, as to the value, design, condition, merchantability
or fitness for any particular purpose or fitness for the use contemplated by the City of the
Project, or any other representation or warranty with respect to the Project. In no event shall the
Authority or the Trustee be liable for incidental, indirect, special or consequential damages in
connection with or arising out of this Installment Sale Agreement or the Indenture for the
existence, furnishing, functioning or City s use of the Project.
Section 6.2. Access to the Enterprise. The City agrees that the Authority and the Trustee,
and any duly authorized representative thereof, shall have the right at all reasonable times to
enter upon and to examine and inspect the Enterprise. The City further agrees that the
Authority and the Trustee, and any duly authorized representative thereof, shall have such
rights of access to the Enterprise as may be reasonably necessary to cause the proper
maintenance of the Enterprise in the event of failure by the City to perform its obligations
hereunder.
Section 6.3. Release and Indemnification Covenants. The City shall and hereby agrees to
indemnify and save the Authority and the Trustee and their respective officers, agents,
successors and assigns harmless from and against all claims, losses and damages, including
legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or
from any work or thing done on the Enterprise by the City, (b) any breach or default on the part
of the City in the performance of any of its obligations under this Installment Sale Agreement,
(c) any negligence or willful misconduct of the City or of any of its agents, contractors, servants,
employees or licensees with respect to the Enterprise, (d) any act or negligence of any sublessee
of the City with respect to the Enterprise, (e) the Acquisition and Construction of the Project or
the authorization of payment of the Project Costs, (f) the performance by the Trustee of its
duties and obligations under the Indenture, including any duties referred to in Section 8.12 of
the Indenture, (g) the presence on, tinder or about, or release from, the Enterprise of any
substance, material or waste which is, or which becomes, regulated or classified as hazardous or
toxic under State, federal or local law, or (h) the offer, sale and issuance of the Bonds. No
indemnification is made under this Section 6.3 or elsewhere in this Installment Sale Agreement
for adjudicated willful misconduct or negligence by the Authority or the Trustee, or their
respective officers, employees, successors or assigns. The rights of the Trustee and the
obligations of the City under this Section 6.3 shall survive the termination of this Installment
Sale Agreement and the resignation or removal of the Trustee.
Section 6.4. Non-Liability of Authority for Enterprise Obligations. The Authority and its
successor and assigns shall have no obligation and shall incur no liabilities or debts whatsoever
for the obligations, liabilities and debts of the City incurred in connection with the Enterprise.
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ARTICLE VII
ASSIGNMENT, SALE AND AMENDMENT
Section 7.1. Assignment by the City. The obligations of the City under this Installment
Sale Agreement may not be assigned by the City.
Section 7.2. Sale or Other Disposition of Enterprise. Except as provided herein, the City
covenants that the Enterprise shall not be encumbered, sold, leased, pledged, any charge placed
thereon, or otherwise disposed of, as a whole or substantially as a whole; provided, however, the
City may lease the Enterprise to a related public entity that (a) assumes all liabilities of the City
with respect to the Enterprise, and (b) covenants to maintain Gross Revenues sufficient to
operate and maintain the Enterprise and duly provide for the punctual payment of all
obligations assumed by such related public entity in connection with such lease including, but
not limited to, the Installment Payments hereunder. Neither the Net Revenues nor any other
funds pledged or otherwise made available to secure payment of the Installment Payments shall
be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed or
used except as authorized by the terms of this Installment Sale Agreement. The City shall not
enter into any agreement which impairs the operation of the Enterprise or any part of it
necessary to secure adequate Net Revenues to pay the Installment Payments, or which
otherwise would impair the rights of the Bond Owners and the owners of any Parity
Obligations with respect to the Net Revenues. If any substantial part of the Enterprise shall be
sold, the payment therefor shall either (a) be used for the acquisition or construction of
improvements, extensions or replacements of Project constituting part of the Enterprise, or (b)
to the extent not so used, be paid to the Trustee to be applied to prepay the Installment
Payments or any Parity Obligations, in accordance with written instructions of the City filed
with the Trustee.
Section 7.3. Amendment of Installment Sale Agreement. The City and the Authority
shall have the right to modify or amend this Installment Sale Agreement without the consent of
any of the Bond Owners or any of the owners of Parity Obligations, but only if such amendment
or modification does not cause interest represented by the Bonds to be includable in gross
income for federal income tax purposes in the opinion of Bond Counsel, and only if such
amendment or modification does not materially adversely affect the interests of the Owners of
the Bonds in the opinion of Bond Counsel, and only if such amendment or modification is for
any one or more of the following purposes:
(a) to provide for the issuance of Parity Obligations pursuant to Section 4.9;
(b) to add to the covenants and agreements of the City contained in this Installment Sale
Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender
any rights or power herein reserved to or conferred upon the City;
(c) to cure any ambiguity, or to cure, correct or supplement any defective provision
contained herein, or in any other respect whatsoever as the Authority and the City may deem
necessary or desirable; or
(d) to amend any provision thereof for the purpose of complying with the applicable
requirements of the Tax Code.
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ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default Defined. The following events shall be Events of Default
hereunder:
(a) Failure by the City to pay any Installment Payment when and as the same become
due and payable hereunder.
(b) Failure by the City to pay any Additional Payment when due and payable
hereunder, and the continuation of such failure for a period of ten (10) days.
(c) Failure by the City to observe and perform any covenant, condition or agreement on
its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b),
for a period of thirty (30) days after written notice specifying such failure and requesting that it
be remedied has been given to the City by the Authority or the Trustee; provi~~ed, hozoczu:r, that if
the City shall notify the Authority and the Trustee that in its reasonable opinion the failure
stated in the notice can be corrected, but not within such thirty (30) day period, such failure
shall not constitute an Event of Default hereunder if the City shall commence to cure such
failure within such thirty (30) day period and thereafter diligently and in good faith cure such
failure in a reasonable period of time.
(d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City
promptly to lift any execution, garnishment or attachment, or adjudication of the City as a
bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an
agreement of composition with creditors, or the approval by a court of competent jurisdiction of
a petition applicable to the City in any proceedings instituted under the provisions of the
Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be
enacted.
(e) The occurrence and continuation of any payment event of default under and as
defined in the instruments authorizing the issuance of any Parity Obligations or any event that
allows the acceleration of Parity Obligations.
Section 82. Remedies on Default. Whenever any Event of Default shall have happened
and be contimiing, the Trustee as assignee of the Authority shall have the right, at its option and
without any further demand or notice, but subject in all respects to the provisions of Article VII
of the Indenture, to:
(a) declare all principal components of the unpaid Installment Payments, together with
accrued interest thereon at the net effective rate of interest per annum then borne by the
Outstanding Bonds from the immediately preceding Interest Payment Date on which payment
was made, to be immediately due and payable, whereupon the same shall immediately become
due and payable;
(b) take whatever action at law or in equity may appear necessary or desirable to collect
the Installment Payments then due or thereafter to become due during the Term of this
Installment Sale Agreement, or enforce performance and observance of any obligation,
agreement or covenant of the City under this Installment Sale Agreement; and
(c) as a matter of right, in connection with the filing of a suit or other commencement of
judicial proceedings to enforce the rights of the Trustee and the Bond Owners hereunder, cause
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the appointment of a receiver or receivers of the Gross Revenues and other amounts pledged
hereunder, with such powers as the court making such appointment shall confer.
The provisions of the preceding clause (a), however, are subject to the condition that if,
at any time after the principal components of the unpaid Installment Payments shall have been
so declared due and payable pursuant to the preceding clause (a), and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered, the City shall
deposit with the Trustee a sum sufficient to pay all principal components of the Installment
Payments coming due prior to such declaration and all matured interest components (if any) of
the Installment Payments, with interest on such overdue principal and interest components
calculated at the net effective rate of interest per annum then borne by the Outstanding Bonds,
and the reasonable expenses of the Trustee (including any fees and expenses of its attorneys),
and any and all other defaults known to the Trustee (other than in the payment of the principal
and interest components of the Installment Payments due and payable solely by reason of such
declaration) shall have been made good, then, and in every such case, with the written consent
of the Trustee, shall rescind and anmtl such declaration and its consequences. However, no such
rescission and annulment shall extend to or shall affect any subsequent default, or shall impair
or exhaust any right or power consequent thereon. As provided in Section 8.6, the Trustee shall
be required to exercise the remedies provided herein in accordance with the Indenture.
Section 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Installment Sale Agreement or now or
hereafter existing at law or in equity. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time and as often
as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved
to it in this Article VIII it shall not be necessary to give any notice, other than such notice as may
be required in this Article VIII or by law.
