HomeMy WebLinkAbout11 ISSUANCE OF 2016 WATER REFUNDING REVENUS BONDS• Agenda Item 1 1
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- AGENDA REPORT Reviewed.
City Manager
Finance Director
MEETING DATE: AUGUST 16, 2016
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: JENNIFER LEISZ, ACTING FINANCE DIRECTOR
SUBJECT: ISSUANCE OF 2016 WATER REFUNDING REVENUE BONDS
SUMMARY:
Approval by the City of Tustin ("City") is requested to authorize the issuance and sale of
2016 Water Refunding Revenue Bonds, (the "Bonds") in an estimated aggregate principal
amount of $19.855 million to refinance the 2011 Water Revenue Bonds (the "2011
Bonds") to take advantage of lower interest rates to reduce the annual debt service
payments.
RECOMMENDATION:
It is recommended that:
• The City Council adopt City Council Resolution 16-47 AUTHORIZING THE
ISSUANCE OF CITY OF TUSTIN (ORANGE COUNTY, CALIFORNIA) 2016
WATER REFUNDING REVENUE BONDS, APPROVING THE FORM AND
AUTHORIZING EXECUTION OF AN INDENTURE OF TRUST, AN ESCROW
AGREEMENT, A BOND PURCHASE AGREEMENT, A PRELIMINARY OFFICIAL
STATEMENT AND A CONTINUING DISCLOSURE CERTIFICATE AND
AUTHORIZING ACTIONS RELATED THERETO.
1. Indenture of Trust;
2. Escrow Agreement;
3. Bond Purchase Agreement;
4. Preliminary Official Statement, and
5. Continuing Disclosure Certificate
FISCAL IMPACT:
The Bonds will have no financial impact on the City's General Fund, as all payments of
principal and interest on the Bonds will be paid solely from the net revenues of the Water
Enterprise Fund. It is estimated that the refunding of the 2011 Bonds will reduce annual
debt service payments by $220,000 per year, totaling over $2.24 million in net present
value savings over the remaining term of the Bonds.
BACKGROUND:
The City, working with its consultants, has determined that, due to prevailing financial
market conditions, it is in the best interests of the City at this time to refund the 2011
ISSUANCE OF 2016 WATER REFUNDING REVENUE BONDS
AUGUST 16, 2016 PAGE 2
Bonds. The $20.760 million 2011 Bonds were issued to fund the Rawlings Reservoir and
Tustin Avenue Well projects. The Bonds will defease the 2011 Bonds. The Bonds will
mature in 2041, which is the current maturity date of the 2011 Bonds.
Based on the current interest rates, the City is proposing to issue approximately $19.855
million par amount of Bonds. The City will be obtaining an underlying credit rating for the
Bonds from Standard & Poor's. It is expected the credit rating from Standard & Poor's will
be favorable and help the City obtain the best possible interest rates.
The City Council 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 a Preliminary 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
September 13, 2016.
Jennifer Ceisz
Acting Finance Director
Attachment(s): Resolution No. 16-47
Indenture of Trust
Escrow Agreement
Bond Purchase Agreement
Preliminary Official Statement
Continuing Disclosure Certificate
CITY OF TUSTIN
RESOLUTION NO. 16-47
RESOLUTION AUTHORIZING THE ISSUANCE OF CITY OF TUSTIN
(ORANGE COUNTY, CALIFORNIA) 2016 WATER REFUNDING REVENUE
BONDS, APPROVING THE FORM AND AUTHORIZING EXECUTION OF
AN INDENTURE OF TRUST, AN ESCROW AGREEMENT, A BOND
PURCHASE AGREEMENT, A PRELIMINARY OFFICIAL STATEMENT AND
A CONTINUING DISCLOSURE CERTIFICATE AND AUTHORIZING
ACTIONS RELATED THERETO
RESOLVED, by the City Council (the "Council") of the City of Tustin (the "City"), as follows:
WHEREAS, the Tustin Public Financing Authority (the "Authority") has heretofore issued
its $20,760,000 Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A, of which
$20,760,000 remains outstanding (the "2011 Bonds"), pursuant to an 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 (the "Trustee"), for the purpose of financing the improvement, betterment,
renovation and expansion of certain facilities within the City's municipal water enterprise (the
"Enterprise");
WHEREAS, debt service on the 2011 Bonds is paid from revenues comprised of payments
(the "2011 Installment Payments") made by the City under an installment sale agreement, dated
as May 1, 2011, by and between the Authority and the City;
WHEREAS, Article 10 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with
section 53570) of the California Government Code (the "Refunding Bond Law") authorizes the
City to issue its refunding bonds for the purpose of refunding obligations of the City;
WHEREAS, the City, after due investigation and deliberation, has determined that it is in
the interests of the City at this time to provide for the issuance of bonds under the Refunding Bond
Law to provide for the payment and prepayment of the 2011 Installment Payments and refunding
of the 2011 Bonds;
WHEREAS, to that end, the City has determined to issue its City of Tustin (Orange County,
California) 2016 Water Refunding Revenue Bonds (the "2016 Bonds"), pursuant to an indenture
of trust (the "Indenture"), by and between the City and the Trustee;
WHEREAS, the 2016 Bonds will be secured by a pledge of the net revenues generated
by the Enterprise, on a parity with installment sale agreements securing the Authority's
outstanding Tustin Public Financing Authority 2012 Water Refunding Revenue Bonds and Tustin
Public Financing Authority 2013 Water Revenue Bonds;
WHEREAS, the firm of Hilltop Securities Inc. (the "Underwriter') has proposed to purchase
and underwrite the 2016 Bonds; and
WHEREAS, the Council has duly considered such transactions and wishes at this time to
approve said transactions in the public interests of the City;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1. Determination to Carry Out Refunding. The Council hereby determines to
carry out the issuance and sale of the 2016 Bonds, the payment and prepayment of the
Installment Payments and the refunding of the 2011 Bonds.
SECTION 2. Issuance of the 2016 Bonds: Approval of Indenture.
(a) The Council hereby authorizes the issuance of the 2016 Bonds.
(b) The 2016 Bonds shall be issued pursuant to the Indenture. The Council hereby
approves the Indenture in the form on file with the City Clerk, together with such non -material
additions thereto and changes therein as the Mayor, the Mayor Pro Tem, the City Manager or the
Finance Director, or any designee thereof (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 non -material 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 Indenture for and in the name and on behalf of the City.
The Council hereby authorizes the delivery and performance of the Indenture.
SECTION 3. Approval of Escrow Agreement. The Council hereby approves an escrow
agreement (the "Escrow Agreement"), by and between the City and The Bank of New York Mellon
Trust Company, N.A., as escrow bank, in the form on file with the City Clerk, together with any
changes therein or additions thereto deemed advisable by any Designated Officer, desirable or
appropriate, the execution of which by a Designated Officer shall be conclusive evidence of the
approval of any such non -material 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 Escrow Agreement for and in the name and on behalf of
the City. The Council hereby authorizes the delivery and performance of the Escrow Agreement.
SECTION 4. Sale of 2016 Bonds. The Council hereby approves the sale of the 2016
Bonds by negotiation with the Underwriter pursuant to a bond purchase agreement (the "Bond
Purchase Agreement") in the form on file with the City Clerk, together with such non -material
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
any such non -material additions and changes, so long as the debt service on the 2016 Bonds, as
compared to the debt service with respect to the 2011 Bonds, provides net present value savings
to the City of at least 5%. 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 2016 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 2016 Bonds shall be not more than 0.5%
of the par amount thereof (not taking into account any original issue discount on the sale thereof).
SECTION 5. Official Statement. The Council hereby approves the Preliminary Official
Statement, in the form on file with the City Clerk, together with any changes therein or additions
thereto deemed advisable by any Designated Officer. The Council authorizes and directs any
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Designated Officer to deem the Preliminary Official Statement "final" for purposes of Rule 15c2-
12 under the Securities Exchange Act of 1934 (the "Rule").
Any Designated Officer is authorized and directed to cause the Preliminary Official
Statement to be brought into the form of a final official statement (the "Final Official Statement')
and to execute said Final Official Statement, dated as of the date of the sale of the 2016 Bonds,
and a statement that the facts contained in the Final Official Statement, and any supplement or
amendment thereto (which shall be deemed an original part thereof for the purpose of such
statement) were, at the time of sale of the 2016 Bonds, true and correct in all material respects
and that the Final Official Statement did not, on the date of sale of the 2016 Bonds, and does not,
as of the date of delivery of the 2016 Bonds, contain any untrue statement of a material fact with
respect to the City or omit to state material facts with respect to the City required to be stated
where necessary to make any statement made therein not misleading in the light of the
circumstances under which it was made. The Designated Officers shall take such further actions
prior to the signing of the Final Official Statement as are deemed necessary or appropriate to
verify the accuracy thereof. The execution of the final Official Statement, which shall include such
changes and additions thereto deemed advisable by any Designated Officer and such information
permitted to be excluded from the Preliminary Official Statement pursuant to the Rule, shall be
conclusive evidence of the approval of the final Official Statement by the City.
The Final Official Statement, when prepared, is approved for distribution in connection
with the offering and sale of the 2016 Bonds.
SECTION 6, Continuing Disclosure Certificate. The Council hereby approves a continuing
disclosure certificate (the "Continuing Disclosure Certificate"), in the form on file with the City
Clerk, together with any changes therein or additions thereto deemed advisable by any
Designated Officer, the execution of which by the City shall be conclusive evidence of the approval
of any such non -material additions and changes. The Designated Officers, each acting alone, are
hereby authorized and directed to execute the final form of the Continuing Disclosure Certificate
for and in the name and on behalf of the City. The City hereby authorizes the delivery and
performance of the Continuing Disclosure Certificate.
SECTION 7. Official Actions. The Mayor, the Mayor Pro Tem, the City Manager, the
Director of Finance, 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, which they, or any of them, may deem necessary or advisable in order to
consummate the lawful issuance and sale of the 2016 Bonds and the consummation of the
transactions as described herein.
SECTION 8. Effective Date. This Resolution shall take effect from and after the date of its
passage and adoption.
************
-3-
This resolution is hereby approved and adopted at a regular meeting of the City Council
of the City of Tustin held on August 16, 2016, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST
Erica N. Rabe, City Clerk
ME
John Nielsen, Mayor
PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 30, 2016
NEW ISSUE—FULL BOOK -ENTRY
RATING:
S&P: u "
(See "RATING" herein)
In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject to compliance by 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 from personal income taxation imposed by the State of California. See "TAX MATTERS" herein.
TUSTIN
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Dated: As of Date of Delivery
CITY OF TUSTIN
(Orange County, California)
2016 Water Refunding Revenue Bonds
Due: April 1, as shown below
The $ ' City of Tustin (Orange County, California) 2016 Water Refunding Revenue Bonds (the "Bonds") are being issued by the City of Tustin, Californja (the
"City"), in fully registered form without coupons and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC").
Payments of the principal of and interest on the Bonds will be made by The Bank of New York Mellon Trust Company, N.A., as trustee for the Bonds (the "Trustee"), to DTC,
which is obligated in turn to remit such principal and interest to DTC participants for subsequent disbursement to the beneficial owners of the Bonds. The Bonds are being issued
pursuant to an Indenture of Trust, dated as of October 1, 2016 (the "Indenture"), by and between the City and the Trustee. Interest on the Bonds wi0 be payable semi-annually on
each April 1 and October 1, commencing on April 1, 2017.
The Bonds are being issued to provide funds to (i) refund, on an advance basis, the outstanding Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "2011
Bonds"), which were issued to finance the improvement, betterment, renovation and expansion of certain facilities within the City's municipal water enterprise (the
"Enterprise"), and (u) pay the costs of issuing the Bonds.
The Bonds are payable from the net revenues (the "Net Revenues") of the Enterprise, derived primarily from charges and revenues received by the City from the operation of the
Enterprise, less the costs of the operation and maintenance of the Enterprise. The Net Revenues are pledged, as a first and prior hen thereon, to pay the principal of and interest on
the Bonds on a parity, as to payment and security, with an existing obligation secured by Net Revenues, as described herein, and any parity obligations issued or incurred by the City
in accordance with the Indenture, as described herein (the "Parity Obligations"). The City has covenanted to set rates and charges for the service and facilities of the Enterprise
sufficient to provide Net Revenues in each year equal to at least 1.20 tunes the aggregate annual amount of principal of and interest due on the Bonds and all Parity Obligations. A
reserve fund has not been established for the Bonds.
The Bonds are subject to redemption prior to maturity as described herein. See "THE BONDS—Redemption."
NEITHER THE BONDS NOR THE OBLIGATION TO PAY PRINCIPAL OF OR INTEREST THEREON CONSTITUTES A DEBT OR A LIABILITY OF THE CITY,
THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON
INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE BONDS ARE SECURED SOLELY BY THE PLEDGE OF NET
REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE
CITY.
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES OR YIELDS
$ Serial Bonds
CUSIPt Prdir_
Maturity Principal Interest CUSIPt
April I Amount Rate Yield Suffix
% Term Bonds Maturing April 1, ; Price: , to Yield %—CUSIPt:
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE OF BONDS. INVESTORS
MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION
WITH RESPECT TO THE PURCHASE OF THE BONDS.
The Bonds are offered when, as and if issued azul received by the Underwriter and subject to the approval as to their legality by Quint & 7himmig LLP, Larkspur,
California, as Bond Counsel Certain legal matters will also be passed upon for the City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel, and
by Woodruff; Spradlin 6 Smart, Costa Mesa, California, the City Attorney. It is anticipated that the Bonds will be delivered in definitive form through the facilities of
DTC on or about October 4, 2016.
HilltopSecurides
Dated: September . 2016
'Preliminary, subject to change.
t Copyright 2016, American Bankers Association. CUSIP6 is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by Standard &
Poor 'a. This data is not intended to create a database and does not serve in any way as a substitute for CU SIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with
the Authority and arc included solely for the convenience of the registered owners of the Bonds. Neither the City nor the Underwriter is responsible for the selection or uses of these CUSIP numbers and no
representation is made as to their correctness on the Bonds or as included herein. The CUSIP munber for a specific maturity is subject to being changed after the delivery of the Bonds as a result of various
subsequent actions including, but not limited to, a reflmding in whole or in pan or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable
to all or a portion oPoertain maturities of the Bonds.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended ("Rule 15c2-
12 "), this Preliminary Official Statement constitutes an "offs al statement" of the District with respect to the Bonds that has been
deemed "final" by the District as of its date except for the omission of no more than the information permitted by Rule 15c2-12.
Use of Oficial Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and
may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a
contract with the purchasers of the Bonds.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the City, in any press release
and in any oral statement made with the approval of an authorized officer of the City, the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar
expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
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 information and expressions of
opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made
hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the City since
the date hereof.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by 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.
Limited Scope oflnformation. The City has obtained certain information set forth herein from sources which are believed to be
reliable, but such information is neither guaranteed as to accuracy or completeness, nor to be construed as a representation of
such by the City. The information and expressions of opinions 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 City since the date hereof. All summaries of or references to the documents referred to in this Official
Statement are made subject to the provisions of such documents and do not purport to be complete statements of any or all of
such provisions. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Indenture.
Underwriter. 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.
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 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH
ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY
STATE.
Website. 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.
TAS OF CONTENTS
INTRODUCTION.........................................................................1
Gener-A.......................................................................................1
TheCity......................................................................................1
The Enterprise............................................................................1
Purposeof the Bonds..................................................................1
Authorityfor Issuance............................................................... 2
Pledgeof Net Revenues............................................................. 2
RateCovenant........................................................................... 2
Additional Obligations............................................................... 2
Payment................................................................................... 2
Redemption............................................................................... 3
Formof Bonds........................................................................... 3
Book -Entry System.................................................................... 3
Risksof Investment................................................................... 3
Continuing Disclosure............................................................... 3
Forward -Looking Statements.................................................... 3
OtherMatters............................................................................ 4
OtherInformation...................................................................... 4
BudgetaryProcess....................................................................21
Rate Setting Process.................................................................21
Rates.........................................................................................21
FutureRate Study.................................................................... 23
Billing and Collection Procedures ............................................ 24
Water Connections.................................................................. 24
Water Users............................................................................. 25
Capital Improvement Program................................................26
Financial Statements............................................................... 27
Historical Revenues and Expenditures .................................... 28
Projection of Revenues, Expenditures and Debt
Service Coverage
29
RiskManagement.................................................................... 29
Retirement Programa............................................................... 30
INVESTMENT OF CITY FUNDS ............................................ 38
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS
ANDFEES...................................................................................39
ArticleXIIIA.............................................................................39
ESTIMATED SOURCES AND USES OF FUNDS .................... 5 Article XIIIB ............................................................................. 39
THE REFUNDING PLAN........................................................... 5 Proposition 218........................................................................ 40
DEBT SERVICE REQUIREMENTS ........................................... 7 Effect of Proposition 218 on the City; Possible
THEBONDS................................................................................. 8 Limitations on Enforcement Remedies.................................... 42
Authorityfor Issuance............................................................... 8
General Provisions..................................................................... 8
Redemption...............................................................................
9
Book -Entry Only System..........................................................10
SECURITY FOR THE BONDS..................................................11
Pledgeof Net Revenues............................................................11
WaterUse................................................................................ 20
NoBond Reserve Fund............................................................12
Receipt, Deposit and Application of Gross Revenues
WaterStorage...........................................................................21
and Net Revenues.....................................................................12
Application of Interest Account................................................13
Application of Principal Account..............................................13
Application of Sinking Account................................................13
RateCovenant..........................................................................13
Limitations on Future Obligations Secured by Net
Revenues..................................................................................14
THECITY....................................................................................16
General.....................................................................................16
Governance and Management..................................................16
THE ENTERPRISE.....................................................................17
History......................................................................................17
Existing Facilities......................................................................17
APPENDIX C:
Management.............................................................................17
Service Area..............................................................................17
WaterSupply............................................................................17
APPENDIX E:
WaterUse................................................................................ 20
Mandatory Drought Restriction
...............................................21
WaterStorage...........................................................................21
BOOK -ENTRY ONLY SYSTEM
Distribution System..................................................................21
Proposition 26.......................................................................... 42
FutureInitiatives..................................................................... 43
RISK FACTORS RELATING TO THE BONDS ...................... 43
General.................................................................................... 43
Limited Obligations................................................................. 44
SeismicConsiderations............................................................ 44
Environmental Regulation....................................................... 44
Maintenance and Operation Costs ........................................... 44
Demandand Usage; Drought..................................................44
Limited Recourse on Default ................................................... 45
Limitations on Remedies......................................................... 45
Initiatives................................................................................. 45
Bankruptcy.............................................................................. 45
Rate Process............................................................................. 46
Insurance ......
E:s'
TaxExemption........................................................................ 46
ParityObligations.................................................................... 46
SecondaryhfadmL................................................................... 46
TAXMATTERS......................................................................... 46
CERTAIN LEGAL MATTERS .................................................. 49
LITIGATION.............................................................................. 49
RATING...................................................................................... 49
MUNICIPAL ADVLSOR............................................................. 49
CONTINUING DISCLOSURE .................................................. 50
AUDITED FINANCIAL STATEMENTS ................................ 50
VERIFICATION OF MATHEMATICAL COMPUTATIONS 50
UNDERWRITING.......................................................................51
MISCELLANEOUS.....................................................................51
APPENDIX A: SUMMARY OF THE INDENTURE
APPENDIX B: COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL
YEAR ENDED JUNE 30, 2015
APPENDIX C:
FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX D:
CITY INVESTMENT POLICY
APPENDIX E:
GENERAL INFORMATION REGARDING THE CITY OF TUSTIN AND ORANGE COUNTY
APPENDIX F:
FORM OF OPINION OF BOND COUNSEL
APPENDIX G:
BOOK -ENTRY ONLY SYSTEM
AL
TIM W
TUS I- W0101A
CITY OF TUSTIN
300 Centennial Way
Tustin, CA 92780
(714) S73-3000
http://www.tustinca.org
CITY COUNCIL MEMBERS
John Nielsen, Mayor
Dr. Allan Bernstein, Mayor Pro Tem
Rebecca Gomez, Councilmember
Elwyn A. Murray, Councilmember
Charles E. Puckett, Councilmember
CITY OFFICIALS
Jeffrey C. Parker, City Manager
Leisz, Acting Finance Director and City Treasurer
can Tran, Administrative Services Manager
Douglas Stack, Public Works Director
Stacey Cuevas, Public Works Manager
n, P.E., Principal Engineer, Public Works, Engineering
'ater Services Manager, Public Works, Water Services Division
Erica N. Rabe, City Clerk
Woodruff, Spradlin & Smart, City Attorney
SPECIAL SERVICES
Municipal Advisor
Fieldman Rolapp & Associates
Irvine, California
Bond and Disclosure Counsel
Quint & Thimmig LLP
Larkspur, California
Trustee and Escrow Bank
ank of New York Mellon Trust Company, N.A.
Los Angeles, California
Verification Agent
Grant Thornton LLP
Minneapolis, Minnesota
OFFICIAL STATEMENT
CITY OF TUSTIN
(Orange County, California)
2016 Water Refunding Revenue Bonds
INTRODUCTION
General
This Official Statement, which includes the cover page and appendices hereto, provides
information in connection with the sale of the 2016 Water Refunding Revenue Bonds (the "Bonds"),
being issued by the City of Tustin, California (the "City"), in the aggregate principal amount of
This Introduction is not a summary of this Official Statement. It is only a brief description of and
guide to, and is qualified by, more complete and detailed information contained in the entire Official
Statement, including the cover page and appendices hereto, and the documents summarized or described
herein. A full review should be made of the entire Official Statement. The offering of the Bonds to
potential investors is made only by means of the entire Official Statement.
Capitalized terms used, but not otherwise defined herein, shall have the meanings assigned
thereto as set forth in APPENDIX A—SUMMARY OF THE INDENTURE—Certain Definitions.
The City
The City of Tustin (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 a Council -Manager form of government.
The Mayor is selected by the City Council from among its members. See "THE CITY" and APPENDIX
E—GENERAL INFORMATION REGARDING THE CITY OF TUSTIN AND ORANGE COUNTY
AND ORANGE COUNTY.
The Enterprise
The City's municipal water enterprise (the "Enterprise") includes water treatment, storage and
distribution facilities. See "THE ENTERPRISE" herein.
Purpose of the Bonds
The Bonds are being issued to provide funds to (i) refund, on an advance basis, the outstanding
Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "2011 Bonds"), which were
delivered for the purpose of financing the improvement, betterment, renovation and expansion of certain
* Preliminary, subject to change.
facilities of the Enterprise, and (ii) pay the costs of issuing the Bonds. See "THE REFUNDING PLAN"
herein.
Authority for Issuance
The Bonds are authorized pursuant to the provisions of section 53570 et seq. of the California
Government Code, a resolution adopted by the City Council of the City on August 16, 2016 (the
"Resolution"), and an Indenture of Trust (the "Indenture"), dated as of October 1, 2016, by and between
the City and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").
Pledge of Net Revenues
The Bonds are payable from the net revenues (the "Net Revenues") of the Enterprise, derived
primarily from charges and revenues received by the City from the operation of the Enterprise, less the
costs of the operation and maintenance of the Enterprise. The Net Revenues are pledged, as a first and
prior lien thereon, to pay the principal of and interest on the Bonds on a parity, as to payment and
security, with the Installment Sale Agreement, dated as of April 1, 2012 (the "2012 Installment Sale
Agreement"), by and between the Tustin Public Financing Authority (the "Authority") and the City,
securing the Tustin Public Financing Authority Water Revenue Bonds, 2012 Series A, the Installment
Sale Agreement, dated as of October 1, 2013 (the "2013 Installment Sale Agreement"), by and between
the Authority and the City, securing the Tustin Public Financing Authority 2013 Water Revenue Bonds,
and with any parity obligations issued or incurred by the City in accordance with the Indenture, as
described herein (the "Parity Obligations").
See "SECURITY FOR THE BONDS—Pledge of Net Revenues."
Rate Covenant
The City has covenanted to set rates and charges for the service and facilities of the Enterprise
sufficient to provide Net Revenues in each year equal to at least 1.20 times the aggregate annual amount of
principal of and interest due on the Bonds and all Parity Obligations. See "SECURITY FOR THE
BONDS—Rate Covenant."
Additional Obligations
Additional obligations and bonds issued or incurred on a parity with or subordinate to the Bonds
may be issued pursuant to the Indenture provided that certain conditions are met. See "SECURITY FOR
THE BONDS—Limitations on Future Obligations Secured by Net Revenues."
Payment
Principal of the Bonds will be payable in each of the years and in the amounts set forth on the
cover page hereof at the office of the Trustee. Interest on the Bonds will be paid by check or draft of the
Trustee mailed by first class mail to the person entitled thereto. See "THE BONDS—General." Initially,
principal of and interest on the Bonds will be payable when due by wire of the Trustee to The Depository
Trust Company ("DTC"), which will in turn remit such interest and principal to DTC Participants (as
defined herein), which will in turn remit such interest and principal to Beneficial Owners (as defined
herein) of the Bonds. See "THE BONDS—Book-Entry Only System."
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tion
The Bonds are subject to redemption prior to their stated maturity dates, as provided herein. See
"THE BONDS—Redemption."
Form of Bonds
The Bonds will be dated as of their date of delivery and will be issued in fully registered form,
without coupons, in the minimum denominations of $5,000 or any integral multiple thereof. Any Bond
may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the
Indenture. See "THE BONDS—General."
Book -Entry System
The Bonds will be registered in the name of Cede & Co., as nominee of 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. Upon receipt of payments of principal
of and interest on the Bonds, DTC will in turn remit such principal 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.
Risks of Investment
The Bonds are repayable only from certain money available to the City from the Enterprise. For a
discussion of some of the risks associated with the purchase of the Bonds, see "RISKS RELATING TO
THE BONDS" herein.
NEITHER THE BONDS NOR THE OBLIGATION TO PAY PRINCIPAL OF OR INTEREST
THEREON CONSTITUTES A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF
ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL
LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF
THE CITY. THE BONDS ARE SECURED SOLELY BY THE PLEDGE OF NET REVENUES AND
CERTAIN FUNDS HELD UNDER THE INDENTURE.
Continuing Disclosure
The City has covenanted, for the benefit of the 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 each Fiscal Year (currently June 30), and to provide notices of the occurrence
of certain enumerated events. See "CONTINUING DISCLOSURE" herein and APPENDIX C—
FORM OF CONTINUING DISCLOSURE CERTIFICATE.
Forward -Looking Statements
This Official Statement, and particularly the information contained under the headings entitled
"REFUNDING PLAN," "ESTIMATED SOURCES AND USES OF FUNDS," "SECURITY FOR
THE BONDS," "THE ENTERPRISE" AND APPENDIX E—GENERAL INFORMATION
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REGARDING THE CITY OF TUSTIN AND ORANGE COUNTY, 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 "RISK FACTORS RELATING TO THE BONDS."
Other Matters
There follows in this Official Statement brief descriptions of the Bonds, the security for the
Bonds, the Indenture, 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 City since the date hereof.
All financial and other information presented in this Official Statement has been provided by the
City from its 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 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: Administrative Services Manager. The City may
impose a charge for copying, mailing and handling expenses related to any request for documents.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds are as follows:
Sources:
Principal Amount of Bonds
Plus: Original Issue Premium
TOTAL SOURCES
Uses:
Deposit to Escrow Fund (1)
Costs of Issuance (2)
TOTAL USES
(1) Amount required to defease the 2011 Bonds. See "THE REFUNDING PLAN."
(2) Costs of Issuance include the Underwriter's discount, legal fees, printing costs, rating agency fees and other miscellaneous
expenses.
THE REFUNDING PLAN
Proceeds of the Bonds will be used to (a) refund, on an advance basis, the 2011 Bonds, and (b) pay
costs incurred in connection with the issuance and sale of the Bonds.
A portion of the proceeds of the Bonds will be used to purchase United States Treasury
Securities—State and Local Government Series (the "SLGS"), to be held in a separate fund for the 2011
Bonds (the "Escrow Fund"), established under an escrow agreement (the "Escrow Agreement"), by and
between the City and The Bank of New York Mellon Trust Company, N.A., as escrow agent (the
"Escrow Bank"). See "—Sources and Uses of Funds." The maturing SLGS, the interest income thereon
and the uninvested cash in the Escrow Fund will be applied to pay the interest on the 2011 Bonds to and
including April 1, 2021, and to redeem all 2011 Bonds in full on April 1, 2021, at a redemption price equal
to 1009 of the par amount thereof. The sufficiency of the moneys, investment earnings and maturing
SLGS for such purposes will be verified by Grant Thornton LLP (the "Verification Agent"). See
"VERIFICATION OF MATHEMATICAL COMPUTATIONS." Assuming the accuracy of the
Verification Agent's computations, as a result of the deposit and application of funds as provided in the
Escrow Agreement, the obligations of the Authority and the City with respect to the 2011 Bonds will be
defeased and discharged.
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The 2011 Bonds to be refunded are shown in the following table:
Maturity
Amount
Interest
Call
Call
Date
Refunded
Rate
Date
Price
4/1/24
$ 735,000
5.000%
4/1/21
100.000
4/1/25
770,000
5.000
4/1/21
100.000
4/1/26
810,000
5.000
4/1/21
100.000
4/1/27
850,000
5.000
4/1/21
100.000
4/1/28
890,000
5.250
4/1/21
100.000
4/1/29
935,000
5.250
4/1/21
100.000
4/1/30
985,000
5.250
4/1/21
100.000
4/1/31
1,040,000
5.250
4/1/21
100.000
4/1/36
6,040,000
5.000
4/1/21
100.000
4/1/41
7,705,000
5.000
4/1/21
100.000
CUSIP
Number
90105T AA9
90105T AB7
90105T AC5
90105T AD3
90105T AE1
90105T AF8
90105T AG6
90105T AH4
90105T AJO
90105T AK7
The maturing SLGS, the interest income thereon and the uninvested cash in the Escrow Fund will be held
in trust solely far the 2011 Bonds and will not be available to pay principal of or interest on the Bonds or any
obligations other than the 2011 Bonds.
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DEBT SERVICE REQUIREMENTS
Annual debt service on the Bonds (assuming no redemptions of the Bonds) is presented below.
Maturity
(April l Principal Interest Total
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
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Set forth below is the combined annual debt service on the Bonds and the 2012 Installment Sale
Agreement and the 2013 Installment Sale Agreement secured by Net Revenues.
THE BONDS
Authority for Issuance
The Bonds are authorized pursuant to the provisions of section 53570 et seq. of the California
Government Code, a resolution adopted by the City Council of the City on August 16, 2016, and the
Indenture.
General Provisions
The Bonds will be dated as of their date of delivery and issued in fully registered form without
coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond shall have more
than one maturity date. The Bonds will mature in the amounts and on the dates, and bear interest at the
rates per annum, set forth on the cover page of this Official Statement.
10
2012
2013
Installment
Installment
Maturity
Sale
Sale
(April l
Agreement
Agreement Bonds Total
2017
$ 998,075.00
$ 697,220.00
2018
992,275.00
701,320.00
2019
995,475.00
700,320.00
2020
998,500.00
698,320.00
2021
995,600.00
701,320.00
2022
995,200.00
698,570.00
2023
998,400.00
695,820.00
2024
—
958,070.00
2025
—
960,910.00
2026
—
957,510.00
2027
—
957,675.00
2028
—
961,475.00
2029
—
966,275.00
2030
—
965,275.00
2031
—
958,675.00
2032
—
961,143.76
2033
—
962,787.50
2034
—
963,025.00
2035
—
959,375.00
2036
—
959,750.00
2037
—
963,925.00
2038
—
961,625.00
2039
—
958,100.00
2040
—
962,937.50
2041
—
966,062.50
2042
—
2,742,437.50 —
2043
—
2,744,306.26 —
TOTALS
$6,973,525.00
$27,684,230.02
THE BONDS
Authority for Issuance
The Bonds are authorized pursuant to the provisions of section 53570 et seq. of the California
Government Code, a resolution adopted by the City Council of the City on August 16, 2016, and the
Indenture.
General Provisions
The Bonds will be dated as of their date of delivery and issued in fully registered form without
coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond shall have more
than one maturity date. The Bonds will mature in the amounts and on the dates, and bear interest at the
rates per annum, set forth on the cover page of this Official Statement.
10
Repayment of the Bonds. Interest on the Bonds will be payable on April 1 and October 1 in each
year, beginning April 1, 2017 (each an "Interest Payment Date"), to the person whose name appears on
the Bond 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 or draft of the Trustee mailed by first class mail
to the Owner or, at the option of any Owner of at least $1,000,000 aggregate principal amount of the
Bonds with respect to which written instructions have been filed with the Trustee prior to the Record
Date, by wire transfer, at the address of such Owner as it appears on the Bond Registration Books. In the
event there exists a default in payment of interest due on such Interest Payment Date, such interest will be
payable on a payment date established by the Trustee to the persons in whose names the Bonds are
registered at the close of business on a special record date for the payment of such defaulted interest
established by notice mailed by the Trustee to the registered Owners of the Bonds not less than 15 days
preceding such special record date. Principal of any Bond will be paid upon presentation and surrender
thereof at the Principal Corporate Trust Office of the Trustee in Seattle, Washington. Both the principal
of and interest on the Bonds will be payable in lawful money of the United States of America.
The Bonds will bear interest based on a 360 -day year comprised of twelve 30 -day months from the
Interest Payment Date next preceding the date of authentication thereof, unless said date of
authentication is an Interest Payment Date, in which event such interest is payable from such date of
authentication, and unless said date of authentication is prior to March 15, 2017, in which event such
interest is payable from their 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 date to which interest has
previously been paid or made available for payment thereon in full.
DTC as Registered Owner. The Bonds will initially be issued in book -entry only form, registered in
the name of Cede & Co., as nominee of DTC. Purchasers of the Bonds will not receive certificates
representing their interests therein, which will be held at DTC. See "THE BONDS—Book-Entry Only
System."
Redemption
Optional Redemption. The Bonds maturing on or before April 1, , are not subject to optional
redemption prior to maturity. The Bonds maturing on or after April 1, , are subject to redemption,
at the option of the City on any date on and after April 1, , as a whole or in part, from any available
source of funds, at a redemption price equal to the principal amount thereof, together with accrued
interest to the date fixed for redemption, without premium.
The City is required to give the Trustee written notice of its intention to optionally redeem Bonds
at least forty-five (45) days prior to the date fixed for such redemption.
Sinking Fund Redemption. The Bonds maturing on April 1, , are also subject to mandatory
sinking fund redemption in part by lot on April 1, , and on each April 1 thereafter, to and including
April 1, , from Mandatory Sinking Account Payments made by the City at a redemption price equal
to the principal amount thereof, without premium, in the aggregate respective amounts and on the
respective dates as set forth in the following table.
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Sinking Account
Redemption Date
(April 1)
tMaturity
Principal Amount
to be Redeemed
Notice of Redemption. Unless waived by any Owner of Bonds to be redeemed, notice of any
redemption of Bonds shall be given, at the expense of the City, by the Trustee by providing a redemption
notice at least 30 days and not more than 60 days prior to the date fixed for redemption to the Owner of
the Bond or Bonds to be redeemed at the address shown on the Bond Registration Books; provided, that
neither the failure to receive such notice nor any immaterial defect in any notice shall affect the sufficiency
of the proceedings for the redemption of the Bonds.
All notices of redemption are required to include (i) the redemption date, (ii) the Redemption
Price, (iii) if fewer than all Outstanding Bonds are to be redeemed, the identification (and, in the case of
partial redemption, the respective principal amounts) of the Bonds to be redeemed, (iv) that on the
redemption date the Redemption Price will become due and payable with respect to each such Bond or
portion thereof called for redemption, and that interest with respect thereto shall cease to accrue from and
after said date, and the place or places where such Bonds are to be surrendered for payment of the
Redemption Price, which places of payment may include the Principal Corporate Trust Office of the
Trustee.
Book -Entry Only System
The Bonds will be registered in the name of Cede & Co., as registered owner and nominee of
DTC. DTC will act as securities depository for the Bonds so purchased. Individual purchases will be made
in book -entry form. One fully registered Bond certificate will be issued for each series and maturity of the
Bonds having the same interest rate, in the aggregate principal amount of such maturity and will be
deposited with DTC. Purchasers will not receive a certificate representing their beneficial ownership
interest in Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC,
references herein to the Bondowners 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 DTC Participant acquires an interest in the Bonds. See APPENDIX
G—BOOK-ENTRY ONLY SYSTEM.
So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds
are payable by wire transfer of same day funds by the Trustee to Cede & Co., as nominee for DTC. DTC
is obligated, in turn, to remit such amounts to the DTC Participants for subsequent disbursement to the
Beneficial Owners. See APPENDIX G—BOOK-ENTRY ONLY SYSTEM.
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SECURITY FOR THE BONDS
The general fund of the City is not liable and the credit or taxing power of the City is notpledged for the
payment of the principal of and interest on the Bonds. The Owners of the Bonds may not compel the exercise of the
taxing power by the City or the forfeiture of its property. The principal of and interest on the Bonds are not a debt
of the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of itsproperty, or upon any of its
income, receipts, or revenues except the Net Revenues of the Enterprise.
Pledge of Net Revenues
The Bonds and any Parity Obligations shall be secured by a first pledge of all of the Net Revenues.
In addition, the Bonds shall be secured by a pledge of all of the moneys in the Bond Fund, including all
amounts derived from the investment of such moneys. Such pledge shall constitute a lien on the Net
Revenues and such other moneys for the payment of the principal of and interest on the Bonds and any
Parity Obligations in accordance with the terms hereof. The Bonds and any Parity Obligations shall be
equally secured by a pledge, charge and lien upon the Net Revenues, without priority for number or date
thereof, shall be and are secured by an exclusive pledge, charge and lien upon the Net Revenues and such
moneys, except as set forth in the Indenture. So long as any of the Bonds are Outstanding, the Net
Revenues and such moneys shall not be used for any other purpose, except as set forth in the Indenture;
except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are
expressly permitted by the Indenture.
The Indenture defines "Enterprise" as the entire Enterprise of the City, comprising 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.
The Indenture defines "Net Revenues" as, 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 during such period.
The Indenture defines "Gross Revenues" as 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, (c) capital charges, and (d) all
receipts derived from the investment of such income or revenues, but excluding customer deposits.
The Indenture defines "Maintenance and Operation Costs" as (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
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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.
In consideration of the acceptance of the Bonds by those who shall hold the same from time to
time, the Indenture shall be deemed to be and shall constitute a contract between the City and the Owners
from time to time of the Bonds, and the covenants and agreements herein set forth to be performed on
behalf of the City shall be for the equal and proportionate benefit, security and protection of all Owners of
the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over
any of the others by reason of the number or date thereof or the time of sale, execution and delivery
thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein.
No Bond Reserve Fund
A bond reserve fund has not been established for the Bonds.
Receipt, Deposit and Application of Gross Revenues and Net Revenues
Application of Gross Revenues. All of the Gross Revenues shall be deposited by the City
immediately upon receipt in the Water Fund. All Gross Revenues shall be held in trust by the City in the
Water Fund and shall be applied, transferred, used and withdrawn only for the following purposes:
Maintenance and Operation Costs. The City shall first pay from the moneys in the
Water Fund the budgeted Maintenance and Operation Costs as such Maintenance and Operation
Costs become due and payable.
Payment of Debt Service. On or before the 5th Business Day preceding each Interest
Payment Date, the City shall withdraw from the Water Fund and transfer to the Trustee, for
deposit in the Bond Fund, an amount which, together with the balance then on deposit in the
Bond Fund, the Interest Account, the Principal Account and the Sinking Account (other than
amounts required for payment of principal of or interest on any Bonds which have matured but
which have not been presented for payment), is equal to the aggregate amount of principal of and
interest coming due and payable on the Bonds and shall withdraw from the Water Fund and
transfer amounts required for the payment of debt service on any Parity Obligations. The transfers
required to pay debt service on the Bonds and any Parity Obligations shall be made without
preference or priority and, in the event moneys in the Water Fund are not sufficient to pay the
debt service requirement for the Bonds and any Parity Obligations, the City shall pay such
amounts on a pro rata basis based on the debt service requirements for the Bonds and each
outstanding Parity Obligations.
Surplus. As long as all of the foregoing payments, allocations and transfers are made at
the times and in the manner set forth above, any moneys remaining in the Water Fund may at any
time be treated as surplus and applied for any lawful purpose.
Application ofNet Revenues. On or before the Business Day preceding each Interest Payment Date,
the Trustee shall transfer from the Bond Fund and deposit 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 such account (including the making up of any
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deficiencies in any such account resulting from lack of Net 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:
First: to the Interest Account, the aggregate amount of interest becoming due and payable
on the next succeeding Interest Payment Date on all Bonds then Outstanding;
Second: to the Principal Account, the aggregate amount of principal becoming due and
payable on the Outstanding Bonds on the next succeeding Interest Payment Date, if any; and
Third: to the Sinking Account, the aggregate amount of sinking fund installment
becoming due and payable on the Outstanding Bonds on the next succeeding Interest Payment
Date, if any.
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 the Indenture).
Application of Principal Account
All amounts in the Principal Account shall be used and withdrawn by the Trustee solely for the
purposes of paying the principal of the Bonds when due and payable.
Application of Sinking Account
All amounts in the Sinking Account shall be used and withdrawn by the Trustee solely for the
purposes of paying the sinking fund installments of the Bonds when due and payable.
Rate Covenant
Covenant Regarding Revenues. The City covenants to fix, prescribe, revise and collect rates, fees
and charges for the Enterprise as a whole for the services and improvements furnished by the Enterprise
during each Fiscal Year which are at least sufficient, after making allowances for contingencies and error
in the estimates, to yield Gross Revenues that are sufficient to pay the following amounts in the following
order of priority:
(i) all anticipated Maintenance and Operation Costs of the Enterprise for such Fiscal
Year;
(ii) Debt Service payments on the Bonds and any Parity Obligations as they become due
and payable during such Fiscal Year, without preference or priority, except to the extent such
Debt Service payments are payable from the proceeds of the Bonds or such Parity Obligations, as
applicable, or from any other source of legally available funds of the City that have been deposited
with the Trustee or otherwise segregated for purposes prior to the commencement of such Fiscal
Year (not including a debt service reserve fund); and
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(iii) all other payments required to meet any other obligations of the City which are
charges, liens, encumbrances upon, or which are otherwise payable, from the Revenues during
such Fiscal Year.
Covenant Regarding Net Revenues. In addition, the City covenants to fix, prescribe, revise and
collect, or cause to be fixed, prescribed, revised and collected, rates, fees and charges for the services and
improvements furnished by the Enterprise during each Fiscal Year which are sufficient to yield Net
Revenues which are at least equal to one hundred twenty percent (120%) of the total Debt Service
Payments on the Bonds and any debt service on Parity Obligations coming due and payable in such Fiscal
Year.
Limitations on Future Obligations Secured by Net Revenues
No Obligations Superior to Bonds or Parity Obligations. In order to protect further the availability of
the Net Revenues and the security for the Bonds and any Parity Obligations, the City covenants that no
additional bonds or other indebtedness will be issued or incurred on a senior basis to the Bonds or such
Parity Obligations that are payable out of the Net Revenues in whole or in part.
Parity Obligations. The City further covenants that, except for obligations incurred to prepay or
post a security deposit for the payment of the Bonds or Parity Obligations, the City may issue or incur
Parity Obligations during the term of the Bonds if:
(i) The City shall be in compliance with all covenants set forth in this Indenture.
(ii) The 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 instrument issuing such
Parity Obligations are issued, as shown by the books of the City, plus, at the option of the City,
either or both of the items hereinafter in this covenant designated (A) and (B), but excluding
connection charges, shall at least equal one hundred twenty percent (120%) of the amount of
Maximum Annual Debt Service on all Bonds and Parity Obligations to be Outstanding
immediately subsequent to the issuance of such Parity Obligations. The items any or all of which
may be added to such Net Revenues for the purpose of issuing or incurring Parity Obligations
hereunder are the following:
(A) An allowance for Net Revenues from any additions to or improvements or
extensions of the Enterprise to be made with the proceeds of such Parity Obligations, and
also for Net Revenues from any such additions, improvements or extensions which have
been made from moneys from any source but in any case which, during all or any part of
such Fiscal Year or such twelve (12) month period, were not in service, all in an amount
equal to seventy percent (70%) of the estimated additional average annual Net Revenues
to be derived from such additions, improvements and extensions for the first thirty-six
(36) month period in which each addition, improvement or extension is respectively to be
in operation, all as shown in the written report of an Independent Financial Consultant
engaged by the City.
(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
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that:
additional indebtedness but which, during all or any part of such Fiscal Year or such
twelve (12) month period, was not in effect, in an amount equal to 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 or such twelve (12) month period, all as shown
in the written report of an Independent Financial Consultant engaged by the City.
(iii) The instrument providing for the issuance of such Parity Obligations shall provide
(A) The proceeds of such Parity Obligations shall be applied to the acquisition,
construction, improvement, financing or refinancing of additional facilities,
improvements or extensions of existing facilities within the Enterprise, or otherwise for
facilities, improvements or property which the City determines are of benefit to the
Enterprise, or for the purpose of refunding any Bonds or Parity Obligations in whole or in
part, including all costs (including costs of issuing such Parity Obligations and including
capitalized interest on such Parity Obligations during any period which the City deems
necessary or advisable) relating thereto;
(B) Interest on such Parity Obligations shall be payable on April 1 and October 1
in each year of the term of such Parity Obligations except the first year, during which year
interest may be payable on any April 1 or October 1; and
(C) The principal of such Parity Obligations shall be payable on April 1 in any
year in which principal is payable.
(iv) A reserve fund may, but shall not be required to, be established for such Parity
Obligations.
Subordinate Obligations. The City further covenants that the City shall 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 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.
-15-
THE CITY
General
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.
The City provides a range of municipal services to its residents. 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.
Governance and Management
The City is a general law city and was incorporated in 1927. The City has a council-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 281 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 current mayor and city council members are set forth below:
Name
John Nielsen
Dr. Allan Bernstein
Rebecca Gomez
Elwyn A. Murray
Charles E. Puckett
Position
Mayor
Mayor Pro Tem
Council Member
Council Member
Council Member
Term Expires
November 2016
November 2016
November 2018
November 2018
November 2016
Information with respect to the City, including financial information and certain economic and
demographic information relating to the City is provided in APPENDIX E—GENERAL
INFORMATION ABOUT THE CITY OF TUSTIN AND ORANGE COUNTY. Also, see APPENDIX
B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2015.
612
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`x' 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.
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 14,146 water service connections. Approximately 9,070 (64%) of the connections are within a five
square mile area within the City limits and the remaining 5,076 (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, all from the
Metropolitan Water District of Southern California (MWD). 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
-17-
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 (EOCWD) 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. An additional connection is located south of the 1-5 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. The
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 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 2016, the Enterprise did not pay a BEA to OCWD. For the year ending June 30,
2016, the BPP is 72% and OCWD has set the BPP for the fiscal year ending June 30, 2017 at 75%. The
Enterprise pays OCWD a Replenishment Assessment fee of $402 per acre foot of groundwater pumped
up to the BPP.
Groundwater is produced from the Enterprise's fourteen (14) wells. When operated at full
capacity, they can produce 13,000 gallons per minute or up to 18.7 million gallons of water in a twenty-
four -hour period. Nine (9) 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 BPP and 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 City maintains groundwater reliability by replacing aging infrastructure. Due
to restrictions on the amount of groundwater that can be pumped from the groundwater 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.
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The table below is a summary of the Enterprise's sources of water supply for the last five fiscal
;ars assuming a normal water year.
HISTORIC WATER SUPPLY
(Acre-feet) (')
Fiscal Years 2011-12 through 2015-16
Fiscal Year Pumped Water (2)(3)
2012 (4)
7,445
2013
9,170
2014
8,010
2015
8,199
2016
7,685
Imported Water
Total
Change
4,448
11,893
--
2,966
12,136
2%
4,442
12,452
3%
2,913
11,112
-11%
1,451
9,136
-18%
Source: City of Tustin Finance Dept.
(') 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 72% which allows the Enterprise to pump up to 72% of its annual supply without paying a
BEA.
(3) Includes treated groundwater that is BEA exempt.
(4) Increase in imported water in 2012 (and decrease in pumped water) reflects a special offer from MWD to the City in that year
whereby imported water was charged at the same rate as pumped water.
The table below is a summary of the Enterprise's projected sources of water supply for the next
five fiscal years.
Source: City of Tustin Finance Dept.
(') 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 72% which allows the Enterprise to pump up to 72% of its annual supply without paying a
BEA.
(3) Includes treated groundwater that is BEA exempt.
OCWD. OCWD faces challenges in managing its groundwater basin. A description of these
challenges as well as a variety of other operating information with respect to OCWD is included in certain
disclosure documents prepared by OCWD. OCWD has certain publicly available documents and has
entered into certain continuing disclosure agreements pursuant to which OCWD is contractually
obligated for the benefit of owners of certain of their outstanding obligations, to file certain annual reports,
notices of certain material events as defined under Rule 15c2-12 and annual audited financial statements
(the "OCWD Information") with certain information repositories (a current listing of such repositories is
-19-
PROJECTED WATER SUPPLY
(Acre-feet) (')
Fiscal Years 2016-17 through 2020-21
Fiscal Year
Pumped Water
(2) (3) Imported Water Total
Change
2017
7,915.3
1,494.6 9,410.0
3%
2018
8,152.8
1,539.5 9,692.3
3%
2019
8,397.4
1,585.7 9,983.0
3%
2020
8,649.3
1,633.2 10,282.5
3%
2021
8,908.8
1,682.2 10,591.0
3%
Source: City of Tustin Finance Dept.
(') 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 72% which allows the Enterprise to pump up to 72% of its annual supply without paying a
BEA.
(3) Includes treated groundwater that is BEA exempt.
OCWD. OCWD faces challenges in managing its groundwater basin. A description of these
challenges as well as a variety of other operating information with respect to OCWD is included in certain
disclosure documents prepared by OCWD. OCWD has certain publicly available documents and has
entered into certain continuing disclosure agreements pursuant to which OCWD is contractually
obligated for the benefit of owners of certain of their outstanding obligations, to file certain annual reports,
notices of certain material events as defined under Rule 15c2-12 and annual audited financial statements
(the "OCWD Information") with certain information repositories (a current listing of such repositories is
-19-
maintained on the Internet with the Municipal Securities Rulemaking Board Electronic Municipal Market
Access system at http://emma.msrb.org. The OCWD Information is not incorporated herein by reference
thereto, and neither the Authority nor the City make any representation as to the accuracy or
completeness of such information. OCWD HAS NOT ENTERED INTO ANY CONTRACTUAL
COMMITMENT WITH THE AUTHORITY, THE CITY, THE TRUSTEE OR THE OWNERS OF
THE BONDS TO PROVIDE OCWD INFORMATION TO THE AUTHORITY, THE CITY OR THE
OWNERS OF THE BONDS.
OCWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN,
INCLUDING INFORMATION WITH REGARD TO OCWD. OCWD IS NOT CONTRACTUALLY
OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE
BENEFIT OF THE AUTHORITY, THE CITY OR THE OWNERS OF THE BONDS UNDER RULE
15C2-12.
Water Use
The Enterprise's average daily demand is approximately 8.5 million gallons. The highest recent
daily demand was 14 million gallons. Supply and use varies due to changes in weather patterns,
temperatures, rainfall and implementation of the City of Tustin drought ordinance.
The following table shows the water use 'for the five Fiscal Years ended June 30, 2016.
Consumption is shown in hundred cubic feet (hco, which is the Enterprise's basic billing unit that appears
on the bi-monthly water bills.
WATER CONSUMPTION BY CUSTOMER TYPE
Fiscal Years 2012-2016
Type of Customer
2012 (2)
2013 (2)
2014 (2)
2015 (2)
2016 (2)
Residential
2,733,551
2,748,836
2,901,637
2,600,262
1,933,067
Multiple Units
1,150,470
1,140,469
1,163,049
1,139,321
1,003,318
Commercial
305,638
307,203
317,449
310,572
259,443
Construction Meters
-
-
12,197
1,550
4,428
Fire Meters
1,242
818
615
837
646
Green Meters
149,957
154,167
166,390
154,945
94,433
Public Agency
236,659
268,187
276,857
230,076
134,070
Restaurants
53,183
51,444
52,180
51,655
45,069
Hospitals
12,204
12,442
7,634
10,018
11,166
Non-profit
44,488
44,477
45,920
41,601
22,989
Industrial
58,298
55,260
60,438
59,292
41,825
Hotels/Motels
8,514
8,219
17,390
21,379
23,387
All Others
169,964
173,612
80,319
72,911
66,074
4,924,168
4,965,134
5,102,075
4,694,419
3,639,915
Source: City of Tustin Finance Dept.
(') Measured in hundred cubic feet.
(2) The decline in consumption has been primarily due to the conservation efforts of MWD and the City.
-20-
Mandatory Drought Restriction
In 2015, Governor Brown issued an executive action that required all water agencies in the State
to follow strict conservation goals due to the severe drought in California. The Enterprise was required to
reduce consumption by 28% of 2013 totals. The City was able to achieve a 26% cumulative reduction in
consumption in May 2015 through June 2016. Due to the tiered structure of the rates, the declining
consumption lead to a decline in revenues and expenditures. Currently, the City's conservation target is
21% of 2013 consumption. The City continues to evaluate its conservation targets on a monthly basis and
may choose to relax its conservation target thereby increasing consumption and revenues.
Water Storage
The Enterprise stores water in six (6) reservoirs, with a total storage capacity of 13.83 million
gallons. The destruction and reconstruction of the Simon Ranch Reservoir will maintain storage capacity
at 13.83 million gallons and enhance operating, fire, and emergency storage.
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. The construction of the new Simon booster station will
enhance reliability.
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
was designed to recover costs associated with purchasing additional water as the customer's water use
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.
-21-
The pass-through charge is designed to offset the increasing third party costs. Imported water
rates are established by MWD and additional fees are added to those rates by wholesale water purveyors,
MWDOC and EOCWD. Ground water rates are established by 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 bi-monthly bill of $105.90.
The most recent revision of the rate structure took place in June 2010. The following table
outlines the present rate structure for domestic and commercial uses.
Source: City of Tustin.
Source: City of Tustin.
RATES FOR WATER SERVICE
Bi -Monthly Fixed Charge
Meter Size
5/8" and 3/4"
$ 35.85
1"
89.65
1-1/2"
179.29
2"
286.86
3"
537.86
4"
896.38
6" or larger
1,792.76
Multiple Units/ per unit
28.70
Bi -Monthly Capital Charge
Meter Size
5/8" and 3/4"
$11.00
1"
14.00
1-1/2"
18.00
2"
25.00
3"
37.00
4"
60.00
6" or larger
101.00
Multiple Units/ per unit
9.00
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Bi -Monthly Consumption Charge (Single Family)
(per one hundred cubit foot units)
Small Meter Consumption Charge (Meters 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
0.84 1.48 1.94 2.41 3.05 3.53 4.05
Source: City of Tustin.
Bi -Monthly Consumption Charge (Multi Family)
(per one hundred cubit foot units)
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
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)
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
4"
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
Tier 6
Tier 7
10"
285.81
11-20
21-30
31-40
41-50
51-60
61+
(1)
0-10 Units
Units
Units
Units
Units
Units
Units
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
4.46
Low
0.84
1.48
1.94
2.41
3.05
3.53
4.05
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
4"
$113.41
5"
142.90
6"
172.38
8"
231.36
10"
285.81
12"
342.54
Source: City of Tustin.
Future Rate Study
The City is evaluating a shift from a traditional tiered rate structure to an allocation based rate
structure. As such, the City has secured a grant from the State, administered by the Santa Ana Watershed
Project Area (the "SAWPA") to assist in studying the feasibility of such a shift. The City has selected a
consultant to perform the rate design and analysis for the allocation based rate structure. The SAWPA
provided the City with aerial imagery and calculations on efficient outdoor watering in its service area.
The rate structure will include an indoor allocation based on the number of people living on a property
-23-
with usage allocated a set number of gallons per person per day. The outdoor allocation is based on the
square footage of irrigable surfaces that allocates a set number of gallons to efficiently irrigate the green
space and adjust for weather changes (for example, if the it's 90 degrees outside the allocation will be
higher than if it is 70 degrees). The City anticipates bringing the new rate structure to the City Council for
consideration in early 2017. If approved, implementation is anticipated to be completed by the end of 2017
or early 2018.
Billing and Collection Procedures
The City utility bill to each of its water customers on a bi-monthly basis. Customers must pay
within 20 days of receiving the water bill. Customers with an outstanding account balance will be mailed a
courtesy notice allowing an additional 15 days to pay. If the total payment is not received, the accounts is
then considered to be in a pending shut-off status.
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.
HISTORIC WATER CONNECTIONS BY CUSTOMER TYPE
Fiscal Years 2011-12 through 2015-16
Type of Customer
2012
2013
2014
2015
2016
Single -Family
11,447
11,443
11,803
11,801
11,798
Multi -Family
839
837
847
847
847
Commercial
1,490
1,485
1,143
1,137
1,132
Industrial
51
51
50
50
50
Public Agencies
139
137
148
148
149
Irrigation
210
209
214
213
213
Total
14,176
14,162
14,205
14,196
14,189
Source: City of Tustin Finance Dept.
The Enterprise service area is built out and any future developments will be infill projects.
Therefore, no significant increases in services connections are anticipated.
-24-
Water Users
The following are the top 25 water users for the fiscal year ended June 30, 2016, which accounted
for approximately 14.35% of total revenues.
TWENTY-FIVE LARGEST USERS OF WATER
Year Ended June 30, 2016
Source: City of Tustin.
-2�-
Percent of
Water
Total Water
Water Customer
Charges
Revenues
Tustin Unified School Dist
$ 572,121.84
3.48%
Avalon 2 Calif 1 LP
225,197.92
1.37
Schroeder Prop Mgmt
98,906.93
0.60
Tustin Acres Comm Assn
79,653.19
0.48
Briarwood Investment Co LT
81,721.77
0.50
Sierra Corp Mgt
78,187.79
0.48
Westchester Park L.P / Orange Gardens
74,723.73
0.45
CCF SP Estrella LLC
67,902.51
0.41
Tustin Village Com. Assn
57,850.96
0.35
Alders Apartment Company
49,681.82
0.30
City of Tustin
160,445.34
0.98
15701 TV Way Partnership
66,212.51
0.40
Great West American
63,880.46
0.39
Villa Valencia MHP
60,237.09
0.37
CMC Association Mgmt
54,002.91
0.33
Tustin Plaza Center LP
80,234.60
0.49
Regency West
55,543.58
0.34
Cadigan Communities - Monterey Pines
68,696.48
0.42
Saddleback Mobilodge
56,471.76
0.34
At& T Services Inc.
77,027.10
0.47
Williamshire HOA
47,517.23
0.29
Mansour Roshan M.D.
51,041.51
0.31
Stonebrook Lmtd.
42,807.06
0.26
Medallion Court Apartment
41,667.25
0.25
Tustin Parc
46,716.80
0.28
$2,358,450.14
14.35%
Source: City of Tustin.
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Capital Improvement Program
The City's proposed Enterprise water distribution, production and storage projects for the next
five fiscal years are shown below:
Project Name
Fire Flow Hydraulic Modeling
MWD Turnouts
Project Cost Funding Source
$100,000 Water Capital Fund (Pay as you go)
$1,000,000
Mardick Road Water Main Replacement $850,000
between Red Hill Avenue and Beverly Glen
Drive - Orange County 43 Improvements
Tustin Avenue/Santa Clara Avenue Water $65,000
Main Project $600,000
Tustin Avenue and 17th Street Water Main $125,000
Replacements $900,000
Water Main Replacement - Simon Ranch $975,000
Road to Racquet Hill via Tustin Hills
Racquet Club Parking Lot
Browning Avenue Water Main $1,050,000
Replacement between Beverly Glen and La $750,000
Colina
Simon Ranch Reservoir, Booster Pump $8,200,000
Station and Pipeline Replacement Project
John Lyttle Reservoir Tank Evaluation, Site $100,000
Improvements and Safety Upgrades $500,000
Foothill Reservoir Phase 2 Improvements $465,000
Newport Avenue Reservoir Repairs
Drill and Install Wellhead - Edinger Well
Communication Equipment Replacement
17th Street Treatment Plant Membrane
Replacement
Drill and Install Water Well and Wellhead
at Tustin Avenue
Well Rehabilitation Program
$130,000
Water Capital Fund (Pay as you go)
Water Capital Fund (Pay as you go)
Water Capital Fund (Pay as you go)
Uncertain Funding
2011 Water Bonds
Uncertain Funding
2013 Water Bonds
Water Capital Fund (Pay as you go)
2013 Water Bond
2013 Water Bond
2011 Water Bonds
Uncertain Funding
Uncertain Funding
Uncertain Funding
$1,673,000
2011 Water Bonds
$150,000
Water Capital Fund (Pay as you go)
$170,000
Water Capital Fund (Pay as you go)
$200,000
Water Capital Fund (Pay as you go)
$500,000 2013 Water Bonds
$6,000,000 Uncertain Funding
$970,000 Water Capital Fund (Pay as you go)
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Financial Statements
The City's audited financial statements for the fiscal year ended June 30, 2015, which include the
financial results of the Enterprise, are attached hereto as APPENDIX B—COMPREHENSIVE
ANNUAL FINANCIAL REPORT OIF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2015.