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to
this Installment Sale Agreement shall default under any of the provisions hereof and the
nondefaulting party, the Trustee or the Owner of any Bonds should employ attorneys or incur
other expenses for the collection of moneys or the enforcement or performance or observance of
any obligation or agreement on the part of the defaulting party herein contained, the defaulting
party agrees that it will on demand therefor pay to the nondefaulting party, the Trustee or such.
Owner, as the case may be, the reasonable fees of such attorneys and such other expenses so
incurred.
Section 8.5. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Installment Sale Agreement shall be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
Section 8.6. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as
are given to the Authority under this Article VIII have been assigned by the Authority to the
Trustee under the Indenture, to which assignment the City hereby consents. Such rights and
remedies shall be exercised by Trustee and the Owners of the Bonds as provided in the
Indenture.
Section 8.7. Rights of the Owners of Parity Obligations. Notwithstanding anything in
this Article VIII to the contrary, it is hereby acknowledged and agreed that the rights of the
Trustee and the Bond Owners hereunder in and to the Net Revenues and the Enterprise shall be
exercised on a parity and proportionate basis with the rights of the owners of any Parity
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Obligations and any fiduciary acting for the benefit of such owners. The provisions of this
Article VIII, and the provisions of any instruments authorizing the issuance of any Parity
Obligations, shall be construed in accordance with the foregoing sentence.
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ARTICLE IX
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 9.1. Security Deposit. Notwithstanding any other provision of this Installment
Sale Agreement, the City may on any date secure the payment of Installment Payments in
whole or in part by irrevocably depositing with the Trustee or any other fiduciary an amount of
cash which, together with amounts on deposit in the Bond Fund, the accounts therein and the
cash on deposit in the Reserve Account, is either (a) sufficient to pay all such Installment
Payments, including the principal and interest components thereof, in accordance with the
Installment Payment schedule set forth in Exhibit A, or (b) invested in whole or in part in
Federal Securities in such amount as will, in the written opinion of an Independent Accountant,
together with interest to accrue thereon and together with any cash which is so deposited, be
fully sufficient to pay all such Installment Payments when due pursuant to Section 4.4(a) or
when due on any optional prepayment date pursuant to Section 9.2, as the City shall instruct at
the time of said deposit. In the event of a security deposit pursuant to this Section 9.1 with
respect to all of the Installment Payments, all obligations of the City under this Installment Sale
Agreement, and all security provided by this Installment Sale Agreement for said obligations,
shall cease and terminate, excepting only the obligation of the City to make, or cause to be
made, all of such Installment Payments from such security deposit, and the obligation of the
City to compensate and indemnify the Trustee pursuant to Sections 4.9 and 6.3. Said security
deposit shall be deemed to be and shall constitute a special fund for the payment of Installment
Payments in accordance with the provisions of this Installment Sale Agreement.
Section 9.2. Optional Prepayment. The City may exercise its option to prepay the
principal components of the Installment Payments in whole, or in part in integral multiples of
$5,000, on any date on or after May 15, by paying a prepayment price equal to the
aggregate principal components of the Installment Payments to be prepaid, together with the
interest component of the Installment Payment required to be paid on or accrued to such date.
Such prepayment price shall be deposited by the Trustee in the Redemption Fund or in another
trustee-held fund to be applied to the redemption of Bonds pursuant to Section 4.01(b) of the
Indenture. The City shall give the Trustee written notice of its intention to exercise its option not
less than forty-five (45) days in advance of the date of exercise.
Section 9.3. Credit for Amounts on Deposit. In the event of prepayment of the principal
components of the Installment Payments in full under this Article IX, such that the Indenture
shall be discharged by its terms as a result of such prepayment, and upon payment in full of all
Additional Payments and other amounts then due and payable hereunder, all available
amounts then on deposit in the funds and accounts established tinder the Indenture shall be
credited towards the amounts then required to be so prepaid.
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ARTICLE X
MISCELLANEOUS
Section 10.1. Further Assurances. The City agrees that it will execute and deliver any and
all such further agreements, instruments, financing statements or other assurances as may be
reasonably necessary or requested by the Authority or the Trustee to carry out the intention or
to facilitate the performance of this Installment Sale Agreement, including, without limitation,
to perfect and continue the security interests herein intended to be created.
Section 10.2. Notices. Any notice, request, complaint, demand or other communication
under this Installment Sale Agreement shall be given by first class mail or personal delivery to
the party entitled thereto at its address set forth below, or by telecopy, telex or other form of
telecommunication, at its number set forth below. Notice shall be effective either (a) upon
transmission by telecopy, telex or other form of telecommunication, (b) 48 hours after deposit in
the United States mail, postage prepaid, or (c) in the case of personal delivery to any person,
upon actual receipt.
If to the Authority: Tustin Public Financing Authority
c/o City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
Fax: (714) 838-1602
If to the City: City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
Phone: (714) 573-3000
Fax: (714) 838-1602
if to the Trustee: The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017-4104
Attention: Corporate Trust Department
Phone: (213) 630-6407
Fax: (213) 630-6215
The Authority, the City or the Trustee may, by written notice to the other parties, from
time to time modify the address or number to which communications are to be given
hereunder.
Section 10.3. Third Party Beneficiary. The Trustee shall be and is hereby made a third
party beneficiary hereunder.
Section 10.4. Governing Law. This Installment Sale Agreement shall be construed in
accordance with and governed by the laws of the State.
Section 10.5. Bindin Eg ffect. This Installment Sale Agreement shall inure to the benefit of
and shall be binding upon the Authority and the City, and their respective successors and
assigns, subject, however, to the limitations contained herein.
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Section 10.6. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Installment Sale Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions shall be deemed severable from
the remaining provisions contained in this Installment Sale Agreement and such invalidity,
illegality or unenforceability shall not affect any other provision of this Installment Sale
Agreement, and this Installment Sale Agreement shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein. The Authority and the City each
hereby declares that it would have entered into this Installment Sale Agreement and each and
every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that
any one or more Sections, paragraphs, sentences, clauses or phrases of this Installment Sale
Agreement may be held illegal, invalid or unenforceable.
Section 10.7. Article and Section Headings and References. The headings or titles of the
several Articles and Sections hereof, and any table of contents appended to copies hereof, shall
be solely for convenience of reference and shall not affect the meaning, construction or effect of
this Installment Sale Agreement. All references herein to "Articles," "Sections" and other
subdivisions are to the corresponding Articles, Sections or subdivisions of this Installment Sale
Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar
import refer to this Installment Sale Agreement as a whole and not to any particular Article,
Section or subdivision hereof; and words of the masculine gender shall mean and include
words of the feminine and neuter genders.
Section 10.8. Execution of Counterparts. This Installment Sale Agreement may be
executed in any number of counterparts, each of which shall for all purposes be deemed to be
an original and all of which shall together constitute but one and the same instrument.
Section 10.9. Waiver of Personal Liability. No member of the City Council, officer, agent
or employee of the City shall be individually or personally liable for the payment of Installment
Payments or Additional Payments or be subject to any personal liability or accountability by
reason of this Installment Sale Agreement; but nothing herein contained shall relieve any such
member of the City Council, officer, agent or employee from the performance of any official
duty provided by law or by this Installment Sale Agreement.
Section 10.10. Limitation of Rights to Parties and Bond Owners. Nothing in this
Installment Sale Agreement expressed or implied is intended or shall be construed to give to
any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any
legal or equitable right, remedy or claim under or in respect of this Installment Sale Agreement
or any covenant, condition or provision therein or herein contained; and all such covenants,
conditions and provisions are and shall be held to be for the sole and exclusive benefit of the
Authority, the Trustee, the City and the Owners of the Bonds.
Section 10.11. Captions. The captions or headings in this Installment Sale Agreement are
for convenience only and in no way define, limit or describe the scope or intent of any
provisions or Section of this Installment Sale Agreement.
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IN WITNESS WHEREOF, the Authority and the City have caused this Installment Sale
Agreement to be executed in their respective names by their duly authorized officers, all as of
the date first above written.