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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, 2012, through June 30, 2016:
HISTORICAL REVENUES, EXPENDITURES AND DEBT SERVICE COVERAGE
Fiscal Years Ended June
30, 2012, through June 30,
2016
890,391
$1,047,625
2012
2013
2014
2015
2016
Gross Revenues
997,175
995,425
—
—
288,859
Fixed Charges
$4,896,520
$5,353,227
$6,017,497
$6,551,509
$6,603,678
Consumption Charges
8,689,278
9,676,816
10,923,048
10,606,476
7,745,701
Other Revenues
371,774
480,169
766,067
1,424,527
915,860
Capital Fee
1,370,666
1,490,119
1,529,339
1,531,802
1,540,260
Total Gross Revenues
$15,328,238
$17,000,331
$19,235,951
$20,114,313
$16,805,499
Operating Expenses
Personnel Services
$2,479,348
$2,470,318
$2,408,163
$2,488,663
$2,877,662
Purchased Water and Power
2,897,419
6,096,911
7,632,436
6,530,965
5,178,812
Maintenance and Operations
5,306,854
2,892,491
3,157,999
3,492,020
3,373,017
Total Operating Expenses(')
$10,683,621
$11,459,720
$13,198,598
$12,511,648
$11,429,491
Revenues Available for Debt Service
Debt Service
2003 Installment Sale Agreement (2)
2011 Installment Sale Agreement
2012 Installment Sale Agreement
2013 Installment Sale Agreement
Total Debt Service
Debt Service Coverage Ratio
Net Revenues Remaining after Debt
Service
Repayment of City Loan (3)
$4,644,617 $5,540,611 $6,037,353 $7,602,665 $5,376,008
$1,307,827
—
—
890,391
$1,047,625
$1,047,625
$1,047,625
$1,047,625
—
995,546
996,375
997,175
995,425
—
—
288,859
669,020
698,120
$2,198,218
$2,043,171
$2,332,859
$2,743,820
$2,741,170
2.11x
2.71x
2.59x
2.77x
1.96x
$2,446,399
$3,497,440
$3,704,494
$4,858,845
$2,634,838
$469,547
$469,525
$469,249
$469,092
—
Net Revenues Remaining after Debt $1,976,852 $3,027,915 $3,235,245 $4,389,753 $3,134,838
Service and Repayment of City Loan
Source: City of Tustin Audited Financial Statements, except 2016 data is unaudited
(') Excludes depreciation and amortization.
(Z) Refunded by the 2012 Bonds.
(3) In 2009, the City failed to increase its rates and charges for the services of the Enterprise in order to meet its rate covenant
(1.20x maximum annual debt service) under a prior bond indenture. The rate covenant was met in 2010 by the City's loan to
the Enterprise. Rates were increased in June 2010. The loan was paid in full in fiscal year 2014-15.
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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, 2017, through June 30, 2021:
PROJECTION OF REVENUES, EXPENDITURES AND DEBT SERVICE COVERAGE
Fiscal Years Ended June 30, 2017 through June 30, 2021
Revenues Available for Debt
Service $5,033,200 $4,680,100 $4,316,300 $3,941,600 $3,555,600
Debt Service
2017
2018
2019
2020
2021
Gross Revenues
998,075
992,275
995,475
998,500
995,600
Fixed Charges
$6,603,700
$6,603,700
$6,603,700
$6,603,700
$6,603,700
Consumption Charges (1)(2)
7,745,700
7,745,700
7,745,700
7,745,700
7,745,700
Other Revenues
915,900
915,900
915,900
915,900
915,900
Capital Fee
1,540,300
1,540,300
1,540,300
1,540,300
1,540,300
Total Gross Revenues
$16,805,600
$16,805,600
$16,805,600
$16,805,600
$16,805,600
Operating Expenses (3)
$2,908,516
$2,141,805
$1,775,805
$1,400,080
$1,013,980
Personnel Services
$2,964,000
$3,052,900
$3,144,500
$3,238,800
$3,336,000
Purchased Water and Power
5,334,200
5,494,200
5,659,000
5,828,800
6,003,700
Maintenance and Operations
3,474,200
3,578,400
3,685,800
3,796,400
3,910,300
Total Operating Expenses
$11,772,400
$12,125,500
$12,489,300
$12,864,000
$13,250,000
Revenues Available for Debt
Service $5,033,200 $4,680,100 $4,316,300 $3,941,600 $3,555,600
Debt Service
2012 Installment Sale Agreement
998,075
992,275
995,475
998,500
995,600
2013 Installment Sale Agreement
697,220
701,320
700,320
698,320
701,320
Bonds (4)
429,389
844,700
844,700
844,700
844,700
Total Debt Service (4)
$2,124,684
$2,538,295
$2,540,495
$2,541,520
$2,541,620
Debt Service Coverage Ratio
2.37
1.84x
1.70x
1.55x
1.40x
Net Revenues Remaining after
Debt Service
$2,908,516
$2,141,805
$1,775,805
$1,400,080
$1,013,980
Source: City of Tustin.
(') Revenues are based upon rate structure set in 2010. The City is considering a new rate structure for City Council
consideration in early 2017. If approved, implementation is anticipated to be completed by the end of 2017 or early 2018.
(Z) Consumption charges are based upon mandatory conservation measures. See "THE ENTERPRISE—Future Rate Study."
(3) Excludes depreciation and amortization. Assumes projected annual increases of 3% for salaries and benefits and 5% for
maintenance and operations for fiscal years 2017-2021.
(4) Preliminary, subject to change.
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 higher or lower than
what has been projected.
Risk Management
The City uses a combination of insured and self-insured programs to finance its property and
casualty risk. The City is self-insured for worker's compensation, automotive, and general liability risks.
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Excess liability coverage for the City's self-insurance retention of $250,000 per occurrence is provided
through a risk sharing pool, the California Insurance Pool Authority ("CIPA"). The CIPA provides
excess liability coverage above $2,000,000 per occurrence and $40,000,000 annual aggregate. The City's
self-insurance retention limit is $400,000 per occurrence for worker's compensation claims. Worker's
compensation claims which exceed the self-insurance retention are insured by CIPA up to the California
statutory limit for worker's compensation. Property and employment practices liability risk are financed
through insurance contracts and have various limits and deductibles.
The City is a member of CIPA in order to jointly purchase insurance coverage and to share costs
for professional risk management, claim administration, and group purchasing of insurance products with
ten other Orange County cities. Members may be assessed the difference between the funds available and
the $40,000,000 annual aggregate in proportion to their annual premium. CIPA uses independent
actuaries and underwriters to determine premiums and help set insurance limits and deductible levels.
The pool is managed by an independent general manager and contracted legal advisers. Two
internal subcommittees are made up of City members to provide direction on underwriting and claims
activities. The Governing Board of CIPA is comprised of one member from each participating City and is
responsible for the selection of the independent general manager, legal counsel, and electing
subcommittee members. The financial statements of the CIPA are available at the administrative office
located at 240 Newport Center Drive, Suite 210, Newport Beach, California.
The government retains a risk of loss, due to the fact that actual losses may exceed estimated
claims or coverage amounts. Settled claims have not exceeded any of the City's coverage amounts in any
of the last three fiscal years, and there were no reductions in the City's coverage during the year ended
June30,2015. At June30,2015, estimated claims payable of $5,148,755, which includes a provision for
incurred but not reported claims and loss adjustment expenses, are reported as a long-term liability.
Changes in the balances of claims liabilities for the years ended June 30, 2014 and 2015, including
a provision for incurred but not reported claims and loss adjustment expenses, were as follows:
CHANGES IN BALANCES OF CLAIMS LIABILITIES
Fiscal Beginning Ending
Year Balance Additions Deletions Balance
2014 $4,461,082 $2,796,114 $2,978,696 $4,278,500
2015 $4,278,500 $3,874,920 $3,004,665 $5,148,755
Source: City of Tustin 2015 Audited Financial Statements
See also APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE
CITY FOR FISCAL YEAR ENDED JUNE 30, 2015—AUDITED FINANCIAL STATEMENTS, Note
12.
Retirement Programs
Information set forth below regarding the City's retirement programs has been obtained from the City's
most recent audited financial statements, included here in APPENDIX B—COMPREHENSIVE ANNUAL
FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2015. The
-30-
information regarding the City's retirement programs are believed to be reliable but are not guaranteed as to
accuracy or completeness, and should not be constructed as a representation by either the City or the Underwriter.
Pension Plans
Plan Descriptions. All qualified permanent and probationary employees are eligible to participate in
the City's separate Safety (police) and Miscellaneous (all other) Plans. The Miscellaneous Plan is an agent
multiple -employer defined benefit pension plan, and the Safety Plan is a cost-sharing multiple employer
defined benefit pension plan. Both of these Plans are administered by the California Public Employees'
Retirement System ("Ca1PERS"), which acts as a common investment and administrative agent for its
participating member employers. Benefit provisions under the Plans are established by State statute and
City resolution. CAPERS issues publicly available reports that include a full description of the pension
plans regarding benefit provisions, assumptions and membership information that can be found on the
Ca1PERS website. The information presented on such website, however, is not incorporated herein by
reference.
Benefits Provided. Ca1PERS provides service retirement and disability benefits, annual cost of
living adjustments and death benefits to plan members, who must be public employees and beneficiaries.
Benefits are based on years of credited service. Members with five years of total service are eligible to
retire at age 50 with statutorily reduced benefits. All members are eligible for non -duty disability benefits
after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957
Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each
plan are applied as specified by the Public Employees' Retirement Law.
Employees Covered. At June 30, 2015, the following employees were covered by the benefit terms
for the Miscellaneous Plan:
COVERED EMPLOYEES
Miscellaneous
Inactive employees or beneficiaries currently receiving benefits 218
Inactive employees entitled to but not yet receiving benefits 297
Active employees 172
Total 687
Source: City of Tustin 2015 Audited Financial Statements
Contributions. Section 20814(c) of the California Public Employees' Retirement Law requires that
the employer contribution rates for all public employers be determined on an annual basis by the actuary
and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both
Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by employees during the
year, with an additional amount to finance any unfunded accrued liability. The City is required to
contribute the difference between the actuarially determined rate and the contribution rate of employees.
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Net Pension Liability. The City's net pension liability for each Plan is measured as the total
pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the
Plans is measured as of June 30, 2014, using an annual actuarial valuation as of June 30, 2013 rolled
forward to June 30, 2014 using standard update procedures.
NET PENSION LIABILITY
Balance at 6/30/14
Service cost
Interest on total pension liability
Difference between actual and expected expense
Changes in assumptions
Changes in benefit terms
Employer contribution
Employee contribution (paid by Employer)
Employee contribution
Net investment income
Administrative expenses
Benefit payments
Net Changes
Total
Plan
Net
Pension
Fiduciary
Pension
Liability
Net Position
Liability
89,297,153
69,316,731
19,980,422
1,747,949
-
1,747,494
6,613,765
-
6,613,765
-
1,379,562
(1,379,562)
-
962,617
(962,617)
-
11,900,167
(11,900,167)
(3,974,724)
(3,974,724)
-
4,386,535
10,267,622
(5,881,087)
Balance at 6/30/15 93,683,688 79,584,353 14,099,335
Source: City of Tustin 2015 Audited Financial Statements
As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the net
pension liability for the Safety Plan as follows:
AMOUNT OF SAFETY PLAN PENSION LIABILITY
Proportionate
Share of Net
Pension Liability
Safety $25,822,675
Source: City of Tustin 2015 Audited Financial Statements
The City's net pension liability for each Plan is measured as the proportionate share of the net
pension liability. The net pension liability of each of the Plans is measured as of June 30, 2014, and the
total pension liability for each Plan used to calculate the net pension liability was determined by an
actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures.
The City's proportionate share of the net pension liability was based on a projection of the City's long-
term share of contributions to the pension plans relative to the projected contributions of all participating
employers, actuarially determined.
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The City's proportionate share of the net pension liability for the Safety Plan as of June 30, 2013
and 2014 was as follows:
SHARE OF SAFETY PLAN PENSION LIABILITY
Safety
Proportion - 6/30/13 .673639
Proportion - 6/30/14 .68843
Change .01480
Source: City of Tustin 2015 Audited Financial Statements
Pension Expenses and Deferred Outfloms/Infloms of Resources Related to Pensions. For the year ended
June 30, 2015, the City recognized pension expense of $3,470,634. At June 30, 2015, the City reported
deferred outflows of resources and deferred inflows of resources related to pensions from the following
sources:
DEFERRED OUTFLOWS/(INFLOWS) OF RESOURCES
Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions subsequent to measurement date $8,552,671 —
Difference between actual and expected expense — —
Change in assumptions — —
Differences between Employer's contributions —
and employer's proportionate share of contributions 290,902 —
Differences between expected and actual earnings on plan — $(11,621,755)
investments
Total 8,843,573 (11,621,755)
Source: City of Tustin 2015 Audited Financial Statements
$8,552,671 reported as deferred outflows of resources related to contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ending June 30,
2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related
to pensions will be recognized as pension expense as follows:
FUTURE REDUCTIONS OF NET PENSION LIABILITY
Fiscal Year Amount
2016
(2,801,545)
2017
(2,801)545)
2018
(2,822,324)
2019
(2,905,439)
2020
—
Source: City of Tustin 2015 Audited Financial Statements
Payable to the Pension Plans. At June 30, 2015, the City had no outstanding amount of
contributions to the pension plans required for the year ended June 30, 2015.
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Additional Information Concerning Ca1PERS, Actuarial Methods and Assumptions, Discount Rate.
For information concerning Ca1PERS, descriptions of the actuarial methods and assumptions, and an
explanation of the discount rate used by Ca1PERS, see APPENDIX B—COMPREHENSIVE ANNUAL
FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2015—AUDITED
FINANCIAL STATEMENTS, Note 9.
Recent Actions by Ca1PERS. On March 14, 2012, the Ca1PERS Board of Administration voted to
reduce its discount rate, which is attributable to its expected price inflation and investment rate of return
(net of administrative expenses), from 7.75% to 7.5%. As a result of such discount rate decrease, among
other things, (i) the amounts of Ca1PERS member state and employer contributions will increase by 1.2 to
1.6% for Miscellaneous plans and 2.2 to 2.4% for Safety plans beginning fiscal year 2012-13 and (ii) the
amounts of Ca1PERS member public agency contributions will increase by 1 to 2% for Miscellaneous plans
and 2 to 3% for Safety plans beginning fiscal year 2013-14.
The Ca1PERS Board adjustment has been undertaken in order to address underfunding of the
Ca1PERS funds, which arose from significant losses incurred as a result of the economic crisis arising in
2008 and persists due to a slower than anticipated, subsequent economic recovery. The City is unable to
predict what the amount of Ca1PERS liabilities will be in the future, or the amount of the Ca1PERS
contributions which the City may be required to make.
At its April 17, 2013 meeting, the Ca1PERS Board of Administration approved a recommendation
to change the Ca1PERS amortization and smoothing policies. Prior to this change, Ca1PERS employed an
amortization and smoothing policy which spread investment returns over a 15 -year period with experience
gains and losses paid for over a rolling 30 -year period. After this change, Ca1PERS will employ an
amortization and smoothing policy that will pay for all gains and losses over a fixed 30 -year period with the
increases or decreases in the rate spread directly over a 5 -year period.
The new amortization and smoothing policy were used for the first time in the June 30, 2013
actuarial valuations. These valuations were performed in the fall of 2014 and set employer contribution
rates for the fiscal year 2015-16.
On February 20, 2014, the Ca1PERS Board of Administration adopted new mortality and
retirement assumptions as part of a regular review of demographic experience. Key assumption changes
included longer post-retirement life expectancy and earlier retirement ages. The impact of the assumption
changes will be phased in over five years, with a twenty-year amortization, beginning in the 2016-17 Fiscal
Year.
According to Ca1PERS, the current amortization and smoothing policy was designed to reduce
volatility in employer contribution rates, and, although the policy accomplished this goal fairly well since
its adoption, a number of concerns have developed:
• The use of an actuarial value of assets corridor can lead to significant single year increases
to rates in years when there are large investment losses.
• The use of long asset smoothing periods and long rolling amortization periods result in
slow progress toward full funding.
-34-
• The use of an actuarial value of assets requires the disclosure of two different funded
statuses and unfunded liability numbers in actuarial valuation reports. This adds
confusion and inhibits transparency.
• The use of rolling amortization and long asset smoothing periods makes it difficult for
employers to predict when contribution rates will peak and how high that peak will be.
• The use of rolling amortization and asset smoothing periods may result in additional
calculations for the new accounting standards. These calculations would be avoided with
a quicker funded status recovery.
According to Ca1PERS, the adoption of the new smoothing and amortization policies will change
future employer contribution rates, as follows:
• Funding levels will improve, which will reduce the funding level risk.
• Local agencies' plans will experience more rate volatility in normal years, but a much
reduced chance of very large rate increases in years when there are large investment
losses.
• Contribution rates in the near term will increase.
• Long-term contribution rates will be lower.
• There will be greater transparency about the timing and impact of future employer
contribution rate changes.
• The new policy eliminates the need for an actuarial value of assets. As a result, there will
be only one funded status and unfunded liability in actuarial reports.
• There will be less confusion when the new accounting standards are implemented since
there will be no need for extra liability calculations.
Pension Reform Act of 2013 (Assembly Bill 340). On September 12, 2012, Governor Brown signed
AB 340, a bill that enacted the California Public Employees' Pension Reform Act of 2013 ("PEPRA") and
that also amended various sections of the State Education and Government Codes. PEPRA (i) increases
the retirement age for new State, school, and city and local agency employees depending on job function,
(ii) caps the annual Ca1PERS pension benefit payouts, (iii) addresses numerous abuses of the system, and
(iv) requires State, school, and certain city and local agency employees to pay at least half of the costs of
their Ca1PERS pension benefits. PEPRA applies to all public employers except the University of
California, charter cities and charter counties (except to the extent they contract with Ca1PERS.)
The provisions of PEPRA went into effect on January 1, 2013 with respect to new State, school,
and city and local agency employees hired on that date and after; existing employees who are members of
employee associations, including employee associations of the City, will have a five-year window to
negotiate compliance with PEPRA through collective bargaining. If agreement is not reached by January 1,
2018, a city, public agency or school district could force employees to pay their half of the costs of
CalPERS pension benefits, up to 8% of pay for civil workers and 11% or 12% for public safety workers.
Ca1PERS has predicted that the impact of PEPRA on employers, including the City and other
employers in the Ca1PERS system, and employees will vary, based on each employer's current level of
benefits. To the extent that the new formulas lower retirement benefits, employer contribution rates could
-35-
11 1
decrease over time as current employees retire and employees subject to the new formulas make up a
larger percentage of the workforce. This change would, in some circumstances, result in a lower
retirement benefit for employees than they currently earn. Additionally, Ca1PERS has noted that changes
arising from PEPRA could ultimately have an adverse impact on public sector recruitment in areas that
have historically experienced recruitment challenges due to higher pay for similar jobs in the private
sector.
More information about PEPRA can be accessed through the Ca1PERS's web site at
https://www.calpers.ca.gov/page/about/laws-regulations/regulatory-actions/pepra. Such website is not
incorporated herein by reference.
The City is unable to predict what the amount of State pension liabilities will be in the future, or
the amount of the contributions which the City may be required to make.
Other Post -Employment Benefits
Plan Description. The City provides other postemployment benefits ("OPEB") to retired
employees in the form of a contribution towards their medical premiums under the Ca1PERS health plan,
a single -employer defined benefit 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 hired prior to July 1, 2011 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. Employees hired after June 30, 2011 are eligible for
retiree health benefits if they retire from the City on or after age 50 (unless disabled), with ten 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, 2015:
MEMBERSHIP IN OPEB PLAN
Police
Police General Management Confidential Support Total
Retirees Receiving Benefits 35 32 28 1 6 102
Eligible Active Employees 93 88 41 6 43 271
Source: City of Tustin 2015 Audited Financial Statements
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 contributions are made on a pay-as-you-go basis. As of July 1,
2011, the City's monthly contribution rate was $250 for the Confidential, General, and Police Support
groups; $350 for the Police and Management group. For the year ended June 30, 2015, the City paid
$418,323 in contributions for postemployment health care benefits. Current active employees are not
required to contribute any portion towards these benefits.
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Annual OPEB Cost and Net OPEB Obligation. The City's annual OPEB cost/(expense) is
calculated based on the annual required contribution of the employer ("ARC"), an amount actuarially
determined. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover
normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) not to exceed
thirty years.
The City's ARC for the year ended June 30, 2015 was $1,400,220. The following table shows the
components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and
changes in the City's net OPEB obligation:
NET OPEB OBLIGATION
Source: City of Tustin 2015 Audited Financial Statements
The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and
the net OPEB obligation for 2015 and the two preceding years were as follows:
HISTORICAL OPEB CONTRIBUTIONS
Annual
% of Annual
Net
Fiscal
Police
OPEB Cost
OPEB
Police
General
Managemen
Confidential
Support
Total
35.98%
4,277,824
2014
t
37.50
4,970,150
2015
ARC
480,504
450,473
259,022
26,278
183,943
1,400,220
Interest on net OPEB obligation
59,037
60,334
31,203
13,844
26,155
190,573
Adjustment to ARC
(138,910)
(141,961)
(73,417)
(32,574)
(61,540)
(448,402)
Annual OPEB cost
400,631
368,846
216,808
7,548
148,558
1,142,391
Contributions made
(152,182)
(96,746)
(147,328)
(3,117)
(18,950)
(418,323)
Increase in net OPEB obligation
248,449
272,100
69,480
4,431
129,608
724,068
Net OPEB obligation, beginning of
1,539,693
1,573,514
813,768
361,054
682,121
4,970,150
year
Net OPEB obligation, end ofyear
1,788,142
1,845,614
883,248
365,485
811,729
5,694,218
Source: City of Tustin 2015 Audited Financial Statements
The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and
the net OPEB obligation for 2015 and the two preceding years were as follows:
HISTORICAL OPEB CONTRIBUTIONS
Source: City of Tustin 2015 Audited Financial Statements
Funding Status and Progress. As of June 30, 2013, the most recent valuation date, the actuarial
accrued liability for benefits was $12.05 million, and the actuarial value of assets was $0, resulting in an
unfunded actuarial accrued liability (UAAL) of $12.05 million and a funded ratio (actuarial value of assets
as a percentage of the actuarial accrued liability) of 0%. The covered payroll (annual payroll of active
employees) was $20.35 million and the ratio of the UAAL to the covered payroll was 59.2%. Actuarial
valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about
the probability of occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status
of the plan and the annual required contributions of the employer are subject to continual revision as
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Annual
% of Annual
Net
Fiscal
OPEB
OPEB Cost
OPEB
Year
Cost
Contributed
Obligation
2013
1,034,400
35.98%
4,277,824
2014
1,107,635
37.50
4,970,150
2015
1,142,391
36.62
5,694,218
Source: City of Tustin 2015 Audited Financial Statements
Funding Status and Progress. As of June 30, 2013, the most recent valuation date, the actuarial
accrued liability for benefits was $12.05 million, and the actuarial value of assets was $0, resulting in an
unfunded actuarial accrued liability (UAAL) of $12.05 million and a funded ratio (actuarial value of assets
as a percentage of the actuarial accrued liability) of 0%. The covered payroll (annual payroll of active
employees) was $20.35 million and the ratio of the UAAL to the covered payroll was 59.2%. Actuarial
valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about
the probability of occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status
of the plan and the annual required contributions of the employer are subject to continual revision as
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actual results are compared with past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary information following the notes to the
financial statements, presents multi-year trend information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued liabilities for the benefits.
See also APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE
CITY FOR FISCAL YEAR ENDED JUNE 30, 2015—AUDITED FINANCIAL STATEMENTS, Note
10.
IRS Section 457 Deferred Compensation Plan
In accordance with federal law, all part-time employees must be enrolled in Social Security or
another "qualified" retirement plan. Since the City does not participate in Social Security, part-time
employees are enrolled in the City's IRS Section 457 deferred compensation plan. Nationwide Retirement
Solutions, Inc. acts as the third party administrative services provider for the defined contribution plan.
Employees are required to contribute 5.5% of salary to the deferred compensation plan every pay period.
The City contributes an additional 2% of salary, for a total contribution of 7.5%. Council established the
plan by resolution in fiscal year 2011-2012, and has the authority to amend contribution requirements.
Contributions to the participants account must equal at least 7.5% of the participant's compensation, or
such other minimum amount as required for the plan to be considered a retirement system under
applicable government code and legal requirements. Total contributions to the plan during fiscal year 2015
were $62,099.
See also APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE
CITY FOR FISCAL YEAR ENDED JUNE 30, 2015—AUDITED FINANCIAL STATEMENTS, Note
11.
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 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 D—CITY
INVESTMENT POLICY.
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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 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
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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, under Article XIIID, revenues derived from a property -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 a
property -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 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 Richmond P. Shasta 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
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Proposition 218. The Court also indicated in dictum that a fee for ongoing water service through an
existing connection could, under certain circumstances, constitute a property -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 P. City of Fresno (March 23, 2005), the California Court of
Appeal, Fifth District, concluded that water, sewer and trash fees are property -related fees 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 View Water Agency P. 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 water
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 Bighorn 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.
Conclusion. 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 be enacted.
Under the Bighorn 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
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of local agencies to impose, levy, charge and collect increased fees and charges for water, or to call into
question previously adopted water 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 Indenture and to generate Net
Revenues sufficient to pay 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 Indenture 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 Indenture, 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
Indenture, 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 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
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adjudication thereof; (4) 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
The following section describes certain special considerations and risk factors affecting the risk of
nonpayment or the security for the Bonds. The following discussion is not meant to be an exhaustive or definitive
description of the risks associated with a purchase of the Bonds and does not necessarily reflect the relative
importance of the various risks. Potential investors are advised to consider the following special factors regarding
the Bonds, together with all other information in this Official Statement, in order to make an informed investment
decision with respect to the Bonds. There can be no assurance that other risk factors are not or will not become
material in the future.
General
The payment of principal of and interest on the Bonds is secured solely by a pledge of Net
Revenues. The realization of the Net Revenues is subject to, among other things, the capabilities of
management of the City, the ability of the City to provide water services to its users, and the ability of the
City to establish and maintain water fees and charges sufficient to provide the required debt service
coverage as well as pay for Maintenance and Operation Costs.
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Among other matters, drought, general and local economic conditions and changes in law and
government regulations (including initiatives and moratoriums on growth) could adversely affect the
amount of Net Revenues realized by the City.
Limited Obligations
The Bonds 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.
The City is obligated under the Indenture to pay debt service on the Bonds 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.
Seismic Considerations
The City, like much of California, is subject to seismic activity that could result in interference
with the delivery of water from the City's operation of the Enterprise. As a result, no assurance can be
given that a future seismic event will not materially adversely affect the operation of the Enterprise. The
City does not, and does not expect to, maintain earthquake insurance on the Enterprise.
Environmental Regulation
The kind and degree of water treatment effected through the Enterprise is regulated, to a large
extent, by the federal government and the State of California. Treatment standards set forth in federal and
state law control the operations of the Enterprise and mandate the use of water treatment technology. In
the event that the federal government, acting through the Environmental Protection Agency, or the State
of California, acting through the Department of Health Services, or additional federal or state agencies,
should impose stricter water quality standards upon the Enterprise, the City's expenses could increase
accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to
predict the direction federal or state regulation will take with respect to water quality standards, although
it is likely that, over time, both will impose more stringent standards with attendant higher costs.
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
Indenture.
Demand and Usage; Drought
There can be no assurance that the local demand for services provided by the Enterprise will
continue according to historical levels. In addition, drought conditions and voluntary or mandatory water
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conservation measures could decrease usage of the services of the Enterprise. California is currently in the
midst of one of the worst droughts in its recorded history.
Reduction in the level of demand or usage could require an increase in rates or charges in order to
produce Net Revenues sufficient to comply with the City's rate covenants. Such rate increases could
increase the likelihood of nonpayment.
Limited Recourse on Default
Failure by the City to make debt service payments on the Bonds constitutes an event of default
under the Indenture 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 amount of the debt service payments on the Bonds, 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 Indenture and to generate Net
Revenues sufficient to pay 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)
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 Indenture 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 Indenture 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 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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Rate Process
The passage of Proposition 218 by the California electorate potentially affects the City's ability to
impose future rate increases, and no assurance can be given that future rate increases will not encounter
majority protest opposition under Proposition 218. See "CONSTITUTIONAL LIMITATIONS ON
APPROPRIATIONS AND FEES—Proposition 218" and "—Effect of Proposition 218 and of Possible
General Limitations on Enforcement Remedies."
Insurance
The Indenture obligates the City to obtain and keep in force various forms of insurance or self-
insurance, subject to deductibles, for repair or replacement of a portion of the Enterprise in the event of
damage or destruction to such portion of the Enterprise. The City expects to self -insure a portion of the
risk of loss as permitted by the Indenture. No assurance can be given as to the adequacy of any such self-
insurance or any additional insurance to fund necessary repair or replacement of any other portion of the
Enterprise. Significant damage to the Enterprise could result in a lack of the ability to generate sufficient
Net Revenues to repay the Bonds. The City does not, and does not expect to, maintain earthquake
insurance on the Enterprise.
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." See also
"TAX MATTERS—Changes in Federal and State Tax Law."
Parity Obligations
As described in "SECURITY FOR THE BONDS—Parity Obligations" above, the Indenture
permits the City to issue or incur Parity Obligations which would be payable from Net Revenues on a
parity with the payment of the Bonds. In the event of a decline in Net Revenues, the existence of Parity
Obligations could adversely affect the City's ability to pay the Bonds.
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.
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,
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requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain
other matters. The City has 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 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 City with respect to
certain material facts within their respective 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 Code includes provisions for an alternative minimum tax ("AMT") for corporations in
addition to the corporate regular tax in certain cases. The AMT for a corporation, if any, depends upon
the corporation's alternative minimum taxable income ("AMTI"), which is the corporations' 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 generally include certain
tax-exempt interest, but not 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 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
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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 a tax-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 "IRS") has an ongoing program of auditing tax exempt
obligations to determine whether, in the view of the IRS, 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 IRS will commence an audit of the Bonds. If an audit is commenced, under
current procedures the IRS 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 IRS. 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 IRS 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.
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.
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The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of
the Bonds is set forth in APPENDIX F—FORM OF OPINION OF BOND COUNSEL.
CERTAIN LEGAL MATTERS
Quint & Thimmig LLP, Larkspur, California, Bond Counsel, will render an opinion with respect
to the validity of the Bonds, the form of which opinion is set forth in APPENDIX F—FORM OF
OPINION OF BOND COUNSEL. Bond Counsel has assumed no responsibility for the accuracy,
completeness or fairness of the Official Statement. Certain legal matters will also be passed upon for the
City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel. Certain legal matters will be
passed upon for the City by Woodruff, Spradlin & Smart, Costa Mesa, California. Certain matters will be
passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, P.C., Newport Beach, California.
Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and counsel to the Underwriter is
contingent upon issuance of the Bonds.
LITIGATION
To the best knowledge of the City, there is no action, suit, proceeding or investigation at law or in
equity before or by any court or governmental agency or body pending or threatened against the City to
restrain or enjoin the authorization, execution or delivery of the Bonds, or the pledge of the Net Revenues
or the collection of the payments to be made pursuant to the Indenture, or in any way contesting or
affecting validity of the Bonds, the Indenture or the agreement for the sale of the Bonds, or in any way
contesting or affecting the transactions described in this Official Statement.
RATING
S&P Global Ratings, a division of Standard & Poor's Financial Services LLC ("S&P'), has
assigned the underlying rating of " " to the Bonds. This rating reflects only the views of S&P and an
explanation of the significance of such rating may be obtained from S&P. There is no assurance that such
rating will continue for any given period of time or that such rating will not be revised downward or
withdrawn entirely by S&P, if in the judgment of the S&P, circumstances so warrant. Any such downward
revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
MUNICIPAL ADVISOR
The City has retained Fieldman, Rolapp & Associates, Irvine, California, as municipal advisor
(the "Municipal Advisor") in connection with the delivery of the Bonds. The Municipal Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or assume
responsibility for the accuracy, completeness, or fairness of the information contained in this Official
Statement. Compensation of the Municipal Advisor is contingent upon the issuance and delivery of the
Bonds.
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CONTINUING DISCLOSURE
The City has covenanted for the benefit of owners and beneficial owners of the Bonds to provide
certain financial information and operating data relating to the Enterprise by not later than seven 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, 2016, 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 C—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 "Rule"). The City did not have any instances in the
previous five years in which it failed to comply, in all material respects, with any previous undertakings
pursuant to the Rule.