Attest:
Secretary
Attest:
City Clerk
TUSTIN PUBLIC FINANCING
AUTHORITY, as seller
By
Executive Director
CITY OF TUSTIN, as Purchaser
By
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City Manager
EXHIBIT A
SCHEDULE OF INSTALLMENT PAYMENTS
Total
Installment Principal Interest Installment
Payment Date Component Component Payment
Exhibit A
Pale 1
EXHIBIT B
DESCRIPTION OF THE PROJECT
The proceeds of the Bonds, together with other available moneys, will be used to finance the
Project, which includes various water capital improvement projects for storage, production/supply,
distribution, treatment, and control/security including, but not limited to, the following water projects:
Rnzvlings Reservoir: Water storage is a key element of any water distribution system. Water
storage provides operational supply during peak periods of the day, fire protection and as a backup
supply for emergency conditions. In 1996, an engineering analysis of the existing 3.8 million gallon (MG)
Rawlings Reservoir identified several structural deficiencies in the reservoir and recommended its
demolition and replacement. In November of 2004, the reservoir was taken out of service. As part of the
proposed Project the existing reservoir will be demolished and replaced with two 3 MG circular pre-
stressed concrete reservoirs at the same site. The overall system storage capacity will be increased to 13.8
MG. This represents an increase of 2 MG of storage that will provide added system-wide operational, fire
and emergency storage.
Tustin Avenue Well: The Tustin Avenue Well Site Project involves the demolition of an aging
existing water well and facility and replacing it with a new higher capacity water well housed in a 200
square foot facility with modern appurtenances. The new Tustin Avenue Well reduces the City's reliance
on more expensive imported water and increases the system reliability. This component of the Project
includes drilling a new well and providing all pumping equipment, electrical panels, sand separators,
disinfection system and a standby power generator. The proposed Project also includes the replacement
of two sections of undersized 8 inch water main lines on Tustin Avenue north of Seventeenth Street and
on Seventeenth Street west of Carroll Way with 12 inch water main lines. The purpose of these water
main improvements is to optimize the main line distribution in relation to the new well production rate.
Exhibit B
Page 1
Quint & Thimmig LLP
TUSTIN PUBLIC FINANCING AUTHORITY
Water Revenue Bonds, 2011 Series A
03/18/11
04/22/11
BOND PURCHASE AGREEMENT
May 12, 2011
Tustin Public Financing Authority
300 Centennial Way
Tustin, California 92780
City of Tustin
300 Centennial Way
Tustin, California 92780
Ladies and Gentlemen:
The undersigned, Citigroup Global Markets Inc. (the "Underwriter"), hereby offers to
enter into this Bond Purchase Agreement (the "Bond Purchase Agreement") with the Tustin
Public Financing Authority (the "Authority") and the City of Tustin (the "City"), which, upon
the Authority's and City's acceptance hereof, will be binding upon the Authority, the City and
the Underwriter. This offer is made subject to written acceptance by the Authority and the City
and the delivery of such acceptance to the Underwriter at or prior to 5:00 P.M., California time,
on the date hereof. If this offer is not so accepted, this offer will be subject to withdrawal by the
Underwriter upon notice delivered to the Authority and the City at any time prior to acceptance
by the Authority and the City. All capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed thereto in the Official Statement (as defined
herein).
The Authority and the City hereby acknowledge and agree that (a) the purchase and sale
of the Bonds pursuant to this Bond Purchase Agreement is an arm's-length commercial
transaction between the Authority and the City and the Underwriter, (b) in connection
therewith and with the discussions, undertakings and procedures leading up to the
consummation of such transaction, the Underwriter is and has been acting solely as a principal
and is not acting as the agent or fiduciary of the Authority and the City, (c) the Underwriter has
not assumed an advisory or fiduciary responsibility in favor of the Authority and the City with
respect to the offering and sale of the Bonds contemplated hereby or the discussions,
undertakings and procedures leading thereto (irrespective of whether the Underwriter has
provided other services or is currently providing other services to the Authority or the City on
other matters) and the Underwriter has no obligation to the Authority and the City with respect
to the offering and sale of the Bonds contemplated hereby except the obligations expressly set
forth in this Bond Purchase Agreement, and (d) the Authority and the City have consulted their
own legal, financial and other advisors to the extent it has deemed appropriate, in connection
with the Bonds and the matters contemplated by this Bond Purchase Agreement.
2002.01
1. Purchase, Sale and Delivery of the Bonds.
(a) Subject to the terms and conditions, and in reliance upon the representations,
warranties and agreements set forth herein, the Underwriter hereby agrees to purchase, and the
Authority agrees to sell and deliver to the Underwriter, all (but not less than all) of the
$ Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the
"Bonds"). The Bonds shall be dated the date of delivery thereof and shall mature on such dates
and shall bear interest at such rates set forth in Schedule I attached hereto. Interest on the Bonds
shall be payable semiannually on April 1 and October 1 of each year, commencing October 1,
2011. The aggregate purchase price for the Bonds shall be $ (consisting of the
$ aggregate principal amount of the Bonds, plus $ of net original issue
premium, less $ of Underwriter's discount).
(b) The Bonds shall be issued pursuant to the Marks-Roos Local Bond Pooling Act of
1985, consisting of Article 4, Chapter 5, Division 7, Title 1 of the California Government Code
(commencing with Section 6584) (the "Bond Law"), and an Indenture of Trust, dated as of May
1, 2011 (the "Indenture"), by and between the Authority and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"), a resolution of the governing body of the
Authority adopted on May 3, 2011 (the "Authority Resolution"), and a resolution of the City,
adopted on May 3, 2011 (the "City Resolution").
The Bonds shall be substantially in the form described in, and shall be issued and
secured under the provisions of, the Indenture. The Bonds shall be secured by a pledge, charge
and lien upon Revenues which consist primarily of Installment Payments to be made by the
City to the Authority pursuant to an Installment Sale Agreement, dated as of May 1, 2011 (the
"Installment Sale Agreement"), by and between the City and the Authority. The City's
obligations under the Installment Sale Agreement will be on parity as to payment and security
with the City's obligations with respect to its $14,355,000 City of Tustin 2003 Refunding Water
Revenue Bonds, of which $11,165,000 is currently outstanding (the "2003 Bonds"), issued
pursuant to an indenture, dated as of September 1, 2003, by and between the City and the
Trustee, as trustee thereunder (the "2003 Indenture").
The Bonds are being issued for the purpose of providing funds (i) to finance certain
improvements and related facilities (the "Project") which constitute part of the City's municipal
water enterprise (the "Water System"); (ii) to fund a reserve fund for the Bonds; and (iii) to pay
costs of issuance of the Bonds.
The City will undertake, pursuant to a continuing disclosure certificate (the "Continuing
Disclosure Certificate"), to provide certain annual financial information, specified other
information, data and notices of the occurrence of certain events, if material, to Applied Best
Practices, LLC, the initial Dissemination Agent, or any successor Dissemination Agent. A
description of this undertaking is set forth in the Preliminary Official Statement (as defined
herein) and will also be set forth in the Official Statement (as defined herein).
The Indenture, the Installment Sale Agreement, the Continuing Disclosure Certificate
and this Bond Purchase Agreement are herein referred to as the "Financing Documents."
(c) At 8:00 o'clock A.M., California time, on May 25, 2011, or at such other time or on
such other date as mutually agreed upon by the Authority, the City and the Underwriter (such
time and date herein referred to as the "Closing Date"), the Authority will, subject to the terms
and conditions hereof, sell and deliver, or cause to be delivered, the Bonds to the Underwriter,
in definitive form, duly executed and authenticated, together with the other documents
mentioned herein, and subject to the terms and conditions hereof, the Underwriter will accept
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such delivery and pay the purchase price of the Bonds as set forth in subparagraph (a) above in
immediately available funds (such delivery and payment being herein referred to as the
"Closing") to the order of the Trustee. Sale, delivery and payment as aforesaid shall be made at
the offices of Quint & Thimmig LLP ("Bond Counsel"), 575 Market Street, Suite 3600, San
Francisco, California, or such other place as shall have been mutually agreed upon by the
Authority, the City and the Underwriter, except that the Bonds shall be delivered through the
Trustee via the F.A.S.T. delivery book-entry system of The Depository Trust Company ("DTC")
in New York, New York, or at such other place as shall have been mutually agreed upon by the
Authority and the Underwriter, in fully registered book-entry eligible form (which may be
typewritten) and registered in the name of Cede & Co. as nominee of DTC.
(d) The Underwriter agrees to make a bona fide public offering of all of the Bonds at
prices not in excess of the initial public offering prices or at yields not lower than the initial
public offering yields set forth in the Official Statement. The Underwriter reserves the right to
change such initial offering prices or yields from time to time after such offering as they shall
deem necessary in connection with the marketing of the Bonds.