AUDITED FINANCIAL STATEMENTS
The City's Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2015 (the
"City CAFR") is attached as APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2015. The City CAFR includes the City's
audited financial statements for the fiscal year ended June 30, 2015. The City's financial statements were
audited by White Nelson Diehl Evans LLP (the "Auditor"). The Auditor has not been asked to consent
to the inclusion of the City CAFR in this Official Statement and has not reviewed this Official Statement.
As described in "SECURITY FOR THE BONDS—Limited Obligation," the Bonds are payable
from and secured by a pledge of Net Revenues and the Bonds are not a debt of the City.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The Verification Agent will examine the arithmetical accuracy of certain computations included
in the schedules relating to the refunding of the 2011 Bonds. See "REFUNDING PLAN." The
Verification Agent has restricted its procedures to examining the arithmetical accuracy of certain
computations and has not made any study or evaluation of the assumptions and information upon which
the computations are based and, accordingly, has not expressed an opinion on the data used, the
reasonableness of the assumptions, or the achievability of the forecasted outcome.
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UNDERWRITING
The Bonds are being purchased by Hilltop Securities Inc. (the "Underwriter"). The Underwriter
has agreed to purchase the Bonds at a price of $ (which price is equal to the aggregate
principal amount of the Bonds, plus an original issue premium of $ and less an Underwriter's
discount of $ ). The bond purchase contract pursuant to which the Underwriter have agreed
to purchase the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased,
the obligation to make such purchase being subject to certain terms and conditions set forth in the bond
purchase contract, including the approval of certain legal matters by counsel and certain other conditions.
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, including a summary
of significant accounting policies, for the fiscal year ended June 30, 2015, are contained in APPENDIX
B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2015.
The execution of this Official Statement and its delivery have been authorized by the City Council
of the City.
CITY OF TUSTIN
By
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City Manager
THIS PAGE INTENTIONALLY LEFT BLANK
' ' NJ
SUMMARY OF THE INDENTURE
[TO COME]
Appendix A
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Appendix B
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX C
FORM OF THE 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 by the City of its
$ * City of Tustin (Orange County, California) 2016 Water Refunding Revenue Bonds (the
"Bonds"). The Bonds are being issued pursuant to an indenture of trust, dated as of October 1, 2016 (the
"Indenture"), by and between the City and The Bank of New York Mellon Trust Company, N.A., as
trustee. The City 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 Owner" 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 the 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.
"EMMA" 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.
"Owner" or "Bond Owner," when used with respect to any Bond, means the person in whose
name the ownership of such Bond shall be registered.
"Participating Underwriter" shall mean the original underwriter of the Bonds, required to comply
with the Rule in connection with offering of the Bonds.
* Preliminary, subject to change.
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"Rule" 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).
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 2015-16 Fiscal Year, which is due not later than March 31, 2017, 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) Change 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) Delivery of Annual Report to Dissemination Agent. 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. If 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) Financial 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
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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) Other Annual 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:
(i) Principal amount of the Bonds outstanding.
(ii) A statement that the City has complied with its rate covenants with respect to the Bonds,
the 2012 Bonds and the 2011 Bonds as disclosed under the caption "SECURITY FOR
THE BONDS—Rate Covenant" in the Official Statement.
(iii) An update of the following tables under the caption "THE ENTERPRISE" in the
Official Statement:
(A) "HISTORICAL WATER SUPPLY;"
(B) "WATER CONSUMPTION BY CUSTOMER TYPE;"
(C) "RATES FOR WATER SERVICE;"
(D) "HISTORICAL WATER CONNECTIONS BY CUSTOMER TYPE;"
(E) "TWENTY-FIVE LARGEST USERS OF WATER;" and
(F) "HISTORICAL REVENUES, EXPENDITURES AND DEBT SERVICE
COVERAGE."
(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.
If the document included by reference is a final official statement, it must be available from
EMMA.
(d) Further Information. 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 (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.
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(6) Rating changes.
(7) Tender offers.
(8) 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.
Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any
of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding
under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental
authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such
jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but
subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of
reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the obligated person.
(b) Material Reportable 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.
(6) Appointment of a successor or additional trustee, or the change of name of a trustee.
(c) Time to Disclose. Whenever the City obtains knowledge of the occurrence of a Listed Event, 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 the 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
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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 S. Dissemination Agent.
(a) Appointment of Dissemination 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 Owner, with respect to any 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) Compensation of Dissemination 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 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 Dissemination Agent. 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 all of
the following conditions are satisfied:
(a) Change in Circumstances. 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.
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(b) Compliance as oflssue Date. 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 of Owners; Non -impairment Opinion. The amendment or waiver either (i) is approved
by the Owners in the same manner as provided in the Indenture for amendments to the Indenture with the
consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially
impair the interests of the 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 on 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 future 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 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.
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Section 12. 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 TUSTIN
By
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Authorized Officer
EXHIBIT A
NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Tustin
Name of Issue: City of Tustin (Orange County, California) 2016 Water Refunding Revenue
Bonds
Date of Issuance: [Closing Date]
NOTICE IS HEREBY GIVEN that the Issuer 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 Issuer in connection with the Issue. The Issuer anticipates that the Annual Report will be
filed by
Dated:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Appendix C
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Authorized Officer
APPENDIX D
CITY INVESTMENT POLICY
Appendix D
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX E
GENERAL INFORMATION REGARDING
THE CITY OF TUSTIN AND ORANGE COUNTY
The following information concerning the City of Tustin and Orange County is included only for the purpose of
supplying general information regarding the community. The Bonds are not a debt of the City, County, the State or any of its
political subdivisions, and neither the City, the County, the State nor any of itspolitical subdivisions is liable therefor..
Although reasonable efforts have been made to include up-to-date information in this Appendix E, some of
the information is not current due to delays in reporting of information by various sources. It should not be assumed
that the trends indicated by the following data would continue beyond the specific periods reflected herein.
General
The City of Tustin (the "City") is located in central Orange County (the "County"). The City is located
next to the county seat, Santa Ana. According to the United States Census Bureau, the City has a total area of 11.1
square miles (28.7 Ian 2). The City was chosen in 2009 by Forbes as one of the top 25 towns to live well in America.
The County is the third -most populous county in California, the sixth -most populous in the United States,
and it more populous than twenty-one U.S. states. The County is included in the Los Angeles -Long Beach -Anaheim,
CA Metropolitan Statistical Area. Thirty-four incorporated cities are located in the County; the newest is Aliso
Viejo, which was incorporated in 2001. While most population centers in the United States tend to be identified by a
major city, there is no defined urban center in the County. The County is mostly suburban except for some
traditionally urban areas at the centers of the older cities of Anaheim, Fullerton, Huntington Beach, Orange and
Santa Ana.
Organization
The City was incorporated on September 21, 1927 as a general law city. The City operates under a
Council/Manager form of government. The five City Council members, are elected at large. The policies of the City
Council are carried out by the appointed City Manager.
Population
The table below summarizes population of the City and the County for the past five years.
CITY OF TUSTIN and ORANGE COUNTY
Population
Year
City of Tustin
Orange County
2012
77,333
3,069,454
2013
79,534
3,103,654
2014
79,803
3,127,403
2015
80,968
3,151,910
2016
82,717
3,183,011
Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2016, with 2010 Census
Benchmark.
Appendix E
Page 1
Employment
years:
The following table summarizes the historical numbers of workers by industry in the County for the last five
ORANGECOUNTY
SANTA ANA ANAHEIM IRVINE MD
Labor Force and Industry Employment
Annual Averages by Industry
2011 2012 2013 2014 20150)
Total, All Industries 1,370,400 1,385,600 1,422,400 1,462,400 1,498,700
Total Farm
3,200
2,800
2,900
2,800
2,500
Mining and Logging
600
600
600
700
700
Construction
69,200
71,300
76,800
82,000
90,400
Manufacturing
154,300
158,300
158,000
157,400
156,900
Wholesale Trade
77,300
77,200
79,400
80,900
81,000
Retail Trade
142,600
144,000
145,500
148,500
151,200
Transportation, Warehousing & Utilities
27,500
28,000
27,500
26,500
26,900
Information
23,800
24,300
25,000
24,500
25,500
Financial Activities
104,800
108,300
113,100
113,600
116,800
Professional & Business Services
247,700
260,600
267,300
276,600
285,400
Educational & Health Services
172,000
177,000
186,000
190,800
198,800
Leisure & Hospitality
174,000
180,600
187,800
194,500
204,000
Other Services
43,200
44,600
45,600
47,300
48,800
Government
149,300
147,900
148,700
152,200
156,200
Source: California Employment Development Department, based on March 2015 benchmark.
Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons
involved in labor/management trade disputes. Employment reported by place of work. Items may not add to totals due to independent
rounding.
(1) Last available full year data.
Appendix E
Page 2
The following tables summarize historical employment and unemployment for the County, the State of
California and the United States for the past five years:
ORANGE COUNTY, CALIFORNIA, and UNITED STATES
Civilian Labor Force, Employment, and Unemployment
(Annual Averages)
2011-2015
Year Area
2011 Orange County
California
United States
2012 Orange County
California
United States
2013 Orange County
California
United States
2014 Orange County
California
United States
Labor Force
Employment
Unemployment
1,546,400
1,406, 400
140,000
18,419,500
16,260,100
2,159,400
153,617,000
139,869,000
13,747,000
Unemployment
Rate i�1
9.1%
11.7
8.9
1,564,500
1,441,400
123,100
7.9
18, 554,800
16,630,100
1,924,700
10.4
154,975,000
142,469,000
12,506,000
8.1
1,569,200
1,465,900
103,300
6.6
18,671,600
17,002,900
1,668,700
8.9
155,389,000
143,929,000
11,460,000
7.4
1,578,200
1,491,800
86,400
5.5
18,811,400
17,397,100
1,414,300
7.5
155,922,000
146,305,000
9,617,000
6.2
201512 Orange County 1,597,100 1,525,600 71,500 4.5
California 18,981,800 17,798,600 1,183,200 6.2
United States 157,130,000 148,834,000 146,411,000 5.3
Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-2015, and US
Department of Labor.
(1) The unemployment rate is computed from unrounded data, therefore, it may differ from rates computed from rounded figures available in
this table.
(2) Latest available full -year data.
Major Employers
The table below sets forth the principal employers of the City and the County.
CITY of TUSTIN
2015 Principal Employers
Source: City of Tustin 2015 Comprehensive Annual Financial Report.
Appendix E
Page 3
% of Total
Employer
Employees
Employment
Tustin Unified School District
1,449
3.39%
Rockwell Collins Inc
600
1.40
Ricoh Electronics Inc
500
1.17
Costco
450
1.05
City of Tustin
372
.87
Newport Specialty Hospital
300
.70
Tustin Hospital Medical Center
300
.70
Toshiba America Medical Systems
300
.70
Micro Vention Inc.
300
.70
Balboa Water Group
253
.59
Totals
4,824
10.27
Source: City of Tustin 2015 Comprehensive Annual Financial Report.
Appendix E
Page 3
ORANGECOUNTY
2015 Principal
Employers
% of Total
Employer
Employees
Employment
Walt Disney Co.
27,000
1.69%
UC Irvine
22,385
1.40
Orange County
18,135
1.13
St. Joseph Health System
12,227
.76
Kaiser Permanente
7,000
.44
Boeing Co.
6,890
.43
Walmart
6,000
.38
Memorial Care Health System
5,650
.35
Bank of America
5,500
.34
Target Corporation
5,400
.34
Totals
116,187
7.26
Source: Orange County 2015 Comprehensive Annual Financial Report.
Construction Activity
The following tables reflects the five-year history of building permit valuation for the City and the County:
CITY of TUSTIN
Building Permits and Valuation
(Dollars in Thousands)
Permit Valuation:
New Single-family
New Multi -family
Res. Alterations/Additions
Total Residential
Total Nonresidential
Total All Building
2011 2012 2013 2014 20154)
20,613 19,200 - 919 87,618
25,667 6,570 105,137 - -
5,041 1,785 2,171 1,780 2,846
51,321 27,555 107,309 2,700 90,464
14,606 25,301 141,259 21,188 21,801
65,927 52,857 248,569 23,889 112,266
New Dwelling Units:
Single Family 94 70 - 3 241
Multiple Family 237 27 758 - -
Total 331 97 758 3 241
Source: Construction Industry Research Board: "Building Permit Summary."
Note: Totals may not add due to independent rounding.
(1) Last available full year data.
Appendix E
Page 4
ORANGECOUNTY
Building Permits and Valuation
(Dollars in Thousands)
Source: Construction Industry Research Board: "Building Permit Summary."
Note: Totals may not add due to independent rounding.
(1) Last available full year data.
Commercial Activity
Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales
and permits using the NAICS codes. As a result of the coding change, however, industry -level data for 2009 are not
comparable to that of prior years.
Retail and Food Services
Motor Vehicles and Parts Dealers
Furniture and Home Furnishings Stores
Bldg Mtrl. and Garden Equip. and Supplies
Food and Beverage Stores
Gasoline Stations
Clothing and Clothing Accessories Stores
General Merchandise Stores
Food Services and Drinking Places
Other Retail Group
Total Retail and Food Services
All Other Outlets
Totals All Outlets
CITY OF TUSTIN
Taxable Sales, 2009-2013
(Dollars in thousands)
2009 2010 2011
313,105
119,143
66,179
71,396
91,745
95,627
234,341
165,565
142,719
1,299,819
246,317
1,546,136
335,458
130,725
68,929
74,366
104,183
96,688
261,861
161,402
145,245
1,378,857
249,124
1,627,981
374,766
129,782
70,497
79,920
133,217
100,836
279,384
173,260
165,632
1,507,294
249,483
2012 2013(1)
474,101 509,977
115,242 115,965
70,845 75,361
87,379 86,907
142,931 139,527
107,726 114,935
179,279 187,321
455,543 447,231
1,633,046 1,677,223
268,015 257,554
1,756,777 1,901,061 1,934, 777
Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).
Note: Totals may not add due to independent rounding.
(1) Last available full year data.
(#) Sales omitted because their publication would result in the disclosure of confidential information.
Appendix E
Page 5
2011
2012
2013
2014(1)
2015(1)
Permit Valuation:
New Single-family
518,681
752,931
1,237,994
1,234,498
1,288,428
NewMulti-family
378,559
438,118
994,873
985,454
1,052,113
Res. Alterations/Additions
450,105
363,854
363,674
413,518
486,341
Total Residential
1,347,345
1,544,904
2,596,542
2,633,471
2,826,883
Total Nonresidential
1,188,198
1,271,034
4,208,209
2,000,167
2,203,105
Total All Building
2,535,543
2,825,938
6,804,752
4,633,639
5,029,988
New Dwelling Units:
Single Family
1,908
2,438
3,889
3,646
3,667
Multiple Family
2,897
3,725
6,564
6,990
7,230
Total
4,805
6,163
10,453
10,636
10,897
Source: Construction Industry Research Board: "Building Permit Summary."
Note: Totals may not add due to independent rounding.
(1) Last available full year data.
Commercial Activity
Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales
and permits using the NAICS codes. As a result of the coding change, however, industry -level data for 2009 are not
comparable to that of prior years.
Retail and Food Services
Motor Vehicles and Parts Dealers
Furniture and Home Furnishings Stores
Bldg Mtrl. and Garden Equip. and Supplies
Food and Beverage Stores
Gasoline Stations
Clothing and Clothing Accessories Stores
General Merchandise Stores
Food Services and Drinking Places
Other Retail Group
Total Retail and Food Services
All Other Outlets
Totals All Outlets
CITY OF TUSTIN
Taxable Sales, 2009-2013
(Dollars in thousands)
2009 2010 2011
313,105
119,143
66,179
71,396
91,745
95,627
234,341
165,565
142,719
1,299,819
246,317
1,546,136
335,458
130,725
68,929
74,366
104,183
96,688
261,861
161,402
145,245
1,378,857
249,124
1,627,981
374,766
129,782
70,497
79,920
133,217
100,836
279,384
173,260
165,632
1,507,294
249,483
2012 2013(1)
474,101 509,977
115,242 115,965
70,845 75,361
87,379 86,907
142,931 139,527
107,726 114,935
179,279 187,321
455,543 447,231
1,633,046 1,677,223
268,015 257,554
1,756,777 1,901,061 1,934, 777
Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).
Note: Totals may not add due to independent rounding.
(1) Last available full year data.
(#) Sales omitted because their publication would result in the disclosure of confidential information.
Appendix E
Page 5
ORANGECOUNTY
Taxable Sales, 2009-2013
(Dollars in thousands)
Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).
Note: Totals may not add due to independent rounding.
(1) last available full year data.
Median Household Income
The following table summarizes the median household effective buying income for the City, the County,
the State of California and the nation for the past five years.
Appendix E
Page 6
2009
2010
2011
2012
20130
Retail and Food Services
Motor Vehicles and Parts Dealers
4,902,480
5,244,266
5,777,582
6,551,466
7,147,516
Furniture and Home Furnishings Stores
850,889
869,868
909,455
964,018
1,050,308
Electronics and Appliance Stores
1,978,869
2,058,383
2,319,992
2,536,415
2,488,963
Bldg Mtrl. and Garden Equip. and Supplies
2,039,686
2,112,467
2,267,363
2,351,574
2,581,968
Food and Beverage Stores
1,894,642
1,911,192
1,990,893
2,056,803
2,111,209
Health and Personal Care Stores
784,067
824,719
894,003
948,220
983,067
Gasoline Stations
3,383,678
3,801,651
4,826,228
5,063,762
4,706,666
Clothing and Clothing Accessories Stores
2,742,626
2,923,680
3,164,857
3,510,757
3,764,088
Sporting Goods, Hobby, Book and Music Stores
1,074,579
1,075,996
1,101,159
1,133,702
1,176,097
General Merchandise Stores
4,376,154
4,527,201
4,771,143
5,026,911
5,169,057
Miscellaneous Store Retailers
1,625,880
1,611,739
1,656,162
1,738,855
1,766,848
Nonstore Retailers
484,692
481,563
459,841
635,707
893,254
Food Services and Drinking Places
5,024,379
5,109,383
5,449,177
5,853,267
6,186,883
Total Retail and Food Services
31,162,619
32,552,107
35,587,795
38,372,456
40,025,929
All Other Outlets
14,550,164
15,115,073
16,143,344
16,858,156
17,565,288
Totals All Outlets
45,712,784
47,667,179
51,731,139
55,230,612
57,591,217
Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).
Note: Totals may not add due to independent rounding.
(1) last available full year data.
Median Household Income
The following table summarizes the median household effective buying income for the City, the County,
the State of California and the nation for the past five years.
Appendix E
Page 6
CITY OF TUSTIN, ORANGE COUNTY, STATE and UNITED STAT
Effective Buying Income
Source: The Nielsen Company
Education
JS). Inc.
The City is served by the Tustin Unified School District, which operates 18 eler
schools, 4 high schools and alternative and adult education programs, totaling over 22,C
there are 10 private and parochial schools serving the community.
Eight community colleges are located from 5 to 20 miles from the City. The Ran
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 the City 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 II trauma center and centrally located in the heart of the 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-going 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
Appendix E
Page 7
Total Effective
Buying Income
Median Household
Year
Area
(000's Omitted)
Effective Buying Income
2011
City of Tustin
1,786,448
52,614
Orange County
76,315,505
57,607
California
814,578,457
47,062
United States
6,438,704,663
41,253
2012
City of Tustin
2,026,168
56,223
Orange County
81,079,398
57,181
California
864,088,827
47,307
United States
6,737,867,730
41,358
2013
City of Tustin
2,012,100
57,740
Orange County
81,151,078
59,589
California
858,676,636
48,340
United States
6,982,757,379
43,715
2014
City of Tustin
2,074,525
59,744
Orange County
83,607,615
60,931
California
901,189,699
50,072
United States
7,357,153,421
45,448
2015
City of Tustin
2,237,298
62,642
Orange County
90,963,458
64,420
California
981,231,666
53,589
United States
7,757,960,399
46,738
JS). Inc.
The City is served by the Tustin Unified School District, which operates 18 eler
schools, 4 high schools and alternative and adult education programs, totaling over 22,C
there are 10 private and parochial schools serving the community.
Eight community colleges are located from 5 to 20 miles from the City. The Ran
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 the City 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 II trauma center and centrally located in the heart of the 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-going 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
Appendix E
Page 7
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,
Other Community Facilities
In November 2009, the City completed construction of an expanded new 32,000 square foot Tustin
Library. 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 261) 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 Joaquin
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 City. 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
Regional 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, the 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
Appendix E
Page 8
mountains to the north and east provide other kinds of outdoor recreational activities, including hiking, lake
recreation, and water skiing.
Appendix E
Page 9
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APPENDIX F
FORM OF BOND COUNSEL OPINION
[Letterhead of Quint & Thimmig LLP]
[Closing Date]
City Council of the
City of Tustin
300 Centennial Way
Tustin, California 93654
OPINION $ * City of Tustin (Orange County, California) 2016 Water Refunding
Revenue Bonds
Members of the City Council:
We have acted as bond counsel in connection with the issuance by the City of Tustin (the "City") of its
$ * 2016 Water Refunding Revenue Bonds (the "Bonds"), under the provisions of Article 10 of Chapter
3 of Part 1 of Division 2 of Title 5 (commencing with section 53570) of the California Government Code (the
"Law"), an Indenture of Trust, dated as of October 1, 2016 (the "Indenture"), by and between the City and The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), and Resolution No. , adopted by
the City Council of the City on August 16, 2016 (the "Resolution"). 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 City
contained in the Resolution and in the Indenture and in the certified proceedings and certifications of
public officials and others furnished to us, without undertaking to verify such facts by independent
investigation.
Based upon the foregoing, we are of the opinion, under existing law, that:
1. The City is a duly created and validly existing municipal corporation and general law city with
the power to enter into the Indenture and to perform the agreements on its part contained therein.
2. The Indenture has been duly authorized, executed and delivered by the City and is valid, binding and
enforceable against the City in accordance with its terms.
3. The Bonds constitute valid and binding special obligations of the City payable solely from Net
Revenues of the Enterprise (as such terms are defined in the Indenture) and certain other amounts held
under the Indenture, as described in the Indenture.
* Preliminary, subject to change.
Appendix F
Page 1
4. Subject to 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.
5. 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.
With respect to the opinions expressed herein, the enforceability of the Indenture is subject to the
limitations on the imposition of certain fees and charges by the City related to the Enterprise under
Articles XIIIC 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.
Our opinion represents our legal judgment based upon such review of the law 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 F
Page 2
APPENDIX G
BOOK -ENTRY ONLY SYSTEM
The information in this Appendix G, concerning The Depository Trust Company, New York, New York
("DTC'-% and DTC's book -entry system, has been furnished by DTC for use in official statements and the City takes no
responsibility for the completeness or accuracy thereof. The City cannot and does not give any assurances that DTC, DTC
Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of principal of or interest on the
Bonds, (b) certificates representing ownership interest in or other confirmation of ownership interest in the Bonds, or (c)
redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so
do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this
Appendix G. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the
current "Procedures" ofDTC to be followed in dealing with DTC Participants are on file with DTC. Information Furnished
by DTCRegarding its Book -Entry Only System
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the
Bonds (as used in this Appendix G, the "Securities"). The Securities 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 Security certificate will be issued for each maturity of the
Securities, in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the
aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500
million of principal amount, and an additional certificate will be issued with respect to any remaining principal
amount of such issue.
2. DTC, the world's largest securities depository, is a limited -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. DTCC is
owned by the 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 a Standard & Poor's rating of AA+. 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.dtcc.com and
www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each
Security ("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 Securities 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
Appendix G
Page 1
representing their ownership interests in Securities, except in the event that use of the book -entry system for the
Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered
in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such
other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. 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 Securities may wish to take certain steps to augment the transmission to them of notices
of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed
amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the
nominee holding the Securities for their benefit has agreed to obtain and transmit the 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.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue
to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the
Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the City 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 Securities are
credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities 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 or
the paying agent or bond 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 nor its nominee, the paying agent or bond
trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility of the City or the paying agent or
bond 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.
9. DTC may discontinue providing its services as depository with respect to the Securities at any time by
giving reasonable notice to the City or the paying agent or bond trustee. Under such circumstances, in the event that
a successor depository is not obtained, Security certificates are required to be printed and delivered.
10. The City may decide to discontinue use of the system of book -entry -only transfers through DTC (or a
successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
11. The information in this section concerning DTC and DTC's book -entry system has been obtained from
sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.
Appendix G
Page 2
Quint & Thimmig LLP
ESCROW AGREEMENT
by and between the
CITY OF TUSTIN
and
07/01/16
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Bank
Dated October 4, 2016
Relating to
Tustin Public Financing Authority
Water Revenue Bonds, 2011 Series A
20015.08
ESCROW AGREEMENT
This ESCROW AGREEMENT is dated October 4, 2016, by and between the CITY OF
TUSTIN, a municipal corporation and general law city organized and existing under the
constitution and laws of the State of California (the "City"), 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, as escrow agent (the "Escrow Bank");
WITNESSETH:
WHEREAS, the Tustin Public Financing Authority (the "Authority") has heretofore
issued its Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A, in the
original principal amount of $20,760,000, of which $20,760,000 is currently outstanding (the
"2011 Bonds"), the proceeds of which were used to finance and refinance the costs of the
acquisition, construction, installation and equipping of improvements to the City's municipal
Water System (the "2011 Project");
WHEREAS, the 2011 Bonds were issued pursuant to the terms of an indenture of trust,
dated as of April 1, 2011 (the "2011 Indenture"), by and between the Authority and The Bank of
New York Mellon Trust Company, N.A., as trustee (the "2011 Trustee");
WHEREAS, in order to provide for the repayment of the 2011 Bonds, the Authority sold
the 2011 Project to the City pursuant to an installment sale agreement, dated as of April 1, 2011
(the "2011 Installment Sale Agreement"), under which the City agreed to make installment
payments to the Authority (the "2011 Installment Payments") from in sufficient amounts in
each year to pay the full amount of principal of and interest on the 2011 Bonds;
WHEREAS, the City has determined that, as a result of favorable financial market
conditions and for other reasons, it is in the best interests of the City at this time to refinance the
City's obligation to make the 2011 Installment Payments and, as a result thereof, to provide for
the payment of the principal of and interest on the 2011 Bonds to and including April 1, 2021,
and for the redemption of all outstanding 2011 Bonds on April 1, 2021, at a redemption price
equal to 100% of the principal amount thereof, and to that end, the City has issued its
$ City of Tustin (Orange County, California) 2016 Water Refunding Revenue Bonds
(the "2016 Bonds"), pursuant to an indenture of trust, dated as of October 1, 2016 (the "2016
Indenture"), by and between the City and The Bank of New York Mellon Trust Company, N.A.,
as trustee (the "Trustee");
WHEREAS, Article 10 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with
section 53570) of the California Government Code (the "Refunding Bond Law") authorizes the
City to issue refunding bonds for the purpose of refunding obligations of the City;
WHEREAS, the City proposes to appoint the Escrow Bank as its agent for the purpose of
providing for the payment of the 2011 Installment Payments in accordance with the instructions
provided by this Escrow Agreement and of applying said 2011 Installment Payments to the
payment and redemption of the 2011 Bonds and the Escrow Bank desires to accept said
appointment; and
WHEREAS, the Escrow Bank has full powers to perform the duties and obligations to be
undertaken pursuant to this Escrow Agreement.
NOW, THEREFORE, in consideration of the above premises and of the mutual promises
and covenants herein contained and for other valuable consideration, the parties hereto do
hereby agree as follows:
Section 1. Definitions. Capitalized terms used, but not otherwise defined, herein, shall
have the meanings ascribed thereto in the 2011 Indenture.
Section 2. Appointment of Escrow Bank. The City hereby appoints the Escrow Bank as
escrow bank for all purposes of this Escrow Agreement and in accordance with the terms and
provisions of this Escrow Agreement, and the Escrow Bank hereby accepts such appointment.
Section 3. Establishment of Escrow Fund. There is hereby created by the City with, and
to be held by, the Escrow Bank, as security for the payment of the principal of, interest on and
redemption price of the 2011 Bonds as hereinafter set forth, an irrevocable escrow to be
maintained by the Escrow Bank on behalf of the City and for the benefit of the owners of the
2011 Bonds, said escrow to be designated the "Escrow Fund." All moneys and Escrowed
Federal Securities (hereinafter defined) deposited in the Escrow Fund shall be held as a special
fund to provide for the payment of the principal of and interest on the 2011 Bonds to and
including April 1, 2021, and to redeem the outstanding 2011 Bonds on April 1, 2021 (the
"Redemption Date"), at the redemption price of 100% of the principal amount thereof (the
"Redemption Price"), in accordance with the provisions of this Escrow Deposit and Trust
Agreement. If at any time the Escrow Bank shall receive actual knowledge that the moneys in
the Escrow Fund will not be sufficient to make any payment required hereof, the Escrow Bank
shall notify the City of such fact and the City shall immediately cure such deficiency.
Section 4. Deposit into Escrow Fund; Investment of Amounts.
(a) Concurrently with delivery of the 2016 Bonds, the City shall cause to be transferred
to the Escrow Bank for deposit into the Escrow Fund the amount of $ in immediately
available funds, derived as follows:
(i) $ from the proceeds of sale of the 2016 Bonds,
(ii) $ from amounts on deposit in the reserve fund established for the
2011 Bonds (the "2011 Reserve Fund"); and
(iii) $ from amounts on deposit in the debt service fund established for
the 2011 Bonds (the "2011 Debt Service Fund").
(b) The Escrow Bank shall invest $ of the moneys deposited into the Escrow
Fund pursuant to the preceding paragraph in the securities set forth in Exhibit A attached
hereto and by this reference incorporated herein (the "Escrowed Federal Securities") and shall
hold the remaining $ in cash, uninvested. The Escrowed Federal Securities shall be
deposited with and held by the Escrow Bank in the Escrow Fund solely for the uses and
purposes set forth herein.
(c) The Escrow Bank may rely upon the conclusion of . as contained in its
opinion and accompanying schedules (the "Report") dated October 4, 2016, that the Escrowed
Federal Securities mature and bear interest payable in such amounts and at such times as,
together with cash on deposit in the Escrow Fund, will be sufficient to provide for the payment
of the principal of and interest on the 2011 Bonds to and including April 1, 2021, and to redeem
the outstanding 2011 Bonds on the Redemption Date at the Redemption Price.
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(c) The Escrow Bank shall not be liable or responsible for any loss resulting from its full
mpliance with the provisions of this Escrow Deposit and Trust Agreement.
(d) Any money left on deposit in the Escrow Fund after payment in full of the 2011
rods, and the payment of all amounts due to the Escrow Bank hereunder, shall be applied to
e payment of debt service on the 2016 Bonds.
(e) If at any time the Escrow Bank shall receive actual knowledge that the moneys and
e Escrowed Federal Securities in the Escrow Fund will not be sufficient to make any payment
quired by Section 4 hereof, the Escrow Bank shall notify the City of such fact and the City
all immediately cure such deficiency. The Escrow Bank shall have no liability or
3ponsibility for such insufficiency.