2. Use and Preparation of Official Statement. The Authority and the City hereby ratify,
confirm and approve of the use and distribution by the Underwriter prior to the date hereof of
an official statement in preliminary form dated May 4, 2011 relating to the Bonds (which,
together with all appendices thereto, is referred to herein as the "Preliminary Official
Statement"). The Authority and the City have deemed final the Preliminary Official Statement
as of its date for purposes of Rule 15c2-12 promulgated by the U.S. Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"), except for
information permitted to be omitted therefrom by Rule 15c2-12. The Authority and the City
hereby agree to deliver or cause to be delivered to the Underwriter, within seven (7) business
days of the date hereof and at least in sufficient time to accompany any orders or confirmations
that request payment from any customer, copies of the final official statement, dated the date
hereof (which, together with all information previously permitted to have been omitted by
Rule 15c2-12 and any amendments or supplements to such official statement as have been
approved by the Authority, the City and the Underwriter is referred to herein as the "Official
Statement") in sufficient quantity to enable the Underwriter to comply with the rules of the U.S.
Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The
Authority and the City hereby approve of the use and distribution by the Underwriter of the
Official Statement in connection with the offer and sale of the Bonds. At the time of or prior to
the Closing Date, the Underwriter shall file a copy of the Official Statement with the Municipal
Securities Rulemaking Board.
Representations, Warranties and Agreements of the Authority and the City.
(a) The Authority hereby represents, warrants and agrees with the Underwriter as
follows:
(1) The Authority is, and will be on the Closing Date, a joint exercise of powers
Authority organized and operating pursuant to the laws of the State of California with
the full power and authority to issue the Bonds pursuant to the Bond Law, to execute
and deliver the Official Statement and to enter into the Financing Documents to which
the Authority is a party;
(2) By all necessary official action of the Authority prior to or concurrently with
the acceptance hereof, the Authority has duly approved the distribution of the
Preliminary Official Statement and the execution, delivery and distribution of the
Official Statement, and has duly authorized and approved the execution and delivery
of, and the performance by the Authority of the obligations on its part contained in, the
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Financing Documents to which the Authority is a party and the consummation by it of
all other transactions contemplated by the Official Statement and the Financing
Documents to which the Authority is a party;
(3) The Authority is not in breach of or default under any applicable
constitutional provision, law or administrative regulation to which it is subject or any
applicable judgment or decree or any loan agreement, indenture, bond, note, resolution,
agreement or other instrument to which the Authority is a party or to which the
Authority or any of its property or assets is otherwise subject, and no event has
occurred and is continuing which with the passage of time or the giving of notice, or
both, would constitute such a default or event of default in any material respect under
any such instrument; and the issuance of the Bonds and the execution and delivery of
the Official Statement and the Financing Documents to which the Authority is a party
and compliance with the provisions on the Authority's part contained herein and
therein, will not in any material respect conflict with or constitute a breach of or default
under any law, administrative regulation, judgment, decree, loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which the Authority is a party
or is otherwise subject, nor will any such execution, delivery, adoption or compliance
result in the creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Authority under the terms of any such law, administrative regulation, judgment,
decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument, except as provided in the Indenture or the Installment Sale Agreement;
(4) There is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental agency, public board or body, pending or,
to the best knowledge of the Authority, threatened against the Authority affecting the
corporate existence of the Authority or affecting or seeking to prohibit, restrain or enjoin
the issuance, sale or delivery of the Bonds or contesting or affecting the execution and
delivery of the Financing Documents or the Bonds or the lien or pledge or application of
any moneys or security provided thereby, or in any way contesting or affecting the
validity or enforceability of the Financing Documents, the Bonds or the Authority
Resolution, or the compliance by the Authority with the covenants contained in the
Financing Documents, or contesting in any way the completeness or accuracy of the
Official Statement relating to the Bonds, or contesting the power of the Authority to
execute and deliver the Financing Documents to which the Authority is a party or the
Bonds, nor to the best of the Authority's knowledge, is there any basis therefore,
wherein an unfavorable decision, ruling or finding would materially adversely affect the
validity or enforceability of the Bonds or the Financing Documents or materially impair
the investment quality or value of the Bonds;
(5) All authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having
jurisdiction of the matter which are required for the due authorization by, or which
would constitute a condition precedent to or the absence of which would materially
adversely affect the due performance by, the Authority of its obligations in connection
with the issuance of the Bonds under the Indenture have been duly obtained, except for
such approvals, consents and orders as may be required under the Blue Sky or
securities laws of any state in connection with the offering and sale of the Bonds; and,
except as described in or contemplated by the Official Statement, all authorizations,
approvals, licenses, permits, consents and orders of any governmental authority, board,
agency or commission having jurisdiction of the matter which are required for the due
authorization by, or which would constitute a condition precedent to or the absence of
which would materially adversely affect the due performance by, the Authority of its
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obligations under the Financing Documents to which the Authority is a party have been
duly obtained;
(6) The Authority will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter as the Underwriter may
reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue
Sky or other securities laws and regulations of such states and other jurisdictions of the
United States as the Underwriter may designate and (ii) to determine the eligibility of
the Bonds for investment under the laws of such states and other jurisdictions, and will
use its best efforts to continue such qualification in effect so long as required for
distribution of the Bonds; provided, however, that in no event shall the Authority be
required to take any action which would subject it to service of process in any
jurisdiction in which it is not now so subject;
(7) As of the date thereof, the Preliminary Official Statement (excluding
information concerning DTC and the book-entry system as to which no representation is
made) did not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(8) As of the date hereof and at all times subsequent hereto to and including the
date which is 25 days following the End of the Underwriting Period (as such term is
hereinafter defined) for the Bonds, the Official Statement (excluding information
concerning DTC and the book-entry system as to which no representation is made) did
not and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(9) If between the date hereof and the date which is 25 days after the End of the
Underwriting Period for the Bonds, an event occurs which might or would cause the
information contained in the Official Statement (other than information concerning DTC
and the book-entry system), as then supplemented or amended, to contain an untrue
statement of a material fact or to omit to state a material fact required to be stated
therein or necessary to make such information therein, in light of the circumstances
under which it was presented, not misleading, the Authority will notify the
Underwriter, and, if in the opinion of the Authority, the Underwriter or their respective
counsel, such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the Authority will forthwith prepare and furnish
to the Underwriter (at the expense of the Authority) a reasonable number of copies of
an amendment of or supplement to the Official Statement (in form and substance
satisfactory to the Underwriter) which will amend or supplement the Official Statement
so that it will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Official Statement is delivered to prospective
purchasers, not misleading. For the purposes of this subsection, between the date
hereof and the date which is 25 days after the End of the Underwriting Period for the
Bonds, the Authority will furnish such information with respect to itself as the
Underwriter may from time to time reasonably request;
(10) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph (9) of this Section 3(a), at the time of each
supplement or amendment thereto and (unless subsequently again supplemented or
amended pursuant to such paragraph) at all times subsequent thereto up to and
including the date which is 25 days after the End of the Underwriting Period for the
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Bonds, the portions of the Official Statement so supplemented or amended (other than
information concerning DTC and the book-entry system) will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make such information therein, in the light of the circumstances under
which it was presented, not misleading;
(11) After the Closing Date, the Authority will not participate in the issuance of
any amendment of or supplement to the Official Statement to which, after being
furnished with a copy, the Underwriter shall reasonably object in writing; and
(12) Any certificate signed by any authorized official of the Authority, and
delivered to the Underwriter in connection with the delivery of the Bonds, shall be
deemed a representation and warranty by the Authority to the Underwriter as to the
statements made therein.