(f) If the Escrow Bank learns that the Department of the Treasury or the Bureau of Public
!bt will not, for any reason, accept a subscription of state and local government series
securities ("SLGS") that is to be submitted pursuant to this Escrow Deposit and Trust
Agreement, the Escrow Bank shall promptly request alternative written investment instructions
from the City with respect to funds which were to be invested in SLGS. The Escrow Bank shall
follow such instructions and, upon the maturity of any such alternative investment, the Escrow
Bank shall hold such funds uninvested and without liability for interest until receipt of further
written instructions from the City. In the absence of investment instructions from the City, the
Escrow Bank shall not be responsible for the investment of such funds or interest thereon. The
Escrow Bank may conclusively rely upon the City's selection of an alternative investment as a
determination of the alternative investment's legality and suitability and shall not be liable for
any losses related to the alternative investments or for compliance with any yield restriction
applicable thereto.
Section 5. Instructions as to Application of Deposit.
(a) The maturing Escrowed Federal Securities, the investment earning thereon and the
uninvested cash in the Escrow Fund pursuant to Section 3 shall be applied by the Escrow Bank
for the sole purposes of providing for the payment of the principal of and interest interest on
the 2011 Bonds to and including April 1, 2021, and to redeem the outstanding 2011 Bonds on the
Redemption date at the Redemption Price, all as set forth in Exhibit B attached hereto and by
this reference incorporated herein.
(b) The Escrow Bank, in its capacity as 2011 Trustee, is hereby requested, and the Escrow
Bank, in such capacity, hereby agrees to give notice of the defeasance of the 2011 Bonds to the
owners of the 2011 Bonds and to the Municipal Securities Rulemaking Board (at
http://emma.msrb.org) in the form of defeasance notice attached hereto as Exhibit C.
(d) The Escrow Bank, in its capacity as 2011 Trustee, is hereby requested, and the Escrow
Bank, in such capacity, hereby agrees to give notice, of the redemption of the 2011 Bonds on
April 1, 2021, in accordance with the applicable provisions of the 2011 Indenture and the form
of redemption notice attached hereto as Exhibit D.
Section 5. Investment of Any Remaining Moneys. The Escrow Bank shall invest and
reinvest the proceeds received from any of the Escrowed Federal Securities, and the cash
originally deposited into the Escrow Fund, for a period ending not later than the next
succeeding interest payment date relating to the 2011 Installment Payments Bonds, in U.S.
Treasury Securities pursuant to written directions of the City; provided, however, that (a) such
written directions of the City shall be accompanied by (i) a certification of an independent
certified public accountant or firm of certified public accountants of favorable national
reputation experienced in the refunding of obligations of political subdivisions that the Federal
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Securities then to be so deposited in the Escrow Fund, together with the cash then on deposit in
the Escrow Fund, together with the interest to be derived therefrom, shall be in an amount at all
times at least sufficient to make the payments specified in Section 4 hereof, and (ii) an opinion
of nationally recognized bond counsel ('Bond Counsel") that investment in accordance with
such directions will not affect, for Federal income tax purposes, the exclusion from gross income
of interest due with respect to the 2011 Installment Payments Bonds, and (b) if the City directs
such investment or reinvestment to be made in United States Treasury Securities -State and
Local Government Series, the City shall, at its cost, cause to be prepared all necessary
subscription forms therefor in sufficient time to enable the Escrow Bank to acquire such
securities. In the event that the City shall fail to file any such written directions with the Escrow
Bank concerning the reinvestment of any such proceeds, such proceeds shall be held uninvested
by the Escrow Bank. Any interest income resulting from investment or reinvestment of moneys
pursuant to this Section 4 and not required for the purposes set forth in Section 2, as indicated
by such verification, shall, promptly upon the receipt of such interest income by the Escrow
Bank, be paid to the City.
Section 6. Substitution or Withdrawal of Federal Securities. The City may, at any time,
direct the Escrow Bank in writing to substitute Federal Securities for any or all of the Escrowed
Federal Securities then deposited in the Escrow Fund, or to withdraw and transfer to the City
any portion of the Federal Securities then deposited in the Escrow Fund, provided that any such
direction and substitution or withdrawal shall be simultaneous and shall be accompanied by (a)
a certification of an independent certified public accountant or firm of certified public
accountants of favorable national reputation experienced in the refunding of obligations of
political subdivisions that the Federal Securities then to be so deposited in the Escrow Fund
together with interest to be derived therefrom, or in the case of withdrawal, the Federal
Securities to be remaining in the Escrow Fund following such withdrawal together with the
interest to be derived therefrom, together with the cash then on deposit in the Escrow Fund,
shall be in an amount at all times at least sufficient to make the payments specified in Section 3
hereof; and (b) an opinion of Bond Counsel that the substitution or withdrawal will not affect,
for Federal income tax purposes, the exclusion from gross income of interest on the 2011
Installment Payments Bonds. In the event that, following any such substitution of Federal
Securities pursuant to this Section 5, there is an amount of moneys or Federal Securities in
excess of an amount sufficient to make the payments required by Section 3 hereof, as indicated
by such verification, such excess shall be paid to the City.
Section 7. Application of 2011 Funds. On the date of deposit of amounts in the Escrow
Fund pursuant to Section 4, the Escrow Bank, as 2011 Trustee, is hereby directed to (a)
withdraw all amounts on deposit in the 2011 Reserve Fund ($ ) and transfer such sum to
the Escrow Fund, and (b) withdraw all amounts on deposit in the 2011 Debt Service Fund
($ ) and transfer such sum into the Escrow Fund.
Any amounts remaining in any fund or account created with respect to the 2011 Bonds,
including interest earnings received by the 2011 Trustee, shall, after payment of all fees and
expenses of the 2011 Trustee, be paid to the Trustee and shall be applied to the payment of debt
service on the 2016 Bonds.
Section 8. Application of Certain Terms of 2011 Indenture. All of the terms of the 2011
Indenture relating to the making of payments of principal and interest with respect to the 2011
Bonds are incorporated in this Escrow Agreement as if set forth in full herein. The provisions of
the 2011 Indenture relating to the limitations from liability and protections afforded the 2011
Trustee and the resignation and removal of the 2011 Trustee are also incorporated in this
Escrow Agreement as if set forth in full herein and shall be the procedure to be followed with
respect to any resignation or removal of the Escrow Bank hereunder.
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Section 9. Compensation to Escrow Bank. The City shall pay the Escrow Bank full
compensation for its duties under this Escrow Agreement, including out-of-pocket costs such as
publication costs, prepayment or redemption expenses, legal fees and other costs and expenses
relating hereto. Under no circumstances shall amounts deposited in the Escrow Fund be
deemed to be available for said purposes.
Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no
obligation to make any payment or disbursement of any type or incur any financial liability in
the performance of its duties under this Escrow Agreement unless the City shall have deposited
sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in
acting upon the written instructions of the City or its agents relating to any matter or action as
Escrow Bank under this Escrow Agreement.
The Escrow Bank and its respective Successors, assigns, agents and servants shall not be
held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the
execution and delivery of this Escrow Agreement, the establishment of the Escrow Fund, the
acceptance of the moneys deposited therein, the sufficiency of the uninvested moneys held
hereunder to accomplish the purposes set forth in Section 4 hereof, or any payment, transfer or
other application of moneys by the Escrow Bank in accordance with the provisions of this
Escrow Agreement or by reason of any non -negligent act, non -negligent omission or non -
negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals
of fact contained in the "whereas" clauses herein shall be taken as the statement of the City, and
the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes
no representations as to the sufficiency of the uninvested moneys to accomplish the purposes
set forth in Section 4 hereof or to the validity of this Escrow Agreement as to the City and,
except as otherwise provided herein, the Escrow Bank shall incur no liability in respect thereof.
The Escrow Bank shall not be liable in connection with the performance of its duties under this
Escrow Agreement except for its own negligence, willful misconduct or default, and the duties
and obligations of the Escrow Bank shall be determined by the express provisions of this
Escrow Agreement. The Escrow Bank may consult with counsel, who may or may not be
counsel to the City, and in reliance upon the written opinion of such counsel shall have full and
complete authorization and protection in respect of any action taken, suffered or omitted by it
in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or
desirable that a matter be proved or established 2011 to taking, suffering, or omitting any action
under this Escrow Agreement, such matter (except the matters set forth herein as specifically
requiring a certificate of a nationally recognized firm of independent certified public
accountants or an opinion of counsel) may be deemed to be conclusively established by a
written certification of the City.
Anything in this Escrow Agreement to the contrary notwithstanding, in no event shall
the Escrow Bank be liable for special, indirect, punitive or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Escrow Bank has been
advised of the likelihood of such loss or damage and regardless of the form of action.
The Escrow Bank shall have the right to accept and act upon instructions, including
funds transfer instructions ("Instructions") given pursuant to this Agreement and delivered
using Electronic Means ("Electronic Means" shall mean the following communications methods:
e-mail, facsimile transmission, secure electronic transmission containing applicable
authorization codes, passwords and/or authentication keys issued by the Escrow Bank, or
another method or system specified by the Escrow Bank as available for use in connection with
its services hereunder.); provided, however, that the City shall provide to the Escrow Bank an
incumbency certificate listing officers with the authority to provide such Instructions
("Authorized Officers") and containing specimen signatures of such Authorized Officers, which
incumbency certificate shall be amended by the City, whenever a person is to be added or
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deleted from the listing. If the City elects to give the Escrow Bank Instructions using Electronic
Means and the Escrow Bank in its discretion elects to act upon such Instructions, the Escrow
Bank's understanding of such Instructions shall be deemed controlling. The City understands
and agrees that the Escrow Bank cannot determine the identity of the actual sender of such
Instructions and that the Escrow Bank shall conclusively presume that directions that purport to
have been sent by an Authorized Officer listed on the incumbency certificate provided to the
Escrow Bank have been sent by such Authorized Officer. The City shall be responsible for
ensuring that only Authorized Officers transmit such Instructions to the Escrow Bank and that
the City and all Authorized Officers are solely responsible to safeguard the use and
confidentiality of applicable user and authorization codes, passwords and/or authentication
keys upon receipt by the City. The Escrow Bank shall not be liable for any losses, costs or
expenses arising directly or indirectly from the Escrow Bank's reliance upon and compliance
with such Instructions notwithstanding such directions conflict or are inconsistent with a
subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of
Electronic Means to submit Instructions to the Escrow Bank, including without limitation the
risk of the Escrow Bank acting on unauthorized Instructions, and the risk of interception and
misuse by third parties; (ii) that it is fully informed of the protections and risks associated with
the various methods of transmitting Instructions to the Escrow Bank and that there may be
more secure methods of transmitting Instructions than the method(s) selected by the City; (iii)
that the security procedures (if any) to be followed in connection with its transmission of
Instructions provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances; and (iv) to notify the Escrow Bank immediately upon
learning of any compromise or unauthorized use of the security procedures.
The City hereby assumes liability for, and hereby agrees (whether or not any of the
transactions contemplated hereby are consummated), to the extent permitted by law, to
indemnify, protect, save and hold harmless the Escrow Bank and its respective successors,
assigns, agents, officers, directors, employees and servants from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements (including legal fees and disbursements) of whatsoever kind and nature which
may be imposed on, incurred by, or asserted against, at any time, the Escrow Bank (whether or
not also indemnified against by any other person under any other agreement or instrument)
and in any way relating to or arising out of the execution and delivery of this Escrow Deposit
and Trust Agreement, the establishment of the Escrow Fund, the retention of the moneys
therein and any payment, transfer or other application of moneys by the Escrow Bank in
accordance with the provisions of this Escrow Deposit and Trust Agreement, or as may arise by
reason of any act, omission or error of the Escrow Bank made in good faith in the conduct of its
duties; provided, however, that the City shall not be required to indemnify the Escrow Bank
against its own negligence or misconduct. The indemnities contained in this Section 9 shall
survive the termination of this Escrow Deposit and Trust Agreement or the resignation or
removal of the Escrow Bank.
The City acknowledges that to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grant the City the right to receive brokerage confirmations
of security transactions as they occur, the City specifically waives receipt of such confirmations
to the extent permitted by law. The Escrow Bank will furnish the City monthly cash transaction
statements which include detail for all investment transactions made by the Escrow Bank
hereunder.
No provision of this Escrow Deposit and Trust Agreement shall require the Escrow Bank
to expend or risk its own funds or otherwise incur any financial liability in the performance or
exercise of any of its duties hereunder, or in the exercise of its rights or powers.
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The Escrow Bank may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents, attorneys, custodians or nominees
appointed with due care and shall not be responsible for any willful misconduct or negligence
on the part of any agent, attorney, custodian or nominee so appointed.
The Escrow Bank may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Bank may at any time resign by giving 30 days written notice of resignation
to the City. Upon receiving such notice of resignation, either City shall promptly appoint a
successor and, upon the acceptance by the successor of such appointment, release the resigning
Escrow Bank from its obligations hereunder by written instrument, a copy of which instrument
shall be delivered to each of the City, the resigning Escrow Bank and the successor. If no
successor shall have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Escrow Bank may petition any court of
competent jurisdiction for the appointment of a successor.
Section 10. Amendment. This Escrow Agreement may be modified or amended at any
time by a supplemental agreement which shall become effective when the written consents of
the owners of one hundred percent (100%) in aggregate principal amount of the 2011 Bonds
shall have been filed with the Escrow Bank. This Escrow Agreement may be modified or
amended at any time by a supplemental agreement, without the consent of any such owners,
but only (1) to add to the covenants and agreements of any party, other covenants to be
observed, or to surrender any right or power herein or therein reserved to the City, (2) to cure,
correct or supplement any ambiguous or defective provision contained herein, (3) in regard to
questions arising hereunder or thereunder, as the parties hereto or thereto may deem necessary
or desirable and which, in the opinion of counsel, shall not materially adversely affect the
interests of the owners of the 2011 Bonds or the 2016 Bonds, and that such amendment will not
cause interest on the 2011 Bonds or the 2016 Bonds to become subject to federal income taxation.
In connection with any contemplated amendment or revocation of this Escrow Agreement, 2011
written notice thereof and draft copies of the applicable legal documents shall be provided by
the City to each rating agency then rating the 2011 Bonds.
Section 11. Severability. If any section, paragraph, sentence, clause or provision of this
Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such section, paragraph, sentence clause or provision shall not affect any of
the remaining provisions of this Escrow Agreement. Notice of any such invalidity or
unenforceability shall be provided to each rating agency then rating the 2011 Bonds.
Section 12. Notice of Escrow Bank and City. Any notice to or demand upon the Escrow
Bank may be served and presented, and such demand may be made, at the Principal Corporate
Trust Office of the Escrow Bank as specified by the Escrow Bank as 2011 Trustee in accordance
with the provisions of the 2011 Indenture. Any notice to or demand upon the City shall be
deemed to have been sufficiently given or served for all purposes by being mailed by first class
mail, and deposited, postage prepaid, in a post office letter box, addressed to such party as
provided in the 2011 Indenture (or such other address as may have been filed in writing by the
City with the Escrow. Bank).
Section 13. Merger or Consolidation of Escrow Bank. Any company into which the
Escrow Bank 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 Escrow Bank may sell or transfer all or substantially all of its
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corporate trust business, provided such company shall be eligible to act as trustee under the
2011 Indenture, shall be the Successor hereunder to the Escrow Bank without the execution or
filing of any paper or any further act.
Section 14. Execution in Several Counterparts. This Escrow Agreement 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 shall together constitute but one and the same
instrument.
Section 15. Business Days. Whenever any act is required by this Escrow Agreement to be
done on a specified day or date, and such day or date shall be a day other than a business day
for the Escrow Bank, then such act may be done on the next succeeding business day.
Section 16. Governing Law. This Escrow Agreement shall be construed and governed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the City and the Escrow Bank have each caused this Escrow
Agreement to be executed by their duly authorized officers all as of the date first above written.
Attest:
Erica N. Rabe
City Clerk
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CITY OF TUSTIN
By
Jeffrey C. Parker
City Manager
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Escrow Bank
By _
Name
Title
Type Maturity
SLGS
4/1/17
SLGS
10/1/17
SLGS
4/1/18
SLGS
10/1/18
SLGS
4/1/19
SLGS
10/1/19
SLGS
4/1/20
SLGS
10/1/20
SLGS
4/1/21
EXHIBIT A
SCHEDULE OF ESCROW SECURITIES
Coupon Par Price Cost Accrued Total
Exhibit A
EXHIBIT B
REDEMPTION SCHEDULE
Interest
Payment
Maturing Called Redemption
Total
Date
Principal Principal Interest Premium
Payment
4/1/17
— — $523,812.50 —
$ 523,812.50
10/1/17
— — 523,812.50 —
523,812.50
4/1/18
— — 523,812.50 —
523,812.50
10/1/18
— — 523,812.50 —
523,812.50
4/1/19
— — 523,812.50 —
523,812.50
10/1/19
— — 523,812.50 —
523,812.50
4/1/20
— — 523,812.50 —
523,812.50
10/1/20
— — 523,812.50 —
523,812.50
4/1/21
— $20,760,000 523,812.50 —
21,283,812.50
Exhibit B
EXHIBIT C
NOTICE OF DEFEASANCE
Tustin Public Financing Authority
(Orange County, California)
Water Revenue Bonds, 2011 Series A
Maturity Date
Amount Defeased
Interest Rate
CUSIP No.
4/1/24
$ 735,000
5.000%
90105T AA9
4/1/25
770,000
5.000
90105T A137
4/1/26
810,000
5.000
90105T AC5
4/1/27
850,000
5.000
90105T AD3
4/1/28
890,000
5.250
90105T AE1
4/1/29
935,000
5.250
90105T AF8
4/1/30
985,000
5.250
90105T AG6
4/1/31
1,040,000
5.250
90105T AH4
4/1/36
6,040,000
5.000
90105T AJO
4/1/41
7,705,000
5.000
90105T AK7
NOTICE IS HEREBY GIVEN to the owners of the outstanding Tustin Public Financing Authority
Water Revenue Bonds, 2011 Series A, described above (the 'Bonds"), that pursuant to the indenture
authorizing the issuance of the Bonds (the "Indenture"), the lien of the Indenture with respect to the
Bonds has been discharged through the irrevocable deposit of cash and U.S. Treasury securities in an
escrow fund (the "Escrow Fund"). The Escrow Fund has been established and is being maintained
pursuant to that certain Escrow Agreement, dated October 4, 2016, by and between the City of Tustin (the
"City") and The Bank of New York Mellon Trust Company, N.A., as escrow bank. As a result of such
deposit, the Bonds are deemed to have been paid and defeased in accordance with the Indenture. The
pledge of the funds provided for under the Indenture and all other obligations of the Tustin Public
Financing Authority and the City to the owners of the Bonds shall hereafter be limited to the application
of the maturing U.S. Treasury securities, the earnings thereon and cash in the Escrow Fund for the
payment of the principal, interest and redemption of the Bonds as described below.
As evidenced by a verification report delivered to the Escrow Bank, cash and U.S. Treasury
securities deposited in the Escrow Fund are calculated to provide sufficient moneys to pay the principal
of and interest on the Bonds to and including April 1, 2021, and to redeem the outstanding Bonds in full
on April 1, 2021 (the "Redemption Date"), at a redemption price equal to 100% of the principal amount
thereof. From and after the Redemption Date, interest with respect to the Bonds shall cease to accrue and
be payable.
Dated:
2016
Exhibit C
THE BANK OF NEW YORK
MELLON TRUST COMPANY,
N.A., as Escrow Bank
EXHIBIT D
NOTICE OF FULL AND FINAL REDEMPTION
Tustin Public Financing Authority
(Orange County, California)
Water Revenue Bonds, 2011 Series A
Issue Maturity Principal Redemption Redemption
Date Date Amount Premium Price Interest Rate CUSIP No.
5/25/11 4/1/24 $ 735,000 — $ 735,000 5.000% 90105T AA9
5/25/11 4/1/25 770,000 — 770,000 5.000 90105T AB7
5/25/11 4/1/26 810,000 — 810,000 5.000 90105T AC5
5/25/11 4/1/27 850,000 — 850,000 5.000 90105T AD3
5/25/11 4/1/28 890,000 — 890,000 5.250 90105T AE1
5/25/11 4/1/29 935,000 — 935,000 5.250 90105T AF8
5/25/11 4/1/30 985,000 — 985,000 5.250 90105T AG6
5/25/11 4/1/31 1,040,000 — 1,040,000 5.250 90105T AH4
5/25/11 4/1/36 6,040,000 — 6,040,000 5.000 90105T AJO
NOTICE is hereby given that the City of Tustin (the "City") has called for redemption on April 1,
2021 (the "Redemption Date"), the outstanding Tustin Public Financing Authority Water Revenue Bonds,
2011 Series A, described above (the "Bonds"), in the aggregate principal amount of $20,760,000 at a price
equal to 100% of the principal amount thereof (the "Redemption Price").
Payment of principal will be made upon presentation on and after the Redemption date, at the
following addresses:
Owners of Bonds presenting their Bonds in person for the same day payment must surrender
their Bonds by 1:00 p.m. on the Redemption Date and a check will be available for pickup after 2:00 p.m.
Checks not picked up by 4:30 p.m. will be mailed to the owner by first class mail.
Interest with respect to the principal amount designated to be redeemed shall cease to accrue on
and after the Redemption Date.
If payment of the Redemption Price is to be made to the owner of the Bonds, such owner is not
required to endorse the Bond to collect the Redemption Price.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (the "Act") 28% of the
Redemption Price will be withheld if a tax identification number is not properly certified. The Form W-9
may be obtained from the Internal Revenue Service.
Neither the City nor The Bank of New York Mellon Trust Company, N.A., as trustee, shall be
held responsible for the selection or use of the CUSIP numbers, nor is any representation made as to its
correctness as shown in this Redemption Notice. It is included solely for convenience of the Owners.
Dated: 2017
Exhibit D
THE BANK OF NEW YORK
MELLON TRUST COMPANY,
N.A., as Trustee
Quint & Thimmig LLP
CITY OF TUSTIN
(Orange County, California)
2016 Water Refunding Revenue Bonds
BOND PURCHASE AGREEMENT
September 13, 2016
City of Tustin
300 Centennial Way
Tustin, California 92780
Ladies and Gentlemen:
07/01/16
The undersigned, Hilltop Securities Inc. (the "Underwriter"), hereby offers to enter into
this Bond Purchase Agreement (this "Bond Purchase Agreement") with the City of Tustin (the
"City"), which upon acceptance of this offer by the City, will be binding upon the City and the
Underwriter. This offer is made subject to its acceptance by the City by execution and delivery
of this Bond Purchase Agreement to the Underwriter by 11:59 p.m., Pacific Time, on the date
hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written
notice to the City at any time prior to acceptance hereof by the City.
Section 1. Purchase and Sale of Bonds.
(a) Subject to the conditions, and upon the basis of the representations, warranties and
covenants hereinafter set forth, the Underwriter hereby agrees to purchase from the City, and
the City hereby agrees to sell to the Underwriter, all (but not less than all) of the $
aggregate principal amount of City of Tustin 2016 Water Refunding Revenue Bonds (the
"Bonds"), at a price of $ (which price is equal to the aggregate principal amount of the
Bonds, plus a net original issue premium of $ and less an Underwriter's discount of
The City hereby acknowledges and agrees that (a) the purchase and sale of the Bonds
pursuant to this Bond Purchase Agreement is an arm's-length commercial transaction between
the City and the Underwriter, (b) in connection therewith and with the discussions, undertaking
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 City, (c) the
Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City with
respect to the offering and sale of the Bonds contemplated hereby or the discussions,
undertaking and procedures leading thereto (irrespective of whether the Underwriter has
provided other services or is currently providing other services to the City on other matters)
and the Underwriter has no obligation to 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 City has consulted its own legal, financial and other advisors to the
20015.08
extent it has deemed appropriate, in connection with the Bonds and the matters contemplated
by this Bond Purchase Agreement.
The Bonds are authorized pursuant to the provisions of sections 53570 et seq. and 53580
et seq. of the California Government Code, a resolution adopted by the City Council of the City
on August 16, 2016 (the "Bond Resolution"), and an Indenture of Trust (the "Indenture"), dated
as of October 1, 2016, by and between the City and the The Bank of New York Mellon Trust
Company, N.A. (the "Trustee"). The Bonds are being issued to provide funds to (i) refund the
outstanding Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A (the "2011
Bonds"), which were delivered for the purpose of refinancing the improvement, betterment,
renovation and expansion of certain facilities within the City's municipal water enterprise (the
"Water System"), (ii) fund a bond reserve fund, and (iii) pay the costs of issuing the Bonds.
The Bonds will be issued on a parity, as to payment and security, with installment sale
agreements securing the outstanding Tustin Public Financing Authority 2012 Water Refunding
Revenue Bonds and Tustin Public Financing Authority 2013 Water Revenue Bonds, and with
any parity obligations issued or incurred by the City in the future.
Pursuant to an escrow agreement (the "Escrow Agreement"), by and between the City
and The Bank of New York Mellon Trust Company, N.A. as escrow bank (the "Escrow Bank"),
provision will be made for the defeasance of the 2011 Bonds and redemption of the 2011 Bonds
in full on April 1, 2021, at a price of 100% of the principal amount thereof, together with accrued
interest to such date.
Issuance of the Bonds and execution of this Bond Purchase Agreement, the Indenture,
the Escrow Agreement and the Continuing Disclosure Certificate described below was
approved by the Bond Resolution.
(b) The Bonds shall be as described in the Preliminary Official Statement relating to the
Bonds, dated August 30, 2016 (the "Preliminary Official Statement"). The Bonds shall be dated
as their date of delivery, shall mature on the dates and bear interest at the rates per annum and
shall be subject to redemption, all set forth in Schedule A hereto. As provided in the Indenture,
the Bonds shall be special obligations of the City payable solely from Net Revenues (as defined
in the Indenture) derived from the Water System and amounts on deposit in certain funds and
accounts held under the Indenture, as provided therein.
A final official statement, dated the date hereof and in the form of the Preliminary
Official Statement, with such additions and changes as shall be accepted by the Underwriter
and the City (the "Official Statement"), signed on behalf of the City by its authorized signatory,
shall be delivered by the City to the Underwriter on the Closing Date (defined below). The
Preliminary Official Statement and the Official Statement shall each be deemed to include their
respective cover pages, and all summary statements, appendices, other materials included with
or attached to each of them and any amendments or supplements thereto.
The Indenture, the Escrow Agreement, the Continuing Disclosure Certificate and this
Bond Purchase Agreement are referred to herein collectively as the "Financing Agreements."
All capitalized terms used and not defined herein shall have the meanings assigned to such
terms in the Indenture.
(c) The Underwriter agrees to make an initial bona fide public offering of the Bonds at a
price or prices (or yield or yields) not in excess of the public offering price or prices (or yield or
yields) set forth in the Official Statement, and may subsequently change such offering price or
prices (or yield or yields). The Underwriter may offer and sell the Bonds to certain dealers
(including dealers depositing Bonds into investment trusts) at a price or prices lower (or yield
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or yields higher) or at a price or prices higher (or yield or yields lower) than the public offering
price or prices (or yield or yields) set forth in the Official Statement. The Underwriter also
reserves the right to (i) over -allot or effect transactions that stabilize or maintain the market
prices of the Bonds at levels above those which might otherwise prevail in the open market and
(ii) discontinue such stabilizing, if commenced, at any time without prior notice.
(d) The City hereby authorizes the Underwriter to use copies of the Preliminary Official
Statement and the Official Statement and copies of the forms of the Indenture and the
Continuing Disclosure Certificate in connection with the public offering and sale of the Bonds.
The City further agrees not to supplement or amend, cause to be supplemented or amended or
agree to any supplement or amendment of the Preliminary Official Statement (except as
contemplated by the Official Statement) or the Official Statement at any time prior to the
Closing without the prior written consent of the Underwriter. The City ratifies and consents to
the distribution and use of the Preliminary Official Statement by the Underwriter prior to the
date hereof, and hereby represents that pursuant to the executed certificate attached hereto as
Exhibit B, the Preliminary Official Statement was "deemed final" by the City as of the date
thereof within the meaning of paragraph Rule 15c2-12 of the Securities and Exchange Act of
1934, as amended ("Rule 15c2-12"), except for the omission of such information as may be
permitted by Rule 15c2-12.
(e) The City agrees that there shall be delivered to the Underwriter, within seven (7)
business days of the date hereof, sufficient copies of the Official Statement, as requested by the
Underwriter to comply with the requirements of Rule 15c2-12, and with the requirements of
Rule G-32 of the Municipal Securities Rulemaking Board.
(f) If, at any time prior to the date twenty-five (25) days following the later of the Closing
Date or the date the Underwriter no longer retains, directly or as a member of an underwriting
syndicate, an unsold balance of the Bonds for sale to the public, which date shall be provided to
the City by written notice of the Underwriter (the "End of the Underwriting Period"), any event
of which the City has knowledge shall occur which might or would cause the Official Statement
to contain an untrue statement of a material fact or to omit to state any 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, the City will promptly notify the Underwriter in
writing of the circumstances and details of such event. If, as a result of such event or any other
event, it is necessary, in the opinion of the Underwriter, the City or their respective counsel, to
amend or supplement the Official Statement in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, the City will forthwith
cooperate with the Underwriter in the prompt preparation and furnishing to the Underwriter of
a reasonable number of copies of an amendment of or a supplement to the Official Statement, in
form and substance reasonably satisfactory to the Underwriter, which will so amend or
supplement the Official Statement so that, as amended or supplemented, it will not contain any
untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
(g) The City will undertake to provide certain annual financial information and notices
of the occurrence of certain events, if material, pursuant to a continuing disclosure certificate,
dated the date of issuance of the Bonds (the "Continuing Disclosure Certificate"). A description
of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in
the Official Statement.
Section 2. Closing. At 8:00 a.m., California time, October 4, 2016, or at such other time on
such earlier or later date as shall have been mutually agreed upon by the City and the
Underwriter, the City will deliver or cause to be delivered to the Underwriter the Bonds duly
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.thenticated by the Trustee, together with the other documents hereinafter mentioned, and the
lderwriter will accept such delivery and pay the purchase price of such Bonds as set forth in
ction 1 hereof by federal funds wire. The consummation of the purchase and delivery of such
rods as aforesaid shall be made at the offices of Quint & Thimmig LLP, Larkspur, California,
at such other place as shall be agreed upon by the City and the Underwriter; provided, the
rods will be delivered through the facilities of The Depository Trust Company. Such purchase
A delivery is herein called the "Closing" and the date and time of the Closing is herein called
e "Closing Date."
The Bonds shall be executed, authenticated and delivered under and in accordance with
the provisions of this Bond Purchase Agreement and the Indenture. The Bonds shall be in
definitive form, shall bear CUSIP numbers, and shall be fully -registered bonds, registered in the
name of Cede & Co., as nominee for The Depository Trust Company, with one bond for each
maturity of the Bonds in the principal amount of such maturity.
Section 3. Representations and Warranties.
(a) The Underwriter hereby represents that it has full power and authority to enter into
this Bond Purchase Agreement, that the execution, delivery and performance of this Bond
Purchase Agreement and the purchase of the Bonds contemplated herein have been duly
authorized by the Underwriter, and that this Bond Purchase Agreement, upon due
authorization, execution and delivery by the City, will be a valid and binding obligation of the
Underwriter.
(b) The City, by its acceptance hereof, represents, warrants, covenants and agrees with
the Underwriter as follows:
(i) The City is a general law city and municipal corporation organized and
existing under the constitution and laws of the State of California and the City Council
of the City, by adoption of the Bond Resolution, has duly approved the execution and
delivery of the Financing Agreements and the Official Statement and the issuance of the
Bonds, and the City has full right, power and authority to execute, deliver and perform
its obligations under the Financing Agreements and to carry out and consummate the
transactions contemplated by the Financing Agreements.