(b) The City represents, warrants and covenants to the Underwriter that
(1) The City is and on the Closing Date will be a municipal corporation of the
State of California, with the legal right, power and authority to approve the issuance of
the Bonds, approve the Official Statement, execute, deliver and perform its obligations
under the Financing Documents to which it is a party, and to carry out its obligations
as described therein;
(2) The City has duly approved the Financing Documents to which it is a party
and the distribution of the Preliminary Official Statement, the execution and delivery
of, and the performance by the City of the obligations on its part contained in the Bonds
and the Financing Documents to which it is a party, and the consummation by it of all
other transactions contemplated by the Official Statement and the Financing
Documents;
(3) The Financing Documents to which the City is a party, when duly executed
by the other party thereto, will constitute the legal, valid and binding agreements of the
City enforceable against the City in accordance with their respective terms; except as
enforcement of each of the Financing Documents may be limited by bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance laws, laws affecting the
enforcement of creditors rights, the application of equitable principles and judicial
discretion, by the covenant of good faith and fair dealing which may be implied by law
into contracts, and by the limitations on legal remedies against public agencies in the
State of California;
(4) Except as otherwise disclosed in the Official Statement, the City is not in any
material respect, in breach of or default under (i) any applicable law or administrative
regulation of the State of California or the United States or any applicable judgment or
decree or (ii) any material loan agreement, indenture, bond, note, resolution, agreement
or other instrument to which it is a party or is otherwise subject, and no event has
occurred and is continuing which, with the passage of time or the giving of notice or
both, would constitute an event of default under any such instrument;
(5) The approval of the Official Statement, the execution and delivery of this
Bond Purchase Agreement, the Bonds and the Financing Documents to which the City
is a party, the consummation of the transactions herein and therein contemplated, and
the fulfillment of or compliance with the terms and conditions hereof and thereof will
not conflict with or constitute a violation or breach of or default (with due notice or the
passage of time or both) under any applicable law or administrative rule or regulation,
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or any applicable court or administrative decree or order, or, to the knowledge of the
City, any indenture, mortgage, deed of trust, installment purchase agreement, lease,
contract or other agreement or instrument to which it is a party, or result in the creation
or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever
upon any of the City's assets, which conflict, violation, breach, default, lien, charge or
encumbrance might have consequences that would materially and adversely affect the
consummation of the transactions contemplated by the Official Statement and the
Financing Documents to which the City is a party, or the financial condition, assets,
properties or operations of the City;
(6) No consent or approval of any trustee or holder of any indebtedness of the
City, and no consent, permission, authorization, order or license of, or filing or
registration with, any governmental authority (except in connection with Blue Sky
proceedings, if any) is necessary in connection with the execution and delivery of the
Bonds, this Bond Purchase Agreement or the Financing Documents to which the City is
a party, or the consummation of any transaction therein or herein contemplated on the
part of the City, except as have been obtained or made and as are in full force and
effect or, as appropriate, will be in full force and effect at the Closing;
(7) Except as otherwise disclosed in the Official Statement, there is no action,
suit, proceeding, inquiry or investigation before or by any court or federal, state,
municipal or other governmental authority pending or, to the knowledge of the City,
threatened against or affecting the City which, if determined adversely to the City or the
interests thereof, would (a) affect the creation, organization, existence or powers of the
City or the titles of its officers or officials to their respective offices; (b) in any way
question or affect the validity or enforceability of any of the Financing Documents or
the City Resolution; (c) find illegal, invalid or unenforceable any of the Financing
Documents or the transactions contemplated thereby, or any other agreement or
instrument related to the issuance of the Bonds; (d) affect the issuance or delivery of
any of the Bonds, the payment or collection of any revenues or charges of the Water
System, the validity of the pledge of or lien on such revenues or charges for the
payment of the Installment Payments payable by the City under the Installment Sale
Agreement; (e) affect the power and authority of the City to establish, maintain and
collect rates and charges for water collection and treatment and other services, facilities
and commodities sold, furnished or supplied through the facilities of the Water
System; (f) affect the City's water supply, or (g) contest the completeness or accuracy
of the Official Statement;
(8) Except as otherwise disclosed in the Official Statement, the City does not
and will not have outstanding any indebtedness or obligation which is secured by a
pledge of or lien on the Net Revenues superior to or on a parity with the lien of the
Installment Payments on the Net Revenues;
(9) As of the date thereof, the Preliminary Official Statement (excluding
information concerning DTC and the book-entry system as to which no representation is
made) did not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(10) As of the date hereof and at all times subsequent hereto to and including
the date which is 25 days following the End of the Underwriting Period (as such term is
hereinafter defined) for the Bonds, the Official Statement (excluding information
concerning DTC and the book-entry system as to which no representation is made) did
not and will not contain any untrue statement of a material fact or omit to state a
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material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(11) If between the date hereof and the date which is 25 days after the End of
the Underwriting Period for the Bonds, an event occurs which might or would cause the
information contained in the Official Statement (other than information concerning DTC
and the book-entry system), as then supplemented or amended, to contain an untrue
statement of a material fact or to omit to state a material fact required to be stated
therein or necessary to make such information therein, in light of the circumstances
under which it was presented, not misleading, the City will notify the Underwriter, and,
if in the opinion of the City, the Underwriter or their respective counsel, such event
requires the preparation and publication of a supplement or amendment to the Official
Statement, the City will forthwith prepare and furnish to the Underwriter (at the
expense of the City) a reasonable number of copies of an amendment of or supplement
to the Official Statement (in form and substance satisfactory to the Underwriter) which
will amend or supplement the Official Statement so that it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time the Official
Statement is delivered to prospective purchasers, not misleading. For the purposes of
this subsection, between the date hereof and the date which is 25 days after the End of
the Underwriting Period for the Bonds, the City will furnish such information with
respect to itself as the Underwriter may from time to time reasonably request;
(12) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph (10) of this Section 3(b), at the time of each
supplement or amendment thereto and (unless subsequently again supplemented or
amended pursuant to such paragraph) at all times subsequent thereto up to and
including the date which is 25 days after the End of the Underwriting Period for the
Bonds, the portions of the Official Statement so supplemented or amended (other than
information concerning DTC and the book-entry system) will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make such information therein, in the light of the circumstances under
which it was presented, not misleading;
(13) After the Closing Date, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter shall reasonably object in writing;
(14) Between the date of this Bond Purchase Agreement and the Closing Date,
except as disclosed in the Official Statement, the City will not, without the prior written
consent of the Underwriter, offer or issue any bonds, notes or other obligations for
borrowed money, or incur any material liabilities direct or contingent, payable from Net
Revenues of the Water System, other than in the ordinary course of its business, nor will
there be any adverse change of a material nature in the financial position, results of
operations or condition, financial or otherwise, of the City;
(15) No current study undertaken by or on behalf of the City regarding the
feasibility of the Project has been excluded from mention in the Official Statement;
(16) Except as otherwise disclosed in the Official Statement, the City has not in
the previous five years failed to comply in any material respect, and is as of the date
hereof in compliance in all material respects, with its disclosure obligations under any
prior undertaking related to the Securities and Exchange Commission Rule 15c2-12 to
provide annual reports or notices of material event; and
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(17) Any certificate signed by any authorized official of the City, and delivered
to the Underwriter in connection with the delivery of the Bonds, shall be deemed a
representation and warranty by the City to the Underwriter as to the statements made
therein.
(c) As used herein and for the purposes of the foregoing, the term "End of the
Underwriting Period" for the Bonds shall mean the earlier of (i) the Closing Date unless the
Authority and the City shall have been notified in writing to the contrary by the Underwriter on
or prior to the Closing Date, or (ii) the date on which the End of the Underwriting Period for the
Bonds has occurred under Rule 15c2-12; provided, however, that the Authority and the City
may treat as the End of the Underwriting Period for the Bonds the date specified as such in a
notice from the Underwriter stating the date which is the End of the Underwriting Period.
(d) The representations, warranties and agreements herein shall survive the Closing
Date and any investigation made on behalf of the Authority (with respect to subsection (a) of
this Section 3), the City (with respect to subsection (b) of this Section 3) and the Underwriter of
any matters described in or related the transactions hereby and by this Bond Purchase
Agreement, the Official Statement, the Bonds and the Financing Documents to which the
Authority or the City, as the case may be, is a party.