(ii) The City has, on or before the date hereof, duly adopted the Bond Resolution
and taken all action necessary to be taken by it prior to such date for (A) the issuance,
sale and delivery of the Bonds upon the terms and conditions and for the purposes
described herein, in the Indenture and in the Official Statement, (B) the execution and
delivery of the Financing Agreements and performance of its obligations thereunder, (C)
the authorization of the distribution of the Preliminary Official Statement and the
approval, execution, delivery and distribution of the Official Statement, and (D) the
carrying out of, giving effect to, consummating and performing the transactions and
obligations contemplated to be performed by it by the Financing Agreements and by the
Official Statement, provided that no representation is made with respect to compliance
with the securities or "Blue Sky" laws of the various states of the United States, and such
resolution has not been amended, modified or repealed and is in full force and effect on
the date hereof.
(iii) The delivery of the Preliminary Official Statement and the execution and
delivery by the City of the Financing Agreements and the Official Statement, the
compliance by it with the terms, conditions or provisions hereof and thereof, and the
consummation on its part of the transactions herein and therein contemplated do not
and will not, in any respect material for the performance by the City of its obligations
-4-
under the Financing Agreements, conflict with or constitute a breach of or a default
under nor contravene any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which
the City is a party or is otherwise subject, nor does 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 City under any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, deed of trust, resolution, agreement or other
instrument in any respect material to the performance by the City of its obligations
under the Financing Agreements, except as provided in the Financing Agreements and
the Official Statement.
(iv) Except as may be required under Blue Sky or other securities laws of any
state, there is no consent, approval, authorization or other order of, or filing with, or
certification by, any regulatory authority having jurisdiction over the City required for
the execution, delivery and sale of the Bonds or the consummation by the City of the
transactions contemplated by the Financing Agreements or the Official Statement, which
has not been duly obtained or made on or prior to the date hereof.
(v) Except as described in the Official Statement, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or body
pending against or, to the best knowledge of the City, threatened against or affecting the
City wherein an unfavorable decision, ruling or finding would adversely affect (A) the
validity or enforceability of, or the authority or ability of the City to perform its
obligations under, the Financing Agreements or (B) the transactions contemplated to be
performed by it under the Financing Agreements or by the Official Statement.
(vi) The City is not in default as to the payment of principal or interest with
respect to an obligation issued or incurred by the City and involving expenditure by the
City in excess of $100,000.
(vii) The City will cooperate with the Underwriter in the qualification of the
Bonds for offering and sale and the determination of the eligibility of the Bonds for
investment under the laws of such jurisdictions as the Underwriter shall designate, and
will use its best efforts to continue such qualification in effect so long as required for the
distribution of the Bonds by the Underwriter, provided that the City shall not be
required to take any action which would subject it to service of process or to register as a
foreign corporation in any jurisdiction where it is not now so subject (and it is
understood that the City is not responsible for compliance with or the consequences of
failure to comply with applicable "Blue Sky" laws).
(viii) The information contained in the Preliminary Official Statement and
Official Statement (excluding therefrom for any information relating to DTC and its
book -entry system included therein ), as of its date and the date hereof, did not, does not
and will not, as of the Closing Date, contain any untrue statement of a material fact and
did not, does not and will not, as of the Closing Date, omit to state a material fact
necessary in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(ix) After the Closing Date and prior to the End of the Underwriting Period, the
City will not participate in the issuance of any amendment of or supplement to the
Official Statement which, after being furnished with a copy, the Underwriter shall object
in writing or which shall be reasonably disapproved of by counsel for the Underwriter.
-5-
(x) The proceeds from the sale to the Underwriter of the Bonds will be applied in
the manner and for the purposes specified in the Financing Agreements.
(xi) The City covenants that it will not take any action which would cause
interest payable with respect to the Bonds to become includable in gross income for
federal income tax purposes or subject to State of California personal income taxes.
(xii) Any certificate of the City delivered to the Underwriter in connection with
the transactions contemplated by the Official Statement and this Bond Purchase
Agreement shall be deemed a representation by the City to the Underwriter as to the
statements made therein.
Section 4. Conditions to the Obligations of the Underwriter. The obligations of the
Underwriter under this Bond Purchase Agreement have been undertaken in reliance on, and
shall be subject to, the due performance by the parties hereto of their respective obligations and
agreements to be performed hereunder, and on and as of the date of delivery of this Bond
Purchase Agreement and on and as of the Closing Date. The obligations of the Underwriter
hereunder to accept delivery of and pay for the Bonds at the Closing are also subject, in the
discretion of the Underwriter, to the following further conditions:
(a) At the time of the Closing, (i) the Bond Resolution and the Financing Agreements
shall be in full force and effect and shall not have been rescinded, amended, modified or
supplemented, except as may have been agreed to by the Underwriter, and the City shall have
adopted or executed and delivered, as the case may be, and there shall be in full force and effect
such additional resolutions, agreements, opinions and certificates (including such certificates as
may be required by regulations of the Internal Revenue Service in order to establish the tax-
exempt character of interest evidenced by the Bonds), which resolutions, agreements, opinions
and certificates shall be reasonably satisfactory in form and substance to the Underwriter, and
there shall have been taken in connection therewith and in connection with the issuance of the
Bonds all such action as shall, in the opinion of the Underwriter, be necessary in connection
with the transactions contemplated hereby, (ii) the Bonds shall have been duly issued,
authenticated and delivered, (iii) the Preliminary Official Statement and Official Statement shall
not have been amended, modified or supplemented, except as may have been agreed to in
writing by the Underwriter, and (iv) the City shall perform or have performed all of its
obligations under or specified in the Financing Agreements to be performed by the City at or
prior to the Closing.
(b) On the Closing Date, there shall be delivered to the Underwriter in form satisfactory
to the Underwriter:
(i) Executed counterparts of the Financing Agreements, certified copies of the
Bond Resolution and such other documents and certificates as the Underwriter or its
counsel may reasonably require in order to evidence the accuracy or satisfaction of any
of the representations, warranties or conditions herein contained.
(ii) An approving opinion of Quint & Thimmig LLP, Bond Counsel, substantially
in the form attached as Appendix E to the Official Statement, and a letter from Bond
Counsel addressed to the Underwriter expressly permitting the Underwriter to rely on
such final approving opinion as if the Underwriter was an addressee thereof.
(iii) A supplemental opinion of Bond Counsel dated the Closing Date, addressed
to the Underwriter, to the effect that:
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(A) The City has full right and lawful authority to enter into and perform
its duties under the Indenture, the Escrow Agreement, the Continuing Disclosure
Certificate and this Bond Purchase Agreement, the Escrow Agreement, the
Indenture and the Continuing Disclosure Certificate have been duly authorized,
executed and delivered by the City and constitute legally valid and binding
obligations of the City, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium or similar laws relating to or affecting creditors rights or to the
application of equitable principles or to the exercise of judicial discretion in
appropriate cases or to the limitations on legal remedies against public entities in
the State of California.
(B) The Bonds are exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), and the Indenture is exempt from
qualification under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(C) The statements contained in the Official Statement under the captions
"INTRODUCTION," "THE BONDS" (other than under the caption 'Book -Entry
System"), "THE REFUNDING PLAN," "SECURITY FOR THE BONDS," "TAX
MATTERS" and "CERTAIN LEGAL MATTERS," and in APPENDIX A:
SUMMARY OF THE INDENTURE, APPENDIX C: FORM OF THE
CONTINUING DISCLOSURE CERTIFICATE and in APPENDIX E: FORM OF
OPINION OF BOND COUNSEL, insofar as such statements purport to
summarize certain provisions of the Bonds, the Indenture, the Continuing
Disclosure Certificate and the opinion of Bond Counsel concerning the exclusion
of the interest on the Bonds from gross income for federal income tax purposes
and the tax exemption of such interest for State of California personal income tax
purposes, are accurate in all material respects.
(iv) An opinion of Quint & Thimmig LLP, as Disclosure Counsel, addressed to
the City and the Underwriter and dated the Closing Date, to the effect that no
information came to the attention of the attorneys in such firm rendering legal services
which caused such firm to believe that the Official Statement as of its date (except for
any financial or statistical or engineering data or forecasts, numbers, charts, estimates,
projections, assumptions or expressions of opinion or any information about book -entry
or The Depository Trust Company included therein, as to which no opinion or view
need be expressed) contained any untrue statement of a material fact or omitted to state
any 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.
(v) A certificate, dated the Closing Date, signed by an authorized official of the
City, and in form and substance satisfactory to the Underwriter, to the effect that:
(A) Except as described in the Official Statement, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or body
pending or, to the best knowledge of the City, threatened against or affecting the
City wherein an unfavorable decision, ruling or finding would adversely affect
the validity or enforceability of, or the authority or ability of the City to perform
its obligations under, any of the Financing Agreements or the transactions
contemplated to be performed by it as described in the Official Statement, or
which would restrain or enjoin the sale, execution or delivery of the Bonds or in
any way contest or affect the validity of the Bonds, the proceedings of the City
taken with respect to the issuance, delivery or sale thereof, the pledge or
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application of any moneys or securities provided for the payment of the Bonds
and the existence or powers of the City or the title of any officers of the City to
their respective positions.
(B) The representations and warranties of the City contained in this Bond
Purchase Agreement are true and correct in all material respects on and as of the
Closing Date.
(C) The City has complied, or is presently in compliance, with all
agreements and has satisfied all conditions on its part to be observed or satisfied
under the Financing Agreements at or prior to the Closing Date.
(D) The information and statements in the Official Statement (excluding
therefrom for any information relating to DTC and its book -entry system
included therein) do not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(vi) An opinion of the City Attorney, dated the Closing Date, to the effect that:
(A) The City is a municipal corporation and general law city, duly
organized and existing pursuant to the laws of the State of California, and has
the full legal right, power and authority to enter into the Financing Agreements
and to perform and observe the agreements and covenants on its part contained
therein, and by proper action has duly authorized the execution and delivery
thereof.
(B) The Bond Resolution was duly adopted at a meeting of the governing
board of the City duly called and held pursuant to law and with all public notice
required by law and at which a quorum was present and acting throughout, and
the Bond Resolution is in full force and effect and has not been modified,
amended or rescinded.
(C) Except as described in the Official Statement, there is no action, suit,
proceeding or investigation at law or in equity before or by any court, public
board or body pending with respect to which the City has been served with
process or, to the best of such counsel's knowledge, threatened against or
affecting the City in which an unfavorable decision, ruling or finding would
adversely affect the City's participation in or consummation of the transactions
contemplated by the Indenture, this Bond Purchase Agreement, the Continuing
Disclosure Certificate, the Official Statement, or the Bonds, or in any way
contesting the existence of the City, or the powers of the City with respect
thereto, or the ability of the City to collect or receive the revenues that are the
source of the payment of the Bonds or to apply such revenues to the payment of
the Bonds.
(D) The execution and delivery of the Financing Agreements by the City
do not, and the fulfillment of the terms thereof by the City will not, result in a
material breach of any of the terms or provisions of, or constitute a material
violation of or default under, any resolution, indenture, mortgage, deed of trust
or other agreement or instrument to which the City is now a party or by which it
or any of its properties are now bound.
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that:
(vii) An opinion of counsel to the Trustee, dated the Closing Date, to the effect
(A) The Trustee is a national banking association. duly organized and
existing under the laws of the United States of America and has duly authorized,
executed and delivered the Indenture and by all proper action has authorized
acceptance of the trusts created thereunder.
(B) The Indenture constitutes a legally valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws or equitable principles relating to or limiting
creditors' rights generally.
(C) The Bonds have been validly authenticated by the Trustee.
(D) The Trustee has duly authorized, executed and delivered the
Indenture and by all proper action has authorized acceptance of the trusts
created thereunder.
(viii) An opinion of counsel to the Escrow Bank, dated the Closing Date and
addressed to the City and the Underwriter, to the effect that:
(A) The Escrow Bank is a national banking association organized and
existing under the laws of the United States of America, having full power to
enter into, accept and administer the trusts created under the Escrow Agreement;
(B) The Escrow Agreement have been duly authorized, executed and
delivered by the Escrow Bank and the Escrow Agreement constitute the legal,
valid and binding obligations of the Escrow Bank enforceable in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally and by the application of equitable principles, if equitable
remedies are sought; and
(C) No consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the Escrow Bank
that has not been obtained is or will be required for the execution and delivery of
the Escrow Agreement or the consummation of the transactions on the part of the
Escrow Bank with respect to the Escrow Agreement contemplated by the Escrow
Agreement;
(ix) An executed copy of a non -arbitrage certificate in form and substance
satisfactory to Bond Counsel, together with a copy of the completed and executed IRS
Form 8038-G.
(x) A certificate dated the Closing Date and signed by the Trustee or its designee,
in form and substance satisfactory to the Underwriter, to the effect that:
(A) The Trustee has all necessary power and authority to enter into, and
perform its duties and accepts the trusts created under, the Indenture.
(B) The Trustee is duly authorized to enter into the Indenture and to
authenticate the Bonds pursuant to the terms of the Indenture.
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(C) The Bonds have been duly authenticated and delivered by the Trustee
to the Underwriter pursuant to the direction from the City.
(D) The Trustee is not in breach of or default under any law or
administrative rule or regulation of the State of California or the United States of
America, or of any department, division, agency or instrumentality thereof, or
any applicable court or administrative decree or order, or any other instrument
to which the Trustee is a party or is otherwise subject or bound and which would
materially impair the ability of the Trustee to perform its obligations under the
Indenture.
(E) To the best of the Trustee's knowledge, the execution and delivery of
the Indenture and the authentication of the Bonds will not conflict with or
constitute a breach of or default under the Trustee's duties under any law,
administrative regulation, court decree, resolution, charter or bylaws to which
the Trustee is subject or by which it is bound.
(xi) A certificate, dated the Closing Date, of the Escrow Bank, signed by a duly
authorized officer of the Escrow Bank, to the effect that
(A) the Escrow Bank is duly organized and validly existing as a national
banking association, with full corporate power to undertake the trust of the
Escrow Agreement;
(B) the Escrow Bank has duly authorized, executed and delivered the
Escrow Agreement and by all proper corporate action has authorized the
acceptance of the trusts of the Escrow Agreement; and
(C) to the best of such officer's knowledge, there is no action, suit,
proceeding or investigation at law or in equity before or by any court, public
board or body which has been served on the Escrow Bank (either in state or
federal courts), or to the knowledge of the Escrow Bank which would restrain or
enjoin the execution or delivery of the Escrow Agreement, or which would affect
the validity or enforceability of the Escrow Agreement or the Escrow Bank's
participation in, or in any way contesting the powers or the authority of the
Escrow Bank with respect to, the transactions contemplated by the Escrow
Agreement, or any other agreement, document or certificate related to such
transactions;
(xii) Written evidence satisfactory to the Underwriter that the Bonds have been
assigned the rating of " " from S&P Global Ratings and such rating shall be in effect
on and as of the Closing Date.
(xiii) the report of Grant Thornton LLP, as verification agent, demonstrating the
mathematical accuracy of the calculations as to the sufficiency of the securities and
uninvested cash in the escrow fund established to meet the defeasance requirements of
the 2011 Bonds;
(xiv) An opinion of Bond Counsel, addressed to the City, the Trustee and the
Underwriter that the 2011 Bonds have been legally defeased as of the Closing Date.
(xv) Copies of all closing documents required by, and delivered pursuant to, the
Indenture, and such additional legal opinions, certificates, proceedings, instruments and
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other documents as the Underwriter, Disclosure Counsel, the City Attorney or Bond
Counsel may reasonably request.
If the conditions to the obligations of the Underwriter contained in this Bond Purchase
Agreement shall not be satisfied, unless otherwise waived by the Underwriter, this Bond
Purchase Agreement shall terminate with the effect stated in paragraph (c) of Section 5 hereof.
Section 5. Termination of Agreement.
(a) The Underwriter may terminate this Bond Purchase Agreement, with the effect
stated in paragraph (c) of this Section, at any time subsequent to the date of this Bond Purchase
Agreement and at or prior to the Closing by notifying the City in writing or by telegram of its
election so to do, if:
(i) A tentative decision with respect to legislation shall be reached by a
committee of the House of Representatives or the Senate of the Congress of the United
States or legislation shall be favorably reported by such a committee or be introduced,
after the date of this Bond Purchase Agreement and prior to the Closing, by amendment
or otherwise, in, or be enacted by, the House of Representatives or the Senate, or be
recommended to the Congress of the United States for passage by the President of the
United States, or a decision by a court established under Article III of the Constitution of
the United States, or the Tax Court of the United States, shall be rendered or a ruling,
regulation or order of the Treasury Department of the United States or the Internal
Revenue Service shall be made or proposed having the purpose or effect of imposing
federal income taxation, or any other event shall have occurred which results in the
imposition of federal income taxation, upon revenues or other income of the general
character to be derived by the City (or by any similar body) or upon interest received on
obligations of the general character of the Bonds.
(ii) Legislation shall be introduced, by amendment or otherwise, in, or be enacted
by, the House of Representatives or the Senate of the Congress of the United States, or a
decision by a court of the United States shall be rendered, or a stop order, ruling,
regulation or official statement by, or on behalf of, the United States Securities and
Exchange Commission or other governmental agency having jurisdiction of the subject
matter shall be made or proposed, to the effect that the issuance, offering or sale of
obligations of the general character of the Bonds, as contemplated hereby, is or would be
in violation of any provision of the Securities Act, the Securities Exchange Act of 1934
(the "Securities Exchange Act") or the Trust Indenture Act, as any of the foregoing Acts
are amended, or with the purpose or effect of otherwise prohibiting the issuance,
offering or sale of obligations of the general character of the Bonds, or the Bonds, as
contemplated hereby.
(b) In addition, the Underwriter may terminate this Bond Purchase Agreement with the
effect stated in paragraph (c) of this Section at any time subsequent to the date of this Bond
Purchase Agreement and at or prior to the Closing by notifying the City in writing or by
telegram of its election to do so, if:
(i) Any event shall have occurred, or information shall have become known,
which, in the Underwriter's reasonable opinion, makes untrue, incorrect or misleading
in any material respect any statement or information contained in the Preliminary
Official Statement or Official Statement or has the effect that the Preliminary Official
Statement or Official Statement contains an untrue, incorrect or misleading statement of
a material fact or omits to state a material fact required to be stated therein or necessary
-11-
to make the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(ii) Any legislation, resolution, ordinance, rule or regulation shall be introduced
in, or be enacted by, any governmental body, department or agency of the United States,
of the State of New York or of the State of California, or a decision by any court of
competent jurisdiction within the United States, of the State of New York or of the State
of California shall be rendered which, in the Underwriter's reasonable opinion,
materially adversely affects the marketability of the Bonds or the sale, at the
contemplated offering prices, by the Underwriter.
(iii) Additional restrictions not in force as of the date hereof having a material
adverse effect on the transactions contemplated hereby shall have been imposed upon
trading in securities generally by any governmental authority or by any national
securities exchange.
(iv) A general banking moratorium shall have been established by federal, New
York or California authorities or trading in securities shall generally have been
suspended on the New York Stock Exchange.
(v) Any rating on the Bonds shall have been downgraded or withdrawn by a
national rating service, which, in the Underwriter's reasonable opinion, materially
adversely affects the marketability of the Bonds or the sale, at the contemplated offering
prices, by the Underwriter of the Bonds.
(vi) A war involving the United States shall have been declared, or any existing
conflict involving the armed forces of the United States shall have escalated, or any other
national emergency relating to the financial community shall have occurred, which, in
the Underwriter's reasonable opinion, materially adversely affects the marketability of
the Bonds or the sale, at the contemplated offering prices, by the Underwriter.
(c) If this Bond Purchase Agreement is terminated as herein provided, the parties hereto
shall have no obligations one to the other except as provided in Sections 6 hereof.
Section 6. Expenses.
(a) Except as specifically provided in paragraph (b) of this Section 6, the Underwriter
shall be under no obligation to pay and the City shall pay any expenses incident to, or in
connection with, the offering, issuance and sale of the Bonds, including, but not limited to, (i)
the cost of the preparation, printing or other reproduction (for distribution prior to, on or after
the date of acceptance of this Bond Purchase Agreement) of the Financing Agreements, the
Preliminary Official Statement and the final Official Statement in reasonable quantities for
distribution, (ii) charges made by rating agencies for the rating of the Bonds, (iii) the cost of
printing the Bonds, (iv) all regulatory agency fees, (v) the fees and expenses of the personnel
and staff of the City designated to facilitate the execution and delivery of the Bonds, (vi) the fees
and expenses of the Trustee, (vii) the fees and expenses of the financial advisors, accountants,
verification agent and other consultants, legal counsel, including Bond Counsel and Disclosure
Counsel, and (viii) all other expenses relating to the sale and delivery of the Bonds, except those
expressly provided for in subsection (b) of this Section 6. The aforesaid costs and expenses shall
be paid out of the proceeds of the sale of Bonds or by the City.
(b) The Underwriter shall pay (i) the cost of qualifying the Bonds for sale in various
states chosen by the Underwriter, (ii) the fees and expenses of counsel to the Underwriter, (iii)
the fees of the California Debt and Investment Advisory Commission, and (iv) all other
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expenses incurred by it in connection with its offering and distribution of the Bonds, including
travel and advertising expenses.
(c) In the event that either the City or the Underwriter shall have paid obligations of the
other as set forth in this Section, adjustment shall be made at the Closing or as soon thereafter as
practicable.
Section 7. Miscellaneous.
(a) Except as otherwise specifically provided in this Bond Purchase Agreement, all
notices, demands and formal actions under this Bond Purchase Agreement shall be in writing
and mailed, telegraphed or personally delivered to:
The Underwriter: Hilltop Securities Inc.
1620 26th Street, Suite 230
Santa Monica, CA 90404
Attention: Ms. Elena Zaretsky, Director
The City: City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: Mr. Jeffrey C. Parker, City Manager
(b) This Bond Purchase Agreement will inure to the benefit of and be binding upon the
City and the Underwriter and their respective successors and assigns, and will not confer any
rights upon any other person, partnership, association or corporation other than the City and
persons, if any, controlling the Underwriter within the meaning of the Securities Act or the
Securities Exchange Act. The terms "successors" and "assigns" shall not include any purchaser
or holder of any of the Bonds.
(c) All of the representations, warranties and covenants of the City in this Bond Purchase
Agreement shall remain operative and in full force and effect regardless of (i) any investigation
made by or on behalf of the Underwriter, (ii) delivery of and any payment for the Bonds
hereunder or (iii) termination of the Underwriter's obligation to accept delivery of the Bonds
pursuant to this Bond Purchase Agreement.
(d) Section headings have been inserted in this Bond Purchase Agreement as a matter of
convenience or for reference only, and it is agreed that such section headings are not a part of
this Bond Purchase Agreement and will not be used in the interpretation of any provisions of
this Bond Purchase Agreement.
(e) If any provision of this Bond Purchase Agreement shall be held or deemed to be or
shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule of public policy, or for any other reason, such circumstances shall not
have the effect of rendering the provision in question invalid, inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or provisions of this Bond
Purchase Agreement invalid, inoperative or unenforceable to any extent whatever.
(f) This Bond Purchase Agreement may be executed in several counterparts, each of
which shall be regarded as an original and all of which shall constitute one and the same
document.
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(g) This Bond Purchase Agreement shall be governed by and construed in accordance
with the laws of the State of California.
This Bond Purchase Agreement is accepted
and agreed to as of the date first above
written:
CITY OF TUSTIN
im
Jeffrey C. Parker
City Manager
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HILLTOP SECURITIES INC., as
Underwriter
By
Elena Zaretsky
Director
SCHEDULE A
MATURITY SCHEDULE
'ity Principal Interest
11 Amount Rate Yield Price CUSIP
REDEMPTION PROVISIONS
Optional Redemption. The Bonds maturing on or before April 1, , are not subject to optional
redemption prior to maturity. The Bonds maturing on April 1, , are 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, in lieu of such determination, pro rata among maturities), and by lot
within a maturity, from any available source of funds, at a redemption price equal to the principal
amount thereof, together with accrued interest to the date fixed for redemption, without premium.
Sinking Fund Redemption. The Bonds maturing on April 1, , are also subject to mandatory
sinking fund redemption in part by lot on April 1, , and on each April 1 thereafter, to and including
April 1, , from Mandatory Sinking Account Payments made by the City at a redemption price equal
to the principal amount thereof, without premium, in the aggregate respective amounts and on the
respective dates as set forth in the following table.
Waturity
Sinking Account
Redemption Date
(April 1)
Principal Amount
to be Redeemed
Schedule A
Quint & Thimmig LLP 07/01/16
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 by
the City of its $_ City of Tustin (Orange County, California) 2016 Water Refunding
Revenue Bonds (the 'Bonds"). The Bonds are being issued pursuant to an indenture of trust,
dated as of October 1, 2016 (the "Indenture"), by and between the City and The Bank of New
York Mellon Trust Company, N.A., as trustee. The City 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 Owner" 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 Bands for federal income tax purposes.
"Dissemination Agent" shall mean the 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.
"EMMA" 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.
"Owner" or "Bond Owner," when used with respect to any Bond, means the person in
whose name the ownership of such Bond shall be registered.
"Participating Underwriter" shall mean the original underwriter of the Bonds, required to
comply with the Rule in connection with offering of the Bonds.
20015.08
"Rule" 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).
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 2015-16 Fiscal Year, which is due not later than March
31, 2017, 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) Change 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) Delivery of Annual Report to Dissemination Agent. 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. If 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) Financial 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.
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(b) Other Annual 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:
(i) Principal amount of the Bonds outstanding.
(ii) A statement that the City has complied with its rate covenants with respect to the
Bonds, the 2012 Bonds and the 2011 Bonds as disclosed under the caption
"SECURITY FOR THE BONDS—Rate Covenant" in the Official Statement.
(iii) An update of the following tables under the caption "THE ENTERPRISE" in the
Official Statement:
(A) "HISTORICAL WATER SUPPLY;"
(B) "WATER CONSUMPTION BY CUSTOMER TYPE;"
(C) "RATES FOR WATER SERVICE;"
(D) "HISTORICAL WATER CONNECTIONS BY CUSTOMER TYPE;"
(E) "TWENTY-FIVE LARGEST USERS OF WATER;" and
(F) "HISTORICAL REVENUES, EXPENDITURES AND DEBT SERVICE
COVERAGE."
(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.
If the document included by reference is a final official statement, it must be available
from EMMA.
(d) Further Information. 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 (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.
(8) 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-
-3-
TED) 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.
Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur
when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated
person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal
law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets
or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing
governmental body and officials or officers in possession but subject to the supervision and orders of a court
or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or
liquidation by a court or governmental authority having supervision or jurisdiction over substantially all. of
the assets or business of the obligated person.
(b) Material Reportable 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.
(6) Appointment of a successor or additional trustee, or the change of name of a
trustee.
(c) Time to Disclose. Whenever the City obtains knowledge of the occurrence of a Listed
Event, 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 the 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 Dissemination 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
1511
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 Owner, with respect to any 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) Compensation of Dissemination 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 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 Dissemination Agent. 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 all of the following conditions are satisfied:
(a) Change in Circumstances. 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 Date. 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 of Owners; Non -impairment Opinion. The amendment or waiver either (i) is
approved by the Owners in the same manner as provided in the Indenture for amendments to
the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally
recognized bond counsel, materially impair the interests of the 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
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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 on 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
future 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 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.
Section 12. 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: October 4, 2016
ACKNOWLEDGED:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Authorized Officer
in
CITY OF TUSTIN
By
Jeffrey C. Parker
City Manager
EXHIBIT A
NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Tustin
Name of Issue: $ City of Tustin (Orange County, California) 2016 Water
Refunding Revenue Bonds
Date of Issuance: October 4, 2016
NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with
respect to the above-named Issue as required by the Continuing Disclosure Certificate dated
October 4, 2016, furnished by the Issuer in connection with the Issue. The Issuer anticipates that
the Annual Report will be filed by
Dated:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Exhibit A
Authorized Officer
Quint & Thimmig LLP
INDENTURE OF TRUST
by and between the
CITY OF TUSTIN
and
07/01/16
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
Dated as of October 1, 2016
Relating to the
City of Tustin
(Orange County, California)
2016 Water Refunding Revenue Bonds
20015.08
t
TABLE OF CONTENTS
ARTICLE I
Page
DEFINITIONS; RULES OF CONSTRUCTION; EQUAL SECURITY
Section1.01. Definitions..............................................................................................................................................3
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds......................................................................................................................12
Section2.02. Terms of Bonds....................................................................................................................................12
Section2.03. Form of Bonds......................................................................................................................................13
Section 2.04. Execution of Bonds..............................................................................................................................13
Section 2.05. Transfer of Bonds................................................................................................................................13
Section2.06. Exchange of Bonds..............................................................................................................................13
Section2.07. Temporary Bonds................................................................................................................................14
Section2.08. Bond Registration Books....................................................................................................................14
Section 2.09. Bonds Mutilated, Lost, Destroyed or Stolen...................................................................................14
Section2.10. Book -Entry System..............................................................................................................................14
ARTICLE III
ISSUE OF BONDS; APPLICATION OF PROCEEDS; COSTS OF ISSUANCE FUND
Section3.01. Issuance of Bonds................................................................................................................................17
Section 3.02. Application of Proceeds of Bonds.....................................................................................................17
Section 3.03. Establishment and Application of Costs of Issuance Fund...........................................................17
Section3.04. Validity of Bonds.................................................................................................................................17
ARTICLE IV
REDEMPTION OF BONDS
Section4.01. No Redemption...................................................................................................................................19
Section 4.02. Selection of Bonds for Redemption..................................................................................................19
Section4.03. Notice of Redemption........................................................................................................................19
Section 4.04. Partial Redemption of Bonds.............................................................................................................20
Section4.05. Effect of Redemption..........................................................................................................................20
ARTICLE V
GROSS REVENUES; NET REVENUES
Section 5.01. Pledge of Net Revenues.....................................................................................................................22
Section 5.02. Receipt, Deposit and Application of Gross Revenues and Net Revenues..................................22
Section 5.03. Application of Interest Account........................................................................................................23
Section 5.04. Application of Principal Account.....................................................................................................23
Section 5.05. Application of Sinking Account.......................................................................................................23
Section 5.07. Investment of Moneys in Funds and Accounts..............................................................................23
ARTICLE VI
COVENANTS OF THE CITY; SPECIAL TAX COVENANTS
Section6.01. Punctual Payment...............................................................................................................................25
Section 6.02. Extension of Payment of Bonds........................................................................................................25
Section6.03. Discharge of Claims...........................................................................................................................25
Section 6.04. Operation of Enterprise in Efficient and Economical Manner.....................................................25
Section6.05. Against Encumbrance.........................................................................................................................25
Section 6.06. Records and Accounts........................................................................................................................26
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Section6.07. Rates and Charges...............................................................................................................................26
Section 6.08. Limitations on Future Obligations Secured by Net Revenues.....................................................27
Section6.09. Further Assurances.............................................................................................................................28
Section6.10. Waiver of Laws...................................:................................................................................................28
Section 6.11. Private Activity Bond Limitation......................................................................................................28
Section 6.12. Private Loan Financing Limitation...................................................................................................29
Section6.13. Federal Guarantee Prohibition..........................................................................................................29
Section6.14. Rebate Requirement............................................................................................................................29
Section6.15. No Arbitrage........................................................................................................................................29
Section 6.16. Maintenance of Tax-Exemption........................................................................................................29
Section6.17. Continuing Disclosure........................................................................................................................29
ARTICLE VTI
MAINTENANCE; TAXES; INSURANCE AND CONDEMNATION
Section 7.01. Maintenance and Operation of the Enterprise................................................................................30
Section 7.02. Taxes, Assessments, Other Governmental Charges and Utility Charges...................................30
Section 7.03. Public Liability and Property Damage Insurance..........................................................................30
Section7.04. Casualty Insurance..............................................................................................................................30
Section 7.05. Insurance Net Proceeds; Form of Policies.......................................................................................31
Section7.06. Eminent Domain.................................................................................................................................31
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section8.01. Events of Default.................................................................................................................................32
Section8.02. Acceleration of Maturities..................................................................................................................32
Section 8.03. Application of Net Revenues and Other Funds After Default.....................................................33
Section 8.04. Trustee to Represent Bondowners.«.................................................................................................34
Section 8.05. Bondowners' Direction of Proceedings............................................................................................34
Section 8.06. Limitation on Bondowners` Right to Sue........................................................................................34
Section 8.07. Absolute Obligation of City._............................................................................................................35
Section 8.08. Termination of Proceedings .»............................................................................................................35
Section8.09. Remedies Not Exclusive.....................................................................................................................35
Section8.10. No Waiver of Default..........................................................................................................................35
ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee; Duties, Immunities and Liabilities of Trustee....................................36
Section9.02. Merger or Consolidation....................................................................................................................37
Section 9.03. Liability of Trustee.......................................................................... 37
....................................................