4. Conditions to the Obligations of the Underwriter. The Underwriter hereby enters
into this Bond Purchase Agreement in reliance upon the representations and warranties of the
Authority and the City contained herein and the representations and warranties of the
Authority and the City to be contained in the documents and instruments to be delivered on or
prior to the Closing Date and upon the performance by the Authority and the City of their
obligations both on and as of the date hereof and as of the Closing Date. Accordingly, the
Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery
of and to pay for the Bonds shall be subject, at the option of the Underwriter, to the accuracy in
all material respects of the representations and warranties of the Authority and the City
contained herein as of the date hereof and as of the Closing Date, to the accuracy in all material
respects of the statements of the officers and other officials of the Authority and the City made
in any certificate or other document furnished pursuant to the provisions hereof, to the
performance by the Authority and the City of their obligations to be performed hereunder and
under such documents and instruments at or prior to the Closing Date, and also shall be subject
to the following additional conditions:
(a) The Underwriter shall receive, within seven (7) business days of the date hereof and
at least in sufficient time to accompany any orders or confirmations that request payment from
any customer, copies of the Official Statement (including all information previously permitted
to have been omitted by Rule 15c2-12 and any amendments or supplements as have been
approved by the Underwriter), in such quantity as the Underwriter shall have requested
pursuant to Section 2 hereof;
(b) The representations and warranties of the Authority and the City contained herein
shall be true and correct on the date hereof and on the Closing Date, as if made on and at the
Closing Date;
(c) As of the Closing Date, the Financing Documents shall have been duly authorized,
executed and delivered by the respective parties thereto, and the Official Statement shall have
been duly authorized, executed and delivered by the Authority, all in substantially the forms
heretofore submitted to the Underwriter, with only such changes as shall have been agreed to in
writing by the Underwriter, and such Financing Documents shall be in full force and effect and
shall not have been amended, modified or supplemented and the Official Statement shall not
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have been supplemented or amended, except in any such case as may have been agreed to by
the Underwriter; and there shall be in full force and effect such resolution or resolutions of the
Authority and the City as, in the opinion of Bond Counsel, shall be necessary or appropriate in
connection with the transactions contemplated hereby;
(d) Between the date hereof and the Closing Date, the market price or marketability, at
the initial public offering prices set forth in the Official Statement, of the Bonds shall not have
been materially adversely affected, in the judgment of the Underwriter (evidenced by a written
notice to the Authority terminating the obligation of the Underwriter to accept delivery of and
make any payment for the Bonds), by reason of any of the following:
(1) an amendment to the Constitution of the United States or the State of
California shall have been passed or legislation shall have been introduced in or enacted
by the Congress of the United States or the legislature of any state having jurisdiction
of the subject matter or legislation pending in the Congress of the United States shall
have been amended or legislation shall have been recommended to the Congress of the
United States or to any state having jurisdiction of the subject matter or otherwise
endorsed for passage (by press release, other form of notice or otherwise) by the
President of the United States, the Treasury Department of the United States, the
Internal Revenue Service or the Chairman or ranking minority member of the Committee
on Finance of the United States Senate or the Committee on Ways and Means of the
United States House of Representatives, or legislation shall have been proposed for
consideration by either such Committee by any member thereof or presented as an
option for consideration by either such Committee by the staff of such Committee or by
the staff of the Joint Committee on Taxation of the Congress of the United States, or
legislation shall have been favorably reported for passage to either House of the
Congress of the United States by a Committee of such House to which such legislation
has been referred for consideration, or a decision shall have been rendered by a court of
the United States or of the State of California or the Tax Court of the United States, or
a ruling shall have been made or a regulation or temporary regulation shall have been
proposed or made or any other release or announcement shall have been made by the
Treasury Department of the United States, the Internal Revenue Service or other federal
or State of California authority, with respect to federal or State of California taxation
upon revenues or other income of the general character to be derived by the Authority
or upon interest received on obligations of the general character of the Bonds which may
have the purpose or effect, directly or indirectly, of affecting the tax status of the
Authority, its property or income, its securities (including the Bonds) or the interest
thereon, or any tax exemption granted or authorized by State of California legislation or
materially and adversely affecting the market for the Bonds or the market price
generally of obligations of the general character of the Bonds;
(2) legislation enacted, introduced in the Congress or recommended for passage
by the President of the United States, or a decision rendered by a court established
under Article III of the Constitution of the United States or by the Tax Court of the
United States, or an order, ruling, regulation (final, temporary or proposed) or official
statement issued or made by or on behalf of the Securities and Exchange Commission,
or any other governmental agency having jurisdiction of the subject matter shall have
been made or issued to the effect that obligations of the general character of the Bonds,
or the Bonds, including any or all underlying arrangements, are not exempt from
registration under the Securities Act of 1933, as amended, or that the Indenture is not
exempt from qualification under the Trust Indenture Act of 1939, as amended;
(3) any legislation, ordinance, rule or regulation shall be introduced in, or be
enacted by any governmental body, department or agency of the State of California, or
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a decision by any court of competent jurisdiction within the State of California or any
court of the United States of America shall be rendered which, in the reasonable opinion
of the Underwriter, materially adversely affects the market price of the Bonds;
(4) the escalation in military hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis;
(5) the declaration of a general banking moratorium by federal, New York or
California authorities, or the general suspension of trading on any national securities
exchange;
(6) the imposition by the New York Stock Exchange or other national securities
exchange, or any governmental authority, of any material restrictions not now in force
with respect to the Bonds or obligations of the general character of the Bonds or
securities generally, or the material increase of any such restrictions now in force,
including those relating to the extension of credit by, or the charge to the net capital
requirements of, the Underwriter;
(7) an order, decree or injunction of any court of competent jurisdiction, or
order, ruling, regulation or official statement by the Securities and Exchange
Commission, or any other governmental agency having jurisdiction of the subject
matter, issued or made to the effect that the issuance, offering or sale of obligations of
the general character of the Bonds, or the issuance, offering or sale of the Bonds,
including any or all underlying obligations, as contemplated hereby or by the Official
Statement, is or would be in violation of the federal securities laws as amended and
then in effect;
(8) any litigation shall be instituted, pending or threatened to restrain or enjoin
the issuance or sale of the Bonds or in any way contesting the validity of the Bonds or
the Financing Documents, or the existence or powers of the Authority or the City or
having a material adverse impact on the availability of Net Revenues;
(9) any event occurring, or information becoming known that, in the judgment of
the Underwriter, makes untrue in any material respect any statement or information
contained in the Official Statement or has the effect that the Official Statement contains
any untrue statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(10) the withdrawal or downgrading of any rating of the Bonds by a national
rating agency; or
(11) any other event shall have occurred since the date of hereof that in the
reasonable judgment of the Underwriter materially adversely affects the marketability
or market price of the Bonds.
(e) At or prior to the Closing Date, the Underwriter shall have received the following
documents, in each case satisfactory in form and substance to the Underwriter:
(1) The Official Statement and each supplement or amendment, if any, thereto,
executed by the Authority and approved by the City;
(2) Copies of each of the Financing Documents, each duly executed and
delivered by the respective parties thereto;
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(3) The approving opinion of Bond Counsel, dated the Closing Date and
addressed to the Authority, in substantially the form attached to the Official Statement
as Appendix E thereto;
(4) The supplemental opinion of Bond Counsel, dated the Closing Date and
addressed to the Underwriter, to the effect that;
(i) this Bond Purchase Agreement has been duly authorized, executed
and delivered by the Authority and the City, and assuming the valid execution
and delivery by the Underwriter, is valid and binding upon the Authority and
the City enforceable in accordance with their terms, except as such enforcement
maybe limited by bankruptcy, insolvency, reorganization moratorium or similar
laws or equitable principles relating to or limiting creditors' rights generally;
(ii) the Bonds are exempt from registration pursuant to the Securities
Act of 1933, as amended, and the Indenture is exempt from qualification under
the Trust Indenture Act of 1939; and
(iii) the statements in the Official Statement under the captions
"INTRODUCTION," "THE BONDS" (excluding the information relating to
DTC and the book-entry only system), "SECURITY FOR THE BONDS," "TAX
MATTERS," APPENDIX D-"SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS," and APPENDIX F-"FORM OF CONTINUING
DISCLOSURE CERTIFICATE" insofar as such statements purport to
summarize certain provisions of the Financing Documents or the Bonds and
such counsel's final legal opinion concerning certain federal tax matters, are
accurate in all material respects;
(5) The opinion of Quint & Thimmig LLP, in its capacity as Disclosure Counsel,
dated the Closing Date and addressed to the Authority and the Underwriter, to the
effect that, based upon their participation in the preparation of the Official Statement
as Disclosure Counsel and upon the information made available to them in the course
of the foregoing, but without having undertaken to determine or verify independently or
assuming any responsibility for the accuracy, completeness or fairness of the
statements contained in the Official Statement (except to the extent expressly set forth
in the opinion referred to in Section 4(e)(4) above), nothing has come to the attention of
the personnel directly involved in rendering legal advice and assistance in connection
with the preparation of the Official Statement that causes them to believe that the
Official Statement as of its date or as of the Closing Date contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading (except for the description of any litigation, any
information relating to DTC, Cede & Co., the book-entry system, any financial
statements, forecasts, projections, estimates, assumptions and expressions of opinions
and the other financial and statistical data included therein, as to all of which they
express no view);
(6) The opinion of counsel to the Authority and the City, dated the Closing Date
and addressed to the Underwriter, is substantially the form attached hereto as
Exhibit A;
(7) The opinion of counsel to the Trustee, dated the Closing Date and addressed
to the Authority, the City and the Underwriter, to the effect that (i) the Trustee has
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duly authorized, executed and delivered the Indenture and duly authenticated and
delivered the Bonds on the Closing Date; and (ii) the Indenture constitutes the legally
valid and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws in effect
from time to time affecting the rights of creditors generally and except to the extent that
the enforceability thereof may be limited by the application of general principles of
equity;
(8) A certificate or certificates, dated the Closing Date, signed by a duly
authorized official of the Authority to the effect that (i) the representations and
warranties of the Authority contained in the Financing Documents to which it is a party
are true, complete and correct on and as of the Closing Date; (ii) there is no action, suit,
proceeding, inquiry or investigation pending or, to the best knowledge of such official,
threatened (a) to restrain or enjoin the execution and delivery of any of the Bonds, (b) in
any way affecting the validity of the Bonds or the Financing Documents to which the
Authority is a party, (c) in any way contesting the corporate existence or powers of the
Authority to execute and deliver the Financing Documents to which the Authority is a
party or the Bonds, or (d) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; and (iii) since the date of the Official Statement, no event has occurred
which should have been set forth in an amendment or supplement to the Official
Statement which has not been set forth in such amendment or supplement;
(9) A certificate or certificates, dated the Closing Date, signed by a duly
authorized official of the City to the effect that (i) the representations and warranties of
the City contained in this Bond Purchase Agreement and the Financing Documents to
which the City is a party are true, complete and correct on and as of the Closing Date;
(ii) there is no action, suit, proceeding, inquiry or investigation at law or in equity,
before or by any court, government agency, public board or body, pending or, to the
best knowledge of such official, threatened (a) to restrain or enjoin the execution and
delivery of the Financing Documents to which the City is a party, (b) in any way
contesting or affecting the validity of the Financing Documents to which the City is a
party, (c) in any way contesting the power of the City to execute and deliver the
Financing Documents to which the City is a party, (d) asserting that the Official
Statement contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or (e) seeking to prohibit, restrain or
enjoin the collection of moneys from the Water System to pay the Installment Payments
securing the Bonds, or the compliance by the City of the covenants contained in the
Financing Documents to which the City is a party, or questioning the authority of the
City to fix, charge and collect rates for the services provided by the Water System as
provided in the Installment Sale Agreement, nor to the best knowledge of such official,
is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein
an unfavorable decision, ruling or finding would materially adversely affect the validity
or enforceability of the Bonds or the Financing Documents to which the City is a party
or materially adversely impair the City's ability to perform its obligations the Financing
Documents to which the City is a party; (iii) to the best of such official's knowledge
and belief, after reasonable investigation, the Official Statement (excluding therefrom
the information concerning DTC and the book-entry system included therein and
Appendices G and H thereto), as of the date thereof and the Closing Date, did not and
will not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading; and (iv) (a) since the date
of the Official Statement, no event has occurred which should have been set forth in an
amendment or supplement to the Official Statement which has not been set forth in
such amendment or supplement, and (b) there has not been any material adverse
change in the operations or financial affairs of the City or the Water System since the
date of the Official Statement;
(10) A certificate, dated the Closing Date, signed by a duly authorized official
of the Trustee, satisfactory in form and substance to the Underwriter, to the effect that:
(i) the Trustee is a national banking association organized and existing under and by
virtue of the laws of the United States of America, having the full power and being
qualified to enter into and perform its duties under the Indenture; (ii) the Trustee is
duly authorized to enter into the Indenture and to authenticate and deliver the Bonds
to the Underwriter pursuant to the terms of the Indenture; (iii) the execution and
delivery of the Indenture and compliance with the provisions on the Trustee's part
contained therein, and the authentication and delivery of the Bonds will not conflict
with or constitute a breach of or default under any law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument to which the Trustee is a party or is otherwise subject (except that no
representation, warranty or agreement is made with respect to any federal or state
securities or Blue Sky laws or regulations), nor will any such execution, delivery,
adoption or compliance result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the properties
or assets held by the Trustee pursuant to the lien created by the Indenture under the
terms of any such law, administrative regulation, judgment, decree, loan agreement,
indenture, bond, note, resolution, agreement or other instrument, except as provided by
the Indenture; and (iv) there is no action, suit, proceeding, inquiry or investigation, at
law or in equity, before or by any court, governmental agency, public board or body,
served on, or, to the best knowledge of such officer, threatened against, the Trustee,
affecting the existence of the Trustee or the titles of its officers to their respective offices,
or in any way contesting or affecting the validity or enforceability of the Indenture
against the Trustee, or contesting the power of the Trustee or its authority to enter into,
adopt or perform its obligations under the Indenture, wherein an unfavorable decision,
ruling or finding would materially adversely affect the validity or enforceability of the
Indenture against the Trustee or the authentication and delivery of the Bonds;
(11) A certified copy of the general resolution of the Trustee authorizing the
execution and delivery of the Indenture;
(12) A certified copy of the Authority Resolution;
(13) A certified copy of the City Resolution;
(14) Evidence of a rating on the Bonds of not less than "___" by Standard &
Poor's Ratings Services;
(15) a copy of the certificate of the City referred to in the 2003 Indenture,
required in connection with the execution and delivery of the Installment Sale
Agreement as a Parity Obligation thereunder; and
(16) Such additional legal opinions, certificates, proceedings, instruments,
insurance policies or evidences thereof and other documents as the Underwriter, the
Underwriter's counsel or Bond Counsel may reasonably request to evidence the truth
and accuracy, as of the date hereof and as of the Closing Date, of the representations of
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the Authority herein and of the statements and information contained in the Official
Statement, and the due performance or satisfaction by the Authority and the City on or
prior to the Closing Date of all agreements then to be performed and all conditions then
to be satisfied by the Authority and the City in connection with the transactions
contemplated hereby and by the Official Statement and the Financing Documents.
If the Authority and/or the City shall be unable to satisfy the conditions to the
Underwriter's obligations contained in this Bond Purchase Agreement or if the Underwriter's
obligations shall be terminated for any reason permitted herein, all obligations of the
Underwriter hereunder may be terminated by the Underwriter at, or at any time prior to, the
Closing Date by written notice to the Authority and neither the Underwriter nor the Authority
shall have any further obligations hereunder.
5. Expenses.
(a) The Authority or the City shall pay the expenses incident to the performance of their
obligations hereunder including, but not limited to: (i) the cost of preparation, printing and
distribution of the Financing Documents, the Preliminary Official Statement, the Official
Statement and any supplements or amendments thereto, including a reasonable number of
certified or conformed copies thereof; (ii) the cost of preparation and printing of the Bonds;
(iii) the fees and disbursements of Bond Counsel; (iv) the fees and disbursements of any
engineers, accountants and other experts, consultants or advisors retained by the Authority or
the City; (v) fees for bond ratings (which include fees of rating agencies and travel expenses of
the Authority or the City); (vi) fees, if any, payable to the California Debt and Investment
Advisory Commission, the Municipal Securities Rulemaking Board, the fees associated with
obtaining CUSIP numbers for the Bonds, and fees of the Public Securities Association and the
California Public Securities Association in connection with the execution and delivery of the
Bonds, and (vii) reimbursement of any incidental expenses incurred by the Underwriter on
behalf of the City (which amounts shall be included as an expense component of the
Underwriter's discount).
(b) The Underwriter shall pay (which amounts shall be included as an expense
component of the Underwriter's discount): (i) fees and disbursements of the Underwriter's
counsel, (ii) expenses related to attending working group meetings, such as parking, meals and
transportation, (iii) all advertising expenses and Blue Sky filing fees, if any, in connection with
the public offering of the Bonds, and (iv) all other expenses incurred by them in connection with
the public offering of the Bonds not outlined above.
6. Notices. Any notice or other communication to be given to the Authority, the City or
the Underwriter under this Bond Purchase Agreement may be given by delivering the same in
writing to
Authority: Tustin Public Financing Authority
c/o City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
City: City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: City Manager
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Underwriter: Citigroup Global Markets Inc.
444 South Flower Street, 27"'Floor
Los Angeles, CA 90071
Attention: Mr. Cameron Parks, Director
7. Survival of Representations and Warranties. Representations, warranties and
agreements contained in this Bond Purchase Agreement or made in any certificate delivered by
the Authority or the City hereunder shall remain operative and in full force and effect,
regardless of: (i) any investigations or statements made by or on behalf of the Underwriter; and
(ii) delivery of and payment for the Bonds pursuant to this Bond Purchase Agreement.