Section 9.04. Right of Trustee to Rely on Documents...........................................................................................39
Section9.05. Preservation and Inspection of Documents....................................................................................39
Section9.06. Compensation of Trustee...................................................................................................................39
Section9.07. Indemnification...................................................................................................................................40
ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section10.01. Amendments Permitted...................................................................................................................41
Section 10.02. Effect of Supplemental Indenture...................................................................................................42
Section 10.03. Endorsement of Bonds; Preparation of New Bonds....................................................................42
Section 10.04. Amendment of Particular Bonds....................................................................................................42
ARTICLE XI
DEFEASANCE
Section 11.01. Discharge of Indenture.....................................................................................................................43
Section 11.02. Discharge of Liability on Bonds......................................................................................................43
Section 11.03. Deposit of Money or Securities with Trustee................................................................................43
Section 11.04. Payment of Bonds After Discharge of Indenture.........................................................................44
ARTICLE IX
MISCELLANEOUS
Section 12.01. Liability of City Limited to Net Revenues.....................................................................................45
Section 12.02. Successor Is Deemed Included in All References to Predecessor
..............................................45
Section 12.03. Limitation of Rights to Parties and Bondowners.........................................................................45
Section12.04. Waiver of Notice................................................................................................................................45
Section12.05. Destruction of Bonds........................................................................................................................45
Section 12.06. Severability of Invalid Provisions...................................................................................................45
Section12.07. Notices................................................................................................................................................45
Section 12.08. Evidence of Rights of Bondowners.................................................................................................46
Section12.09. Disqualified Bonds............................................................................................................................46
Section 12.10. Money Held for Particular Bonds...................................................................................................46
Section12.11. Funds and Accounts.........................................................................................................................47
Section 12.12. Article and Section Headings and References..............................................................................47
Section 12.13. Waiver of Personal Liability ............................................................................................................47
Section 12.14. Execution in Several Counterparts.................................................................................................47
Section12.15. Governing Law..................................................................................................................................47
EXHIBIT A—FORM OF BOND
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, is dated as of October 1, 2016, by and between the CITY
OF TUSTIN, a municipal corporation and general law city organized and existing under the
constitution and laws of the State of California (the "City"), 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, and being qualified to accept and administer the trusts hereby created (the
"Trustee");
WITNESSETH:
WHEREAS, the Tustin Public Financing Authority (the "Authority") has heretofore
issued its $20,760,000 Tustin Public Financing Authority Water Revenue Bonds, 2011 Series A,
of which $20,760,000 remains outstanding (the "2011 Bonds"), pursuant to an indenture of trust,
dated as of April 1, 2011, by and between the Authority and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"), for the purpose of financing the improvement,
betterment, renovation and expansion of certain facilities within the City's municipal Water
enterprise (the "Enterprise");
WHEREAS, debt service on the Bonds is paid from revenues comprised of payments
(the "Installment Payments") made by the City under an installment sale agreement, dated as
April 1, 2011, by and between the Authority and the City;
WHEREAS, Article 10 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with
section 53570) of the California Government Code (the "Refunding Bond Law") authorizes the
City to issue its refunding bonds for the purpose of refunding obligations of the City;
WHEREAS, the City, after due investigation and deliberation, has determined that it is
in the interests of the City at this time to provide for the issuance of bonds under the Refunding
Bond Law to provide for the payment and prepayment of the Installment Payments and
refunding of the 2011 Bonds;
WHEREAS, to that end, the City has determined to issue its City of Tustin (Orange
County, California) 2016 Water Refunding Revenue Bonds (the "Bonds"), pursuant to an
indenture of trust (the "Indenture"), by and between the City and the Trustee;
WHEREAS, the Bonds will be secured by a pledge of the net revenues generated by the
Enterprise;
WHEREAS, 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 premium (if any) and of the
interest thereon, the City Council of the City has authorized the execution of this Indenture;
WHEREAS, all Bonds issued under this Indenture will be secured by a pledge of the Net
Revenues, as defined herein, and certain other moneys and securities held by the Trustee
hereunder; and
WHEREAS, all acts and proceedings required by law necessary to make the Bonds,
when executed by the City, authenticated and delivered by the Trustee and duly issued, the
valid, binding and legal special obligations of the City, 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 premium (if any) and interest 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
consideration the receipt and sufficiency of which is hereby acknowledged, the City does
hereby covenant and agree with the Trustee, for the benefit of the respective owners from time
to time of the Bonds, as follows:
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ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION; EQUAL SECURITY
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 Supplemental Indenture and of
any certificate, opinion, request or other documents 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.
"Annual Debt Service" means, for each Fiscal Year, the aggregate amount (without
duplication) of principal and interest with respect to the Bonds and all Parity Obligations.
"Authorized Officer" means, 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.
"Average Annual Debt Service" means, with respect to any portion of the Outstanding
Parity Obligations for which the. calculation is being made, the average Annual Debt Service
during the period from the date of calculation through the final maturity date of all of such
Outstanding Parity Obligations.
"Bond Fund" means the fund by that name established pursuant to Section 5.01.
"Bond Registration Books" means the books maintained by the Trustee pursuant to
Section 2.08 for the registration and transfer of ownership of the Bonds.
"Bonds" means the City's 2016 Water Refunding Revenue Bonds, issued and at any time
Outstanding hereunder.
"Bond Year" means any twelve-month period commencing on April 2 in a year and
ending on the next succeeding April 1, both dates inclusive; provided, however, that the first Bond
Year shall commence on the Closing Date relating to the Bonds and shall end on April 1, 2016.
"Business Day" means a day of the year on which banks in Los Angeles, California, or
Los Angeles, California, are not required or authorized to remain closed and on which The New
York Stock Exchange is not closed.
"Certificate," "Statement," "Request," "Requisition" and "Order" of the City mean,
respectively, a written certificate, statement, request, requisition or order signed in the name of
the City by an Authorized Officer of the City. 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.
"City" means the City of Tustin, a municipal corporation and general law city organized
and existing under the constitution and laws of the State, and any successor thereto.
"City Council" means the City Council of the City.
"Closing Date" means the date upon which there is an exchange of the Bonds for the
proceeds representing the purchase of the Bonds by the Original Purchaser thereof.
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"Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date, or as it
may be amended to apply to obligations issued on the Closing Date, together with applicable
temporary and final regulations promulgated under the Code.
"Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate
executed by the City and dated the date of issuance and delivery of the Bonds, as originally
executed and as it may be amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means all items of expense directly or indirectly payable by or
reimbursable to the City relating to the authorization, issuance, sale and delivery of the Bonds,
including but not limited to printing expenses, operating expenses, rating agency fees, filing
and recording fees, initial fees and charges and first annual administrative fee of the Trustee
and fees and expenses of its counsel, fees, charges and disbursements of attorneys, financial
advisors, fiscal consultants, accounting firms, consultants and other professionals, fees and
charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or
fee in connection with the original issuance of the Bonds.
"Costs of Issuance Fund" means the fund so designated and established pursuant to
Section 3.03.
"Debt Service" means, during any period of computation, the amount obtained for such
period by totaling the following amounts:
(a) The principal components of the Bonds and principal payments with respect to
Parity Obligations coming due and payable by their terms in such period; and
(b) The interest component of the Bonds and interest payments with respect to Parity
Obligations which would be due during such period on the aggregate principal amount of the
Bonds and principal payments with respect to Parity Obligations that would be unpaid in such
period if the Bonds and payments with respect to Parity Obligations are retired as scheduled,
but deducting and excluding from such aggregate amount the amount of Bonds and payments
with respect to Parity Obligations no longer unpaid.
"Defeasance 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).
"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.
"Escrow Agreement" means that certain Escrow Agreement, dated the Closing Date, by
and between the City and the Escrow Bank, providing for the defeasance of the 2011 Bonds.
-4-
"Escrow Bank" means The Bank of New York Mellon Trust Company, N.A., appointed
by the City to act as escrow bank under the Escrow Agreement, and its assigns or any other
corporation or association which may at any time be substituted in its place, as provided in the
Escrow Agreement.
"Escrow Fund" means the fund by that name established pursuant to the Escrow
Agreement.
"Event of Default" means any of the events of default described in Section 8.01.
"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.
"Fiscal Year" means the period commencing on July 1 of each year and terminating on
the next succeeding April 30.
"Government 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 States 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 Revenues" 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, (c) capital
charges, and (d) all receipts derived from the investment of such income or revenues, but
excluding customer deposits.
"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.
-5-
"Independent Accountant" means any certified public accountant or firm of such
accountants appointed and paid by the City, and who, or each of whom:
(a) is in fact independent and not under domination of the City;
(b) does not have any substantial interest, direct or indirect, with the City; and
(c) is not connected with the City as an officer or employee of the City, but who may be
regularly retained to make annual or other audits of the books of or reports to the City.
"Independent Financial Consultant" means any consultant or firm of such consultants
appointed by the City, and who, or each of whom: (a) is in fact independent and not under
domination of the City; (b) does not have any substantial interest, direct or indirect, with the
City; (c) is not connected with the City as an officer or employee of the City, but who may be
regularly retained to make reports to the City, and (d) is judged by the City to have experience
in matters relating to the engineering matters relating to Enterprise enterprises.
"Information Services" means the Electronic Municipal Market Access System (referred to
as "EMMA"), a facility of the Municipal Securities Rulemaking Board (at
http: / /emma.msrb.org) or, in accordance with then current guidelines of the Securities and
Exchange Commission, such other addresses and/or such other national information services
providing information with respect to called bonds as the City may designate in a Certificate of
the City delivered to the Trustee.
"Insurance Consultant" means a person (which may be the City's insurance agent or
broker) having experience and a favorable reputation in consulting on the insurance
requirements of Water utilities in the State of the general size and character of the Enterprise,
selected by the City.
"Interest Account" means the account by that name in the Bond Fund established
pursuant to Section 5.01.
"Interest Payment Date" means April 1 and October 1 in each year, beginning April 1,
2017, and continuing so long as any Bonds remain Outstanding.
"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 Annual Debt Service" means, as of any date of calculation by the City, the
largest Annual Debt Service during the period from the date of such calculation through the
final maturity date of the Bonds and all Parity Obligations.
"Moody's" means Moody's Investors Service, New York, New York, or its successors.
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"Net Proceeds" means the par amount of the Bonds plus accrued interest and premium, if
any, less the amount of any underwriter's and original issue discount, less the proceeds applied
to pay Costs of Issuance.
"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 during such period.
"Original Purchaser" means the first purchaser of the Bonds from the City.
"Outstanding," when used as of any particular time with reference to Bonds, means all
Bonds theretofore executed, issued and delivered by the City under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for
cancellation;
(b) Bonds paid or deemed to have been paid within the meaning of Section 11.01; and
(c) Bonds in lieu of or in substitution for which other Bonds shall have been executed,
issued and delivered by the City pursuant to this Indenture or any Supplemental Indenture.
"Owner" or "Bond Owner", when used with respect to any Bond, means the person in
whose name the ownership of such Bond shall be registered on the Bond Registration Books.
"Parity Obligations" 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 Bonds, entered into or issued pursuant to and in accordance with
Section 6.08(b) hereof. For all purposes, the 2012 Installment Sale Agreement and the 2013
Installment Sale Agreement shall constitute Parity Obligations.
"Participating Underwriter" shall have the meaning ascribed thereto in the Continuing
Disclosure Certificate.
"Permitted Investments" means:
(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
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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
8. 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 System
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 such funds for
which the Trustee, its affiliates or subsidiaries provide investment advisory or other
management services or for which the Trustee or an affiliate of the Trustee serves as investment
administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding
that (i) the Trustee or an affiliate of the Trustee receives fees from funds for services rendered,
(ii) the Trustee collects fees for services rendered pursuant to this Indenture, which fees are
separate from the fees received from such funds, and (iii) services performed for such funds and
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pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee
or an affiliate of the Trustee.
(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.
(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.
"Principal Account" means the account by that name in the Bond Fund established
pursuant to Section 5.01.
"Principal Payment Date" means April 1 in each year, beginning April 1, 2024, and
continuing so long as any Bonds remain Outstanding.
"Rating Category" means, with respect to any Permitted Investment, one or more of the
generic categories of rating by Moody's and/or S&P applicable to such Investment Security,
without regard to any refinement or gradation of such rating category by a plus or minus sign.
"Record Date" means the fifteenth (15th) calendar day of the month immediately
preceding an Interest Payment Date.
"Refunding Bond Law" means Article 10 of Chapter 3 of Part 1 of Division 2 of Title 5
(commencing with section 53570) of the California Government Code, as in effect on the Closing
Date or as thereafter amended in accordance with its terms.
"S&P" means S&P Global Ratings, a Standard & Poor's Financial Services LLC business,
New York, New York, or its successors.
"Securities Depositories" means The Depository Trust 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 City may designate in a
Certificate of the City delivered to the Trustee.
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"Special Record Date" means the date established by the Trustee pursuant to Section 2.02
as a record date for the payment of defaulted interest on Bonds.
"State" means the State of California.
"Sinking Account" means the account by that name in the Bond Fund established
pursuant to Section 5.01, if required.
"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
6.08(c) hereof.
"Supplemental Indenture" means any indenture hereafter duly authorized and entered
into between the City and the Trustee, amendatory of or supplemental to this Indenture, but
only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
"Trust Office" means the corporate trust office of the Trustee at 700 South Flower Street,
Suite 500, Los Angeles, California 900174104, 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.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., appointed by the
City to act as trustee hereunder pursuant to Section 9.01, and its assigns or any other
corporation or association which may at any time be substituted in its place, as provided in
Section 9.01.
"2011 Bonds" means the Tustin Public Financing Authority Water Revenue Bonds, 2011
Series A, of which $20,760,000 remains outstanding as of the Closing Date.
"2012 Bonds" means the Tustin Public Financing Authority 2012 Water Refunding
Revenue Bonds.
"2012 Installment Sale Agreement" means the Installment Sale Agreement, dated as of
April 1, 2012, by and between the Authority and the City, securing the 2012 Bonds.
"2013 Bonds" means the Tustin Public Financing Authority 2013 Water Revenue Bonds.
"2013 Installment Sale Agreement" means the Installment Sale Agreement, dated as of
October 1, 2013, by and between the Authority and the City, securing the 2013 Bonds.
"Water Fund" means the City's existing water enterprise fund, established and held by
the City with respect to the Enterprise.
Section 1.02. Rules of Construction. All references in this Indenture to "Articles,"
"Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of
this Indenture; and the words "herein," "hereof," "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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Section 1.03. Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof, this Indenture shall be deemed to be and shall constitute a contract between the
City and the Owners from time to time of the Bonds; and the covenants and agreements herein
set forth to be performed on behalf of the City shall be for the equal and proportionate benefit,
security and protection of all Owners of the Bonds without preference, priority or distinction as
to security or otherwise of any of the Bonds over any of the others by reason of the number or
date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause
whatsoever, except as expressly provided therein or herein.
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ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds. At any time after the adoption, execution and
delivery of this Indenture, the City may execute and the Trustee, upon Request of the City, shall
authenticate and deliver Bonds in the aggregate principal amount of dollars
Section 2.02. Terms of Bonds. The Bonds shall be issued in fully registered form without
coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond shall
have more than one maturity date. The Bonds shall be dated as of their date of delivery, shall
mature on April 1 in each of the years and in the amounts, and shall bear interest at the rates, as
follows:
Maturity Principal Interest Maturity Principal Interest
April Amount Rate April Amount Rate
Interest on the Bonds shall be payable on each Interest Payment Date to the person
whose name appears on the Bond 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
mailed on the Interest Payment Date or, at the option of any Owner of at least $1,000,000
aggregate principal amount of Bonds and upon written notice received by the Trustee prior to
the Record Date, by wire transfer, at the Owner's address as it appears on the Bond Registration
Books or to such account as shall have been identified by the Owner in the notice requesting
payment by wire transfer. Interest on the Bonds shall be computed on the basis of a year
consisting of 360 days and twelve 30 -day months. Principal of and premium (if any) on any
Bond shall be paid upon presentation and surrender thereof at the Trust Office. Both the
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 bear interest from the Interest Payment Date next preceding the
authentication thereof, unless (a) it is authenticated after a Record Date and on or before the
following Interest Payment Date, in which event it shall bear interest from such Interest
Payment Date; or (b) it is authenticated on or before March 15, 2017, in which event it shall bear
interest from its date of delivery; provided, however, that if, as of the date of authentication of any
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Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment
Date to which interest has previously been paid or made available for payment thereon.
Any such interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Owner on such Record Date and shall be paid to the person in whose name the
Bond is registered at the close of business on a Special Record Date for the payment of such
defaulted interest to be fixed by the Trustee, notice whereof being given to the Owners not less
than ten (10) days prior to such Special Record Date.
Section 2.03. Form of Bonds. The Bonds, the form of Trustee's certificate of
authentication, and the form of assignment to appear thereon, shall be substantially in the
respective forms set forth in Exhibit A attached hereto and by this reference incorporated
herein, with necessary or appropriate variations, omissions and insertions, as permitted or
required by this Indenture.
Section 2.04. Execution of Bonds. The Bonds shall be signed in the name and on behalf of
the City with the facsimile signature of its Mayor, City Manager or Finance Director and
attested by the facsimile signature of its City Clerk. The Bonds shall then be delivered to the
Trustee for authentication by it. In case any officer 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 City, such Bonds may nevertheless be authenticated, delivered
and issued and, upon such authentication, delivery and issue, shall be as binding upon the City
as though the individual who signed the same had continued to be such officer of the City.
Also, any Bond may be signed on behalf of the City 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 of the City.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A attached hereto, 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 2.05. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the Bond 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,
endorsed or accompanied by delivery of a written instrument of transfer in a form acceptable to
the Trustee, duly executed. Every Bond so surrendered to the Trustee shall be canceled by it and
destroyed. Whenever any Bond shall be surrendered for transfer, the City shall execute and the
Trustee shall thereupon authenticate and deliver to the transferee a new Bond or Bonds of like
maturity and aggregate principal amount of authorized denominations. The Trustee shall
require the Owner requesting such transfer to pay any tax or other charge required to be paid
with respect to such transfer. The Trustee may refuse to transfer, under the provisions of Section
2.05, any Bonds selected by the Trustee for redemption under Article 1V, or any Bonds during
the period established by the Trustee for the selection of Bonds for redemption.
Section 2.06. Exchange of Bonds. Bonds may be exchanged at the Trust Office, for a like
aggregate principal amount of Bonds of other authorized denominations of the same maturity.
The Trustee shall require the Owner requesting such exchange to pay any tax or other charge
required to be paid with respect to such exchange. The Trustee may refuse to exchange, under
the provisions of Section 2.06, any Bonds selected by the Trustee for redemption under Article
IV, or any Bonds during the period established by the Trustee for the selection of Bonds for
redemption.
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Section 2.07. Temporary Bonds. The Bonds may be issued initially in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bond may be
printed, lithographed or typewritten, shall be of such denomination as may be determined by
the City and may contain such reference to any of the provisions of this Indenture as may be
appropriate. A temporary Bond may be in the form of a single registered bond payable in
installments, each on the date, in the amount and at the rate of interest established for the Bonds
maturing on such date. Every temporary Bond shall be executed by the City and authenticated
by the Trustee upon the same conditions and in the same manner as the definitive Bonds. If the
City 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, in
exchange therefor 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 of the same maturity or maturities. 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. Bond Registration Books. The Trustee will keep or cause to be kept at its
Trust Office sufficient books for the registration and transfer of the Bonds, which shall at all
times during regular business hours be open to inspection by the City upon reasonable notice;
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 said books,
Bonds as hereinbefore provided.
Section 2.09. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the City shall execute, and the Trustee shall thereupon authenticate and deliver, a
new Bond of like tenor and authorized denomination 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 destroyed and the Trustee shall
provide evidence of such destruction to the City. If any Bond issued hereunder shall be lost,
destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the City and
the Trustee and, if such evidence be satisfactory to the Trustee and indemnity for the City and
the Trustee satisfactory to the Trustee shall be given, the City, at the expense of the Bond
Owner, 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, instead of issuing a substitute Bond, the Trustee may pay the same
without surrender thereof upon receipt of the aforementioned indemnity). The City may require
payment of a reasonable fee for each new Bond issued under this Section 2.09 and of the
expenses which may be incurred by the City and the Trustee in connection therewith. Any Bond
issued under the provisions of this Section 2.09 in lieu of any Bond alleged to be lost, destroyed
or stolen shall constitute an original contractual obligation on the part of the City whether or
not the Bond alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and
shall be equally and proportionately entitled to the benefits of this Indenture with all other
Bonds secured by this Indenture.
Section 2.10. Book -Entry System. 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 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:
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(i) to any successor of The Depository Trust Company or its nominee, or of any
abstitute depository designated pursuant to paragraph (ii) of this subsection (a)
`substitute depository"); provided that any successor of The Depository Trust
.ompany or substitute depository shall be qualified under any applicable laws to
rovide the service proposed to be provided by it;
(ii) to any substitute depository designated in a written request of the City, upon
the resignation of The Depository Trust Company or its successor (or any substitute
.epository or its successor) from its functions as depository or (ii) a determination by
Ze City that The Depository Trust Company or its successor is no longer able to carry
ut its functions as depository; provided that any such substitute depository shall be
ualified under any applicable laws to provide the services proposed to be provided by
:; 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 City 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 City and 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 Officer of the City 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 Officer of the City. 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 Officer of
the City, 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 City
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 Officer of the
City.
(c) The City 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 City;
and the City 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 City 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.
(d) So long as all outstanding Bonds are registered in the name of Cede & Co. or its
registered assign, the City and the Trustee shall reasonably cooperate with Cede & Co., as sole
registered Owner, or its registered assign in effecting payment of the principal 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.
(e) So long as all Outstanding Bonds are registered in the name of Cede & Co. or its
registered assigns (hereinafter, for purposes of this paragraph (e), 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 Trust Company)
executed by the City and received and accepted by The Depository Trust Company.
IIM
ARTICLE III
ISSUE OF BONDS; APPLICATION OF PROCEEDS; COSTS OF ISSUANCE FUND
Section 3.01. Issuance of Bonds. At any time after the adoption, execution and delivery
of this Indenture, the City may execute and the Trustee, upon Request of the City, shall
authenticate and deliver Bonds in the aggregate principal amount of dollars
Section 3.02. Application of Proceeds of Bonds. Upon the receipt of payment for the
Bonds on the Closing Date of $ being the principal amount of the Bonds of
$ .00, less an underwriter's discount of $. plus a net original issue premium of
$ the Trustee shall apply the proceeds of sale thereof as follows:
(a) The Trustee shall deposit to the Costs of Issuance Fund the sum of $ ; and
(b) The Trustee shall transfer to the Escrow Bank the sum of $ for deposit in
the Escrow Fund.
The Trustee may establish temporary funds or accounts on its records to facilitate such
transfer.
Section 3.03. Establishment and Application of Costs of Issuance Fund.
(a) 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 shall be used and withdrawn
by the Trustee to pay Costs of Issuance upon receipt by the Trustee of a Requisition of the City
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
account. Each such Requisition of the City shall be sufficient evidence to the Trustee of the facts
stated therein and the Trustee shall have no duty to confirm the accuracy of such facts.
(b) At the end of three months from the Closing Date, or upon earlier receipt of a
Certificate of the City stating that amounts in the Costs of Issuance Fund are no longer required
for the payment of Costs of Issuance, the Costs of Issuance Fund shall be closed and any
amounts then remaining in the Costs of Issuance Fund shall be transferred to the Bond Fund.
Section 3.04. Validity of Bonds.
(a) The City has reviewed all proceedings heretofore taken relative to the authorization
of the Bonds and has found, as a result of such review, and hereby finds and determines that all
acts, conditions and things required by law to exist, happen or be performed precedent to and
in the issuance of the Bonds do exist, have happened and have been performed in due time,
form and manner as required by law, and the City is now authorized, pursuant to each and
every requirement of the Refunding Bond Law to issue the Bonds in the form and manner
provided in this Indenture and the Bonds shall be entitled to the benefit, protection and security
of the provisions of this Indenture.
(b) From and after the issuance of the Bonds, the findings and determinations of the City
respecting the Bonds shall be conclusive evidence of the existence of the facts so found and
determined in any action or proceeding in any court in which the validity of the Bonds is at
issue, and no bona fide purchaser of any of the Bonds shall be required to see to the existence of
any fact or to the performance of any condition or to the taking of any proceeding required
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prior to such issuance or to the application of the proceeds of sale of the Bonds. The recital
contained in the Bonds that the same are issued pursuant to the Refunding Bond Law and this
Indenture shall be conclusive evidence of their validity and of the regularity of their issuance
and all Bonds shall be incontestable from and after their issuance. The Bonds shall be deemed to
be issued, within the meaning of this Indenture, whenever the definitive Bonds (or any
temporary Bonds exchangeable therefor) have been delivered to the purchaser thereof and the
proceeds of sale thereof received.
SEE
ARTICLE IV
REDEMPTION OF BONDS
ion 4.01. Redemption.
lal Optional Redemption. The Bonds maturing on or after April 1, ,are subject to
redemption prior to their respective maturity dates, at the option of the City, as a whole or in
part on any date or in part, in such order of maturity as shall be selected by the City (or in
inverse order of maturity if the City shall fail to select a particular order) and by lot within a
maturity, on or after April 1, , from any source of available funds, at a redemption price
equal to the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the
date of redemption, without premium.
(b) Sinking Fund Redemption. The 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 each April 1 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 redeemed pursuant to subsection
(a) above, 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 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 City with the Trustee.
Sinking Account
Redemption Date
(April 1)
Maturity
Principal Amount
to be Redeemed
Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in this
Indenture for the redemption of less than all of the Bonds or any given portion thereof, and
unless otherwise specified in Section 4.01, the Trustee shall select the Bonds to be redeemed,
from all Bonds of or such given portion thereof not previously called for redemption, by lot in
any manner which the Trustee in its sole discretion shall deem appropriate and fair. The Trustee
shall promptly notify the City in writing of the Bonds or portions thereof so selected for
redemption.
Section 4.03. Notice of Redemption.
(a) Written notice of redemption shall be given by the City to the Trustee at least thirty
(30) days prior to the date of redemption (unless a shorter time shall be acceptable to the
Trustee in the sole determination of the Trustee). Unless waived by the Owner, notice of any
such redemption shall be given by the Trustee on behalf of the City by mailing a copy of a
redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60
days prior to the date fixed for redemption to the Owner of the Bond or Bonds to be redeemed
at the address shown on the Bond Registration Books.
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All notices of redemption shall be dated and shall state: (i) the redemption date, (ii) the
redemption price, (iii) if less than all Outstanding Bonds are to be redeemed, the identification
(and, in the case of partial redemption, the respective principal amounts) of the Bonds to be
redeemed, (iv) that on the redemption date the redemption price will become due and payable
upon each such Bond or portion thereof called for redemption, and that interest thereon shall
cease to accrue from and after said date, and (v) the place where such Bonds are to be
surrendered for payment of the redemption price, which place of payment shall be the Trust
Office.
Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so
to be redeemed shall, on the redemption date, become due and payable at the redemption price
therein specified, and from and after such date (unless the City shall default in the payment of
the redemption price) interest with respect to such Bonds or portions of Bonds shall cease to
accrue and be payable. Upon surrender of such Bonds for redemption in accordance with said
notice, such Bonds shall be paid by the Trustee at the redemption price. Installments of interest
due on or prior to the redemption date shall be payable as herein provided for payment of
interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the
Owner a new Bond or Bonds of the same maturity in the amount of the unredeemed principal.
All Bonds which have been redeemed shall be canceled and destroyed by the Trustee and shall
not be reissued.
(b) Notice of redemption of Bonds shall be given by the Trustee, at the expense of the
City, for and on behalf of the City.
(c) Notwithstanding the foregoing, in the case of any optional redemption of the Bonds
under Section 4.01(a), the notice of redemption may state that the redemption is conditioned
upon receipt by the Trustee of sufficient moneys to redeem the Bonds to be redeemed on the
anticipated redemption date, and that the optional redemption shall not occur if, by no later
than the scheduled redemption date, sufficient moneys to redeem such Bonds have not been
deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the
scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, such
event shall not constitute an Event of Default; the Trustee shall send written notice to the
Owners, to the effect that the redemption did not occur as anticipated, and the Bonds for which
notice of optional redemption was given shall remain Outstanding for all purposes of this
Indenture.
Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in
part only, the City shall execute and the Trustee shall authenticate and deliver to the Owner
thereof, at the expense of the City, a new Bond or Bonds of authorized denominations, and of
the same maturity, equal in aggregate principal amount to the unredeemed portion of the Bond
surrendered. The Owner shall not be required to submit any Bond to reflect mandatory sinking
account payments.
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 redemption date 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 at the redemption price specified in
such notice plus interest accrued thereon to the redemption date, 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 Owner of said Bonds shall have no rights
in respect thereof except to receive payment of said redemption price.
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All Bonds redeemed pursuant to the provisions of this Article IV shall be canceled upon
surrender thereof and destroyed with a certificate of destruction delivered to or upon the Order
of the City.
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ARTICLE V
GROSS REVENUES; NET REVENUES
Section 5.01. Pledge of Net Revenues. The Bonds and any Parity Obligations shall be
secured by a first pledge of all of the Net Revenues. In addition, the Bonds shall be secured by a
pledge of all of the moneys in all funds and accounts held by the Trustee hereunder, including
all amounts derived from the investment of such moneys. Such pledge shall constitute a lien on
the Net Revenues and such other moneys for the payment of the principal of and interest and
premium (if any) on the Bonds and any Parity Obligations in accordance with the terms hereof.