8. Effectiveness and Counterpart Signatures. This Bond Purchase Agreement shall
become effective and binding upon the respective parties hereto upon the execution of the
acceptance hereof by duly authorized officers of the Authority and approval by duly authorized
officers of the City and shall be valid and enforceable as of the time of such acceptance and
approval. This Bond Purchase Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
9. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of
the Authority, the City and the Underwriter (including the successors or assigns of the
Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
10. Headings. The headings of the sections of this Bond Purchase Agreement are
inserted for convenience only and shall not be deemed to be a part hereof.
11. Governing Law. This Bond Purchase Agreement shall be construed in accordance
with the laws of the State of California.
Very truly yours,
Accepted:
CITIGROUP GLOBAL MARKETS INC., as
Underwriter
By
Authorized Officer
TUSTIN PUBLIC FINANCING
AUTHORITY
By
Executive Director
CITY OF TUSTIN
By
City Manager
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SCHEDULE I
MATURITY SCHEDULE
Maturity Date Principal Interest
A rill Amount Rate Price Yield
c Priced to the 6/7 /20 par call date.
REDEMPTION PROVISIONS
Optional Redemption. The Bonds maturing on or before April 1, ,shall not be subject to
optional redemption prior to maturity. The Bonds maturing on or after April 1, ,shall be subject to
redemption, at the option of the City on any date on or after April 1, , as a whole or in part, by such
maturities as shall be determined by the City, and by lot within a maturity, from prepayments of the
Installment Payments made at the option of the City pursuant to the Installment Sale Agreement, from
any available source of funds, at a redemption price equal to the principal amount of the Bonds to be
redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.
Sinking Account Redemption.
Term Bonds Maturing on April 1, .The Term Bonds maturing on April 1, (the
" Term Bonds") are subject to mandatory redemption, in part by lot, from Sinking Account
payments set forth in the following schedule on April 1, ,and on Apri11 in each year thereafter
to and including April 1, , at a redemption price equal to the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of the Term Bonds have been
optionally redeemed as described below, the total amount of Sinking Account payments to be
made subsequent to such redemption shall be reduced in an amount equal to the principal amount
of the Term Bonds so redeemed by reducing each such future Sinking Account payment as
shall be determined by the City and, in lieu of such determination, on a pro rata basis (as nearly as
practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by
the Authority with the Trustee.
Redemption Date Principal
A rill Amount
t Maturity.
Term Bonds Maturing on April 1, .The Term Bonds maturing on April 1, (the
" Term Bonds") are subject to mandatory redemption, in part by lot, from Sinking Account
payments set forth in the following schedule on April 1, ,and on April 1 in each year thereafter
Schedule I
Page 1
to and including April 1, , at a redemption price equal to the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of the Term Bonds have been
optionally redeemed as described below, the total amount of Sinking Account payments to be
made subsequent to such redemption shall be reduced in an amount equal to the principal amount
of the Term Bonds so redeemed by reducing each such future Sinking Account payment as
shall be determined by the City and, in lieu of such determination, on a pro rata basis (as nearly as
practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by
the Authority with the Trustee.
Redemption Date Principal
A rill Amount
t Maturity.
Schedule I
Page 2
EXHIBIT A
FORM OF OPINION OF CITY ATTORNEY AND AUTHORITY COUNSEL
Tustin Public Financing Authority
300 Centennial Way
Tustin, California 92780
City of Tustin
300 Centennial Way
Tustin, California 92780
Citigroup Global Markets Inc.
444 South Flower Street, 27t'' Floor
Los Angeles, CA 90071
Re: $ Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A
Ladies and Gentlemen:
I have acted as legal counsel to the City of Tustin, California (the "City") and the Tustin Public
Financing Authority (the "Authority") in connection with the issuance of the above-referenced Bonds by
the Authority. In such capacity, I have examined the original, certified copies, or copies otherwise
identified to my satisfaction as being true copies of such resolutions, documents, ordinances, certificates,
and records as I have deemed relevant and necessary as the basis for the opinions set forth herein.
Relying on such examination and applicable law, I am of the opinion that:
1. The Authority is a joint exercise of powers authority duly organized and validly existing
under all applicable laws, with full legal right, power and authority to enter into and perform its
obligations under the Installment Sale Agreement, dated as of May 1, 2011 (the "Installment Sale
Agreement"), by and between the Authority and the City, the Indenture of Trust, dated as of May 1, 2011
(the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company,
N.A., as trustee (the "Trustee"), and the Bond Purchase Agreement, dated May 12, 2011 (the "Bond
Purchase Agreement"), by and among the Authority, the City and Citigroup Global Markets Inc., as
Underwriter, (collectively, the "Authority Documents"). The Authority has duly authorized, executed
and delivered the Authority Documents and, assuming due authorization, execution and delivery by the
other parties thereto (other than the City), each of the Authority Documents constitutes a legal, valid and
binding obligation of the Authority enforceable against the Authority in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, equitable remedies
and other laws affecting creditors' rights or remedies.
2. The City is a municipal corporation organized and validly existing under all applicable
laws, with full legal right, power and authority to enter into and perform its obligations under the
Installment Sale Agreement and the Continuing Disclosure Certificate, substantially in the form included
in the Official Statement (as hereinafter defined) as Appendix F (collectively, the "City Documents"). The
City has duly approved the City Documents and has duly authorized, executed and delivered the City
Documents and, assuming due authorization, execution and delivery by the other parties thereto (other
than the Authority), each of the City Documents constitutes a legal, valid and binding obligation of the
City enforceable against the City in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors'
rights or remedies.
3. The Authority has duly and validly adopted Resolution No. approving the
Authority Documents at a meeting duly called and held, and such Resolution is in full force and effect
and has not been amended, modified or repealed since its adoption.
Exhibit A
Page 1
4. The City has duly and validly adopted Resolution No. approving the City
Documents at a meeting duly called and held, and such Resolution is in full force and effect and has not
been amended, modified or repealed since its adoption.
5. There is no action, suit or proceeding before or by any court, government agency, public
board or body pending or, to the best of our knowledge, threatened wherein an unfavorable decision,
ruling or finding would (a) affect the creation, organization, existence or powers of the Authority or the
City or the titles of their respective officers or officials to their respective offices, (b) in any way question
or affect the validity or enforceability of any of the Authority Documents, the City Documents, or any
resolutions, (c) find illegal, invalid or unenforceable any of the Authority Documents, the City
Documents, or the Ordinances or the transactions contemplated thereby, or any other agreement or
instrument related to the issuance of the Bonds to which the Authority or the City is a party, (d) affect the
issuance or delivery of any of the Bonds, the payment or collection of any revenues or charges of the
City's water enterprise, the validity of the pledge of or lien on such revenues or charges for the benefit of
the owners of the Bonds, the exclusion of interest on the Bonds from gross income, the powers of the
Authority or the City, or the authority of the Authority to issue the Bonds or the consummation of any of
the transactions contemplated by the Authority Documents, the City Documents, the Ordinances or the
Bonds, (e) affect the power and authority of the City to establish, maintain and collect rates and charges
for water collection and treatment and other services, facilities and commodities sold, furnished or
supplied through the facilities of the City's water system, or (f) contest the completeness or accuracy of
the Preliminary Official Statement relating to the Bonds, dated May 4, 2011, or the Official Statement
relating to the Bonds, dated May 12, 2011 (the "Official Statement").
6. The execution and delivery of the Authority Documents and the City Documents and the
other instruments contemplated by any of such documents, and compliance with the provisions thereof,
do not conflict with or constitute a breach of or default under any applicable law or administrative rule or
regulation of the State of California, the United States or any department or agency of either thereof, or
any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture,
trust agreement, contract, agreement or other instrument to which the Authority or the City is subject or
bound in a manner which would materially adversely affect the Authority's or the City's performance
thereunder.
7. Any and all consents, authorizations, approvals and orders of or filings or registrations
with any governmental authority, legislative body, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would materially adversely
affect, the performance by the Authority or the City of its obligations under the Authority Documents or
the City Documents, respectively, have been obtained and are in full force and effect.
8. Although I have not verified and am not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the information contained in the Official
Statement, nothing has come to our attention causing us to believe that the Official Statement (excluding
therefrom the information relating to DTC, Cede & Co. and the book-entry system; as to all of which I
express no view), as of its date, or as of the date hereof, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
I am furnishing this opinion to you solely for your benefit. This opinion is rendered in connection
with the transaction described herein, and may not be relied upon by you for any other purpose. This
opinion shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any
other person, firm, corporation or other entity without my prior written consent.
Very truly yours,
Exhibit A
Page 2