The Bonds shall be equally secured by a pledge, charge and lien upon the Net Revenues,
without priority for number or date, shall be and are secured by an exclusive pledge, charge
and lien upon the Net Revenues and such moneys, except as set forth in this Section 5.01. So
long as any of the Bonds or any Parity Obligations are Outstanding, the Net Revenues and such
moneys shall not be used for any other purpose, except as set forth in this Section 5.01 except,
that out of the Net Revenues, there may be apportioned such sums, for such purposes, as are
expressly permitted by Section 5.02.
In consideration of the acceptance of the Bonds by those who shall hold the same from
time to time, this Indenture shall be deemed to be and shall constitute a contract between the
City and the Owners from time to time of the Bonds and the covenants and agreements herein
set forth to be performed by or on behalf of the City shall be for the equal and proportionate
benefit, security and protection of all Owners of the Bonds without preference, priority or
distinction as to security or otherwise of any of the Bonds over any of the others by reason of
the number or date thereof or the time of sale, execution and delivery thereof, or otherwise for
any cause whatsoever, except as expressly provided therein or herein.
The Trustee shall establish and maintain the Bond Fund and, within the Bond Fund, the
Interest Account, the Principal Account and the Sinking Account.
Section 5.02. Receipt, Deposit and Application of Gross Revenues and Net Revenues.
(a) Application of Gross Revenues. All of the Gross Revenues shall be deposited by the City
immediately upon receipt in the Water Fund. All Gross Revenues shall be held in trust by the
City in the Water Fund and shall be applied, transferred, used and withdrawn only for the
following purposes:
(i) Maintenance and Operation Costs. The City shall first pay from the moneys
in the Water Fund the budgeted Maintenance and Operation Costs as such Maintenance
and Operation Costs become due and payable.
(ii) Payment of Debt Service. On or before the 5th Business Day preceding each
Interest Payment Date, the City shall withdraw from the Water Fund and transfer to the
Trustee, for deposit in the Bond Fund, an amount which, together with the balance then
on deposit in the Bond Fund, the Interest Account, the Principal Account and the
Sinking Account (other than amounts required for payment of principal of or interest on
any Bonds which have matured but which have not been presented for payment), is
equal to the aggregate amount of principal of and interest coming due and payable on
the Bonds and shall withdraw from the Water Fund and transfer amounts required for
the payment of debt service on any Parity Obligations. The transfers required to pay
debt service on the Bonds and any Parity Obligations shall be made without preference
or priority and, in the event moneys in the Water Fund are not sufficient to pay the debt
service requirement for the Bonds and any Parity Obligations, the City shall pay such
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amounts on a pro rata basis based on the debt service requirements for the Bonds and
each outstanding Parity Obligations.
(iii) Surplus. As long as all of the foregoing payments, allocations and transfers
are made at the times and in the manner set forth above, any moneys remaining in the
Water Fund may at any time be treated as surplus and applied for any lawful purpose.
(b) Application of Moneys in the Bond Fund. On or before the Business Day preceding each
Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit 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
such account (including the making up of any deficiencies in any such account resulting from
lack of Net 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:
First: to the Interest Account, the aggregate amount of interest becoming due and
payable on the next succeeding Interest Payment Date on all Bonds then Outstanding;
Second: to the Principal Account, the aggregate amount of principal becoming
due and payable on the Outstanding Bonds on the next succeeding Interest Payment
Date, if any; and
Third: to the Sinking Account, the aggregate amount of sinking fund installment
becoming due and payable on the Outstanding Bonds on the next succeeding Interest
Payment Date, if any.
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 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 for the purposes of paying the principal of
the Bonds when due and payable.
Section 5.05. Application of Sinking Account. All amounts in the Sinking Account shall
be used and withdrawn by the Trustee solely for the purposes of paying the sinking fund
installments of the Bonds when due and payable.
Notwithstanding the foregoing, if some but not all of the Bonds have been theretofore
redeemed pursuant to Sections 4.01(a), the total amount of all future mandatory Sinking
Account payments shall be reduced by the aggregate principal amount of Bonds so redeemed,
allocated among such mandatory Sinking Account payments on a pro rata basis in integral
multiples of $5,000 as determined by the City (notice of which determination shall be given to
the Trustee). In the event of a redemption pursuant to Section 4.01(a) the City shall provide the
Trustee with a revised sinking fund schedule giving effect to the optional redemption so
completed.
Any amounts remaining in the Sinking Account when all of the Bonds are no longer
Outstanding shall be withdrawn by the Trustee and transferred to the Water Fund.
Section 5.07. Investment of Moneys in Funds and Accounts. All moneys in any of the
funds and accounts established pursuant to this Indenture shall, upon Request of the City
provided at least two Business Days prior to the date of investment, be invested by the Trustee,
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but solely in Permitted Investments. In the absence of any such directions from the City, the
Trustee shall invest any such moneys in the money market fund set forth in the letter of
authorization and direction executed by the City and delivered to the Trustee. If no specific
money market fund had been specified by the City, the Trustee shall make a request to the City
for investment directions and, if no investment directions are provided within 10 days, such
amount shall be held in cash, uninvested during such 10 day period and thereafter, until
specific investment directions are provided by the City to the Trustee. All Permitted
Investments shall be acquired subject to the limitations as to maturities hereinafter set forth in
this Section 5.07 and such additional limitations or requirements consistent with the foregoing
as may be established by Request of the City.
Moneys in all funds and accounts shall be invested in Permitted Investments maturing
not later than the date on which it is estimated that such moneys will be required by the
Trustee.
All interest, profits and other income received from the investment of moneys in any
other fund or account established pursuant to this Indenture shall be deposited when received
in the Bond Fund. Notwithstanding anything to the contrary contained in this paragraph, an
amount of interest received with respect to any Permitted Investment equal to the amount of
accrued interest, if any, paid as part of the purchase price of such Permitted Investment shall be
credited to the fund or account for the credit of which such Permitted Investment was acquired.
The Trustee may commingle any of the funds or accounts established pursuant to this
Indenture into a separate fund or funds for investment purposes only, provided that all funds
or accounts held by the Trustee hereunder shall be accounted for separately as required by this
Indenture. The Trustee or an affiliate may act as principal or agent in the making or disposing of
any investment. The Trustee may sell, or present for redemption, any Permitted Investments so
purchased whenever it shall be necessary to provide moneys to meet any required payment,
transfer, withdrawal or disbursement from the fund or account to which such Permitted
Investment is credited, and, subject to the provisions of Section 9.03, the Trustee shall not be
liable or responsible for any loss resulting from such investment.
The City acknowledges that, to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grants the City the right to receive brokerage confirmations
of security transactions as they occur, the City specifically waives receipt of such confirmations
to the extent permitted by law. The Trustee shall furnish the City periodic cash transaction
statements which include detail for all investment transactions effected by the Trustee or
brokers selected by the City. Upon the City's election, such statements will be delivered via the
Trustee's online service and upon electing such service, paper statements will be provided only
upon request. The City waives the right to receive brokerage confirmations of security
transactions effected by the Trustee as they occur, to the extent permitted by law. The City
further understands that trade confirmations for securities transactions effected by the Trustee
will be available upon request and at no additional cost and other trade confirmations may be
obtained from the applicable broker.
The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection
with any investments made by the Trustee hereunder.
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ARTICLE VI
COVENANTS OF THE CITY; SPECIAL TAX COVENANTS
Section 6.01. Punctual Payment. The City shall punctually pay or cause to be paid the
principal and interest to become due in respect of 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 Net Revenues and other assets pledged for such payment as provided in this
Indenture.
Section 6.02. Extension of Payment of Bonds. The City 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 of the claims for interest by the purchase or funding of such Bonds or claims for interest 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 City 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 Bonds.
Section 6.03. Discharge of Claims. The City covenants that in order to fully preserve and
protect the priority and security of the Bonds the City shall pay from the Net 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 Net Revenues prior or
superior to the lien of the Bonds and impair the security of the Bonds. The City shall also pay
from the Net Revenues all taxes and assessments or other governmental charges lawfully levied
or assessed upon or in respect of the Enterprise or upon any part thereof or upon any of the Net
Revenues therefrom.
Section 6.04. Operation of Enterprise in Efficient and Economical Manner. 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 the Enterprise in good repair and
working order.
Section 6.05. Against Encumbrance. Except as provided herein, the City covenants that
the property, facilities and improvements of the Enterprise shall not be voluntarily mortgaged
or otherwise encumbered, leased, pledged, any charge placed thereon, or disposed of as a
whole or substantially as a whole unless: (a) the City shall cause to be filed with the Trustee
written evidence from Moody's, if Moody's is rating the Bonds, and/or S&P, if S&P is rating the
Bonds, that such sale or other disposition will not cause a reduction or withdrawal of the
uninsured rating then assigned to the Bonds by each such rating agency; and (b) such sale or
other disposition shall be so arranged as to provide for a continuance of payments into the Bond
Fund sufficient in amount to permit payment therefrom of the principal of and interest on the
Outstanding Bonds, and also to provide for such payments into the funds as are required under
the terms of this Indenture. Notwithstanding the foregoing, the City may lease real property
constituting a portion of the Enterprise; provided that the lease payments shall be considered
Gross Revenues hereunder.
The City further covenants that the Net Revenues or any other funds pledged or
otherwise made available to secure payment of the principal of and interest on the Outstanding
Bonds shall not be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon,
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or disposed of or used except as authorized by the terms of this Indenture. The City further
covenants that it will 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 principal and
interest of the Bonds or which otherwise would impair the rights of the Bond Owners with
respect to the Net Revenues.
Section 6.06. Records and Accounts. The City covenants that it 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 reasonable request, be subject to the inspection of the Owners of not less than
ten percent (10%) of the Outstanding Bonds or their representatives authorized in writing.
The City covenants that it will cause the books and accounts of the Enterprise to be
audited annually by an Independent Accountant and will make available for inspection by the
Bond Owners at the Trust Office, upon reasonable request, a copy of the report of such
Independent Accountant. Any such audit may be combined with and be a part of the general
audit of the City's financial records.
The City covenants that it will cause to be prepared annually, not more than one
hundred eighty (180) days after the close of each Fiscal Year a summary statement showing the
amount of Gross Revenues and the amount of all other funds collected which are required to be
pledged or otherwise made available as security for payment of principal of and interest on the
Bonds, the disbursements from the Gross Revenues and other funds in reasonable detail, and a
general statement of the financial and physical condition of the Enterprise. The City shall
furnish a copy of the statement to any Bond Owner upon written request.
Section 6.07. Rates and Charges.
(a) Covenant Regarding Gross Revenues. The City covenants to fix, prescribe, revise and
collect rates, fees and charges for the Enterprise as a whole for the services and improvements
furnished by the Enterprise during each Fiscal Year which are at least sufficient, after making
allowances for contingencies and error in the estimates, to yield Gross Revenues that are
sufficient to pay the following amounts in the following order of priority:
(i) all anticipated Maintenance and Operation Costs of the Enterprise for such
Fiscal Year;
(ii) Debt Service payments on the Bonds and any Parity Obligations as they
become due and payable during such Fiscal Year, without preference or priority, except
to the extent such Debt Service payments are payable from the proceeds of the Bonds or
such Parity Obligations, as applicable, or from any other source of legally available
funds of the City that have been deposited with the Trustee or otherwise segregated for
purposes prior to the commencement of such Fiscal Year (not including a debt service
reserve fund); and
(iv) all other payments required to meet any other obligations of the City which
are charges, liens, encumbrances upon, or which are otherwise payable, from the
Revenues during such Fiscal Year.
(b) Covenant Regarding Net Revenues. In addition, the City covenants to fix, prescribe,
revise and collect, or cause to be fixed, prescribed, revised and collected, rates, fees and charges
for the services and improvements furnished by the Enterprise during each Fiscal Year which
are sufficient to yield Net Revenues which are at least equal to one hundred twenty percent
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(120%) of the total Debt Service Payments on the Bonds and any debt service on Parity
Obligations coming due and payable in such Fiscal Year.
Section 6.08. Limitations on Future Obligations Secured by Net Revenues.
(a) No Obligations Superior to Bonds. In order to protect further the availability of the Net
Revenues and the security for the Bonds and any Parity Obligations, the City covenants that no
additional bonds or other indebtedness that are payable out of the Net Revenues in whole or in
part will be issued or incurred on a senior basis to the Bonds and any Parity Obligations.
(b) Parity Obligations. Additional obligations may be issued on a parity with the Bonds
and any then existing Parity Obligations subject to the following specific conditions which are
hereby made conditions precedent to the issuance and delivery of such Parity Obligations,
except that the City need not comply with subparagraph (ii) if the proposed Parity Obligations
are incurred to prepay or post a security deposit for the payment of the Bonds or Parity
Obligations:
(i) The City shall be in compliance with all covenants set forth in this Indenture.
(ii) The 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 instrument issuing such Parity Obligations are issued, as shown by the books of the
City, plus, at the option of the City, either or both of the items hereinafter in this
covenant designated (A) and (B), but excluding connection charges, shall at least equal
one hundred twenty percent (120%) of the amount of Maximum Annual Debt Service on
all Bonds and Parity Obligations to be Outstanding immediately subsequent to the
issuance of such Parity Obligations. The items any or all of which may be added to such
Net Revenues for the purpose of issuing or incurring Parity Obligations hereunder are
the following:
(A) An allowance for Net Revenues from any additions to or
improvements or extensions of the Enterprise to be made with the proceeds of
such Parity Obligations, and also for Net Revenues from any such additions,
improvements or extensions which have been made from moneys from any
source but in any case which, during all or any part of such Fiscal Year or such
twelve (12) month period, were not in service, all in an amount equal to seventy
percent (70%) of the estimated additional average annual Net Revenues to be
derived from such additions, improvements and extensions for the first thirty-six
(36) month period in which each addition, improvement or extension is
respectively to be in operation, all as shown in the written report of an
Independent Financial Consultant engaged by the City.
(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 additional indebtedness but which, during all or any part of
such Fiscal Year or such twelve (12) month period, was not in effect, in an
amount equal to 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 or such twelve (12) month period, all as shown in the written report
of an Independent Financial Consultant engaged by the City.
(iii) The instrument providing for the issuance of such Parity Obligations shall
provide that:
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(A) The proceeds of such Parity Obligations shall be applied to the
acquisition, construction, improvement, financing or refinancing of additional
facilities, improvements or extensions of existing facilities within the Enterprise,
or otherwise for facilities, improvements or property which the City determines
are of benefit to the Enterprise, or for the purpose of refunding any Bonds or
Parity Obligations in whole or in part, including all costs (including costs of
issuing such Parity Obligations and including capitalized interest on such Parity
Obligations during any period which the City deems necessary or advisable)
relating thereto;
(B) Interest on such Parity Obligations shall be payable on April 1 and
October 1 in each year of the term of such Parity Obligations except the first year,
during which year interest may be payable on any April 1 or October 1; and
(C) The principal of such Parity Obligations shall be payable on April 1 in
any year in which principal is payable.
(iv) A reserve fund may, but shall not be required to, be established for such
Parity Obligations.
(c) Subordinate Obligations. The City further covenants that the City shall 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 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 6.09. Further Assurances. The City will adopt, make, execute and deliver any
and all such further resolutions, 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.
Section 6.10. Waiver of Laws. The City 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 City to the extent permitted by law.
Section 6.11. Private Activity Bond Limitation. The City 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(b) of the Code.
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Pr
Section 6.12. Private Loan Financing Limitation. The City shall assure that the proceeds
of the Bonds are not so used as to cause the Bonds to satisfy the private loan financing test of
Section 141(c) of the Code.
Section 6.13. 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.
Section 6.14. 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.
Section 6.15. 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.
Section 6.16. Maintenance of Tax -Exemption. The City shall take 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 Closing Date.
Section 6.17. 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 the Indenture, failure of the City to comply with the
Continuing Disclosure Certificate shall not be considered an event of default; however, 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.
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ARTICLE VII
MAINTENANCE; TAXES; INSURANCE AND CONDEMNATION
Section 7.01. Maintenance and Operation of the Enterprise. The City covenants and
agrees that it will operate and maintain the Enterprise in accordance with all applicable
governmental laws, ordinances, approvals, rules, regulations and requirements including,
without limitation, such zoning, sanitary, pollution and safety ordinances and laws and such
rules and regulations thereunder as may be binding upon the City.
Section 7.02. Taxes, Assessments, Other Governmental Charges and Utility Charges. The
City covenants and agrees that it will pay and discharge all taxes, assessments, governmental
charges of any kind whatsoever, and utility charges which may be or have been assessed or
which may have become liens upon the Enterprise or the interest therein of the Trustee or of the
Owners of the Bonds, and will make such payments or cause such payments to be made,
respectively, in due time to prevent any delinquency thereon or any forfeiture or sale of the
Enterprise or any part thereof, and upon request, will furnish to the Trustee receipts for all such
payments, or other evidence satisfactory to the Trustee; provided, however, that the City shall not
be required to pay any tax, assessment, rate or charge as herein provided as long as it shall in
good faith contest the validity thereof, provided that the City shall have set aside adequate
reserves with respect thereto.
Section 7.03. Public Liability and Property Damage Insurance. The City shall maintain or
cause to be maintained, so long as any Bonds or Parity Obligations remain outstanding, but
only if and to the extent available at reasonable cost from reputable insurers, a standard
comprehensive general insurance policy or policies in protection of the City and its members,
officers, agents, assignees and employees. Said policy or policies shall provide for
indemnification of said parties against direct or contingent loss or liability for damages for
bodily and personal injury, death or property damage occasioned by reason of the operation of
the Enterprise. Said policy or policies shall provide coverage in such liability amounts and shall
be subject to such deductibles as shall be customary with respect to works and property of a like
character. Such liability insurance may be maintained as part of or in conjunction with any other
liability insurance coverage carried by the City, and may be maintained in whole or in part in
the form of self-insurance by the City, in the form of the participation by the City in a joint
powers agency or other program providing pooled insurance. The proceeds of such liability
insurance shall be applied toward extinguishment or satisfaction of the liability with respect to
which such proceeds have been paid.
Section 7.04. Casualty Insurance. The City shall procure and maintain or cause to be
procured and maintained, so long as any Bonds or Parity Obligations remain outstanding, but
only in the event and to the extent available from reputable insurers at reasonable cost, casualty
insurance against loss or damage to any improvements constituting any part of the Enterprise,
covering such hazards as are customarily covered with respect to works and property of like
character. Such insurance may be subject to deductible clauses which are customary with
respect to works and property of a like character. Such insurance may be maintained as part of
or in conjunction with any other casualty insurance coverage carried by the City and may be
maintained, in whole or in part, in the form of self-insurance by the City, subject to the
provisions of Section 7.05, 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.
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Section 7.05. Insurance Net Proceeds; Form of Policies. The City shall pay or cause to be
paid when due the premiums for all insurance policies. The City shall annually, on or before
April 1, deliver to the Trustee a certificate to the effect that the City has complied with the
requirements of Sections 7.03 and 7.04 hereof. The Trustee shall be entitled to rely upon such
Certificate of the City as to the City's compliance with Sections 7.03 and 7.04 hereof. In the event
that any insurance required pursuant to Section 7.03 or 7.04 shall be provided in the form of
self-insurance, the City shall file with the Trustee annually, within ninety (90) days following
the close of each Fiscal Year, a statement of an independent actuarial consultant identifying the
extent of such self-insurance and stating the determination that the City maintains sufficient
reserves with respect thereto. In the event that any such insurance shall be provided in the form
of self-insurance by the City, the City shall not be obligated to make any payment with respect
to any insured event except from Net Revenues or from such reserves.
Section 7.06. Eminent Domain. Any amounts received as awards as a result of the taking
of all or any part of the Enterprise by the lawful exercise of eminent domain, at the election of
the City (evidenced by a Written Certificate of the City filed with the Trustee and the City) shall
be used for the lease, acquisition or construction of improvements or extension of the
Enterprise.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 8.01. Events of Default. The following events shall be Events of Default:
(a) default in the due and punctual payment of the principal of any Bond when and as
the same shall become due and payable, whether at maturity as therein expressed, by
declaration or otherwise, in the amounts and at the times provided therefor;
(b) default in the due and punctual payment of any installment of interest on any Bond
when and as such interest installment shall become due and payable;
(c) default by the City in the observance of any of the covenants, agreements or
conditions on its part in this Indenture or in the Bonds contained (other than as referred to in
subsections (a) or (b) of this Section 8.01), if such default shall have continued for a period of
sixty (60) consecutive days after written notice thereof, specifying such default and requiring
the same to be remedied, shall have been given to the City by the Trustee, or to the City and the
Trustee by the Owners of not less than twenty-five percent (25%) in aggregate principal amount
of the Bonds at the time Outstanding;
(d) abandonment by the City of the Enterprise, or any substantial part thereof, and such
abandonment shall continue for a period of sixty (60) consecutive days after written notice
thereof shall have been given to the City by the Trustee, or to the City and the Trustee by the
Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds
at the time Outstanding, unless the City shall have assumed all of the City's obligations
hereunder; provided, however, that abandonment by the City shall not constitute an Event of
Default if such abandonment was caused by 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, earthquakes, explosion,
mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment,
facilities, sources of energy, material or supplies in the open market and unusually severe
weather or any similar even and/or occurrences beyond the control of the City; or
(e) the City's filing a petition in voluntary bankruptcy, for the composition of its affairs
or for its corporate reorganization under any state or federal bankruptcy or insolvency law, or
making an assignment for the benefit of creditors, or admitting in writing to its insolvency or
inability to pay debts as they mature, or consenting in writing to the appointment of a trustee or
receiver for itself or for the whole or any substantial part of the Enterprise.
Section 8.02. Acceleration of Maturities. If an Event of Default shall occur, then, and in
each and every such case during the continuance of such Event of Default, the Trustee or the
Owners of not less than a majority in aggregate principal amount of the Bonds at the time
Outstanding shall be entitled, upon notice in writing to the City, to 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, however, 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 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
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interest on such overdue principal at the rate borne by the respective Bonds, and the reasonable
charges and expenses of the Trustee, and any and all other defaults 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 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 default; but 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.
Section 8.03. Application of Net Revenues and Other Funds After Default. If an Event of
Default shall occur and be continuing, all Net Revenues and any other funds then held or
thereafter received by the Trustee under any of the provisions of this Indenture (subject to
Section 12.10) 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 charges and expenses of the
Trustee (including, but not limited to, reasonable fees and disbursements of its counsel, agents
and advisors) 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 thereon of the payment if only partially
paid, or surrender thereof if fully paid) subject to the provisions of this Indenture (including
Section 6.02), as follows:
(i) Unless the principal of all of the Bonds shall have become or have been
declared due and payable,
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, in the order of their due
dates, with interest on the overdue principal at the rate borne by the respective
Bonds, and, if the amount available shall not be sufficient to pay in full all the
Bonds due on any date, 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; and
(ii) If the principal of all of the Bonds shall have become or have been declared
due and payable, to the payment of the principal and interest then due and unpaid upon
the Bonds, with interest on the overdue principal at the rate borne by the respective
Bonds, and, if the amount available shall not be sufficient to pay in full the whole
amount so due and unpaid, then to the payment thereof ratably, without preference or
priority of principal over interest, or of interest over principal, or of any installment of
interest over any other installment of interest, or of any Bond over any other Bond,
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according to the amounts due respectively for principal and interest, to the persons
entitled thereto without any discrimination or preference.
Section 8.04. Trustee to Represent Bondowners. 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, the Refunding Bond Law and applicable provisions of any other
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 Bondowners, the Trustee in its discretion may and shall
upon the written request of the Owners of not less than twenty-five percent (25%) in aggregate
principal amount of the Bonds then Outstanding (or, if more than one such request is received,
the written request executed by the Owners of the greatest percentage of Bonds then
Outstanding in excess of twenty-five percent (25%)), 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 this Indenture, the Refunding Bond Law 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 Net Revenues and other assets pledged under this
Indenture, pending such proceedings. All rights of action under 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 for the benefit
and protection of all the Owners of such Bonds, subject to the provisions of this Indenture
(including Section 6.02).
Section 8.05. Bondowners' 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, 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 be unjustly prejudicial to Bondowners not parties to such direction or would
expose the Trustee to liability for which it has not been indemnified to its satisfaction.
Section 8.06. Limitation on Bondowners' Right to Sue. No Owner of any Bond 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 Refunding Bond Law or any other
applicable law with respect to such Bond, unless (1) such Owner shall have given to the Trustee
written notice of the occurrence of an Event of Default; (2) the Owners of not less than twenty-
five per cent (25%) in aggregate principal amount of the Bonds then Outstanding (or, if more
than one such request is received, the written request executed by the Owners of the greatest
percentage of Bonds then Outstanding in excess of twenty-five percent (25%)) 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; (3) such Owner or said Owners shall have
tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request; and (4) the Trustee shall have refused or omitted 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.
ST,a
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 this Indenture, the Refunding Bond Law, the California Government Code 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 (including Section 6.02).
Section 8.07. Absolute Obligation of City. Nothing in Section 8.06 or in any other
provision of this Indenture, or in the Bonds, contained shall affect or impair the obligation of the.
City, which is absolute and unconditional, to pay the principal of and interest on the Bonds to
the respective Owners of the Bonds at their respective dates of maturity, as herein provided, but
only out of the Net 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 8.08. Termination of Proceedings. In case any proceedings taken by the Trustee
or any one or more Bondowners 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 Bondowners, then in every such case the City, the Trustee and the Bondowners,
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
City, the Trustee and the Bondowners shall continue as though no such proceedings had been
taken.
Section 8.09. 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 8.10. 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 default shall
impair any such right or power or shall be construed to be a waiver of any such default or an
acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to
the Owners of the Bonds may be exercised from time to time and as often as may be deemed
expedient.
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ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee; Duties, Immunities and Liabilities of Trustee.
(a) The Bank of New York Mellon Trust Company, N.A. is hereby appointed to serve as
Trustee under this Indenture. By execution hereof, the Trustee accepts such appointment.
(b) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all
Events of Default which may have occurred, perform such duties and only such duties as are
specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of
Default (which has not been cured or waived), exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of his or her own affairs.
(c) The City may remove the Trustee at any time unless an Event of Default shall have
occurred and then be continuing, and shall remove the Trustee if at any time requested to do so
by an instrument or concurrent instruments in writing signed by the Owners of not less than a
majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly
authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with
subsection (f) of this Section 9.01, or shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any
public officer shall take control or charge of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of
such removal to the Trustee, and thereupon shall appoint a successor Trustee by an instrument
in writing.
(d) The Trustee may at any time resign by giving sixty days prior written notice of such
resignation to the City and by giving the Bondowners notice of such resignation by mail to the
addresses shown on the Bond Registration Books. Upon receiving such notice of resignation, the
City shall promptly appoint a successor Trustee by an instrument in writing.
(e) Any removal or resignation of the Trustee and appointment of a successor Trustee
shall become effective upon acceptance of appointment by the successor Trustee. If no successor
Trustee shall have been appointed and have accepted appointment within forty-five (45) days of
giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any
Bondowner (on behalf of himself and all other Bondowners) may petition any court of
competent jurisdiction for the appointment of a successor Trustee, and such court may
thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee.
Any successor Trustee appointed under this Indenture, shall signify its acceptance of such
appointment by executing and delivering to the City and to its predecessor Trustee a written
acceptance thereof, and thereupon such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts,
duties and obligations of such predecessor Trustee, with like effect as if originally named
Trustee herein; but, nevertheless at the Request of the City or the request of the successor
Trustee, such predecessor Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be required for
more fully and certainly vesting in and confirming to such successor Trustee all the right, title
and interest of such predecessor Trustee in and to any property held by it under this Indenture
and shall pay over, transfer, assign and deliver to the successor Trustee any money or other
property subject to the trusts and conditions herein set forth. Upon request of the successor
Trustee, the City shall execute and deliver any and all instruments as may be reasonably
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required for more fully and certainly vesting in and confirming to such successor Trustee all
such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance
of appointment by a successor Trustee as provided in this subsection, the City shall mail a
notice of the succession of such Trustee to the trusts hereunder to the Bondowners at the
addresses shown on the registration books maintained by the Trustee. If the City fails to mail
such notice within fifteen (15) days after acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be mailed at the expense of the City.
(f) Any Trustee appointed under the provisions of this Section 9.01 in succession to the
Trustee shall be a trust company, national banking association or bank having the powers of a
trust company having a corporate trust office in the State, having 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. If such bank, national banking association 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 subsection
the combined capital and surplus of such bank, national banking association 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. In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this subsection (f), the Trustee shall resign immediately in the manner
and with the effect specified in this Section 9.01.
Section 9.02. Merger or Consolidation. Any company or association into which the
Trustee may be merged or converted or with which it may be consolidated or any company or
association resulting from any merger, conversion or consolidation to which it shall be a party
or any company or association to which the Trustee may sell or transfer all or substantially all of
its corporate trust business, provided such company or association shall be eligible under
subsection (f) of Section 9.01, shall be the successor to such Trustee, as the case may be, without
the execution or filing of any paper or any further act, anything herein to the contrary
notwithstanding.
Section 9.03. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as statements of
the City, and the Trustee assumes no responsibility for the correctness of the same, or makes
any representations as to the validity or sufficiency of this Indenture or of the Bonds, or shall
incur any responsibility in respect thereof, other than in connection with the duties or
obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however,
be responsible for its representations contained in its certificate of authentication on the Bonds.
The Trustee shall not be liable in connection with the performance of its duties hereunder,
except for its own negligence or willful misconduct. The Trustee may become the owner of
Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by
law, may act as 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
Bondowners, whether or not such committee shall represent the Owners of a majority in
principal amount of the Bonds then Outstanding.
(b) The Trustee shall not be liable for any error of judgment made in good faith by a
responsible officer, unless the Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action taken or omitted to be taken
by it in good faith in accordance with the direction of the Owners of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds at the time Outstanding, relating to
the time, method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.
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i) The Trustee shall be under no obligation to exercise any of the rights or powers
1 it by this Indenture at the request, order or direction of any of the Bondowners,
pursuant to the provisions of this Indenture, unless such Bondowners shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
(e) The Trustee shall not be liable for any action taken by it in good faith and believed by
it to be authorized or within the discretion or rights or powers conferred upon it by this
Indenture.
(f) No provision in this Indenture shall require the Trustee to risk or expend its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder
if repayment of such funds or adequate indemnity against such risk or liability is not assured to
it.
(g) The Trustee makes no representation, express or implied as to the title, value, design,
compliance with specifications or legal requirements, quality, durability, operation, condition,
merchantability or fitness for any particular purpose or fitness for the use contemplated by the
City of the Enterprise.
(h) The Trustee shall not be deemed to have knowledge of an Event of Default
hereunder unless and until it shall have actual knowledge thereof.
(i) The Trustee shall have no responsibility with respect to any information, statement or
recital in any official statement, offering memorandum or other disclosure material prepared or
distributed with respect to the Bonds.
(j) The immunities extended to the Trustee also extend to its directors, officers,
employees and agents.
(k) The permissive right of the Trustee to do things enumerated in this Indenture shall
not be construed as a duty.
(1) The Trustee may execute any of the trusts or powers hereof and perform any of its
duties through attorneys, agents and receivers and shall not be answerable for the same if
appointed by it with reasonable care.
(m) The Trustee shall have the right to accept and act upon instructions, including funds
transfer instructions ("Instructions") given pursuant to this Indenture and delivered using
Electronic Means ("Electronic Means" shall mean the following communications methods:
S.W.I.F.T., e-mail, facsimile transmission, secure electronic transmission containing applicable
authorization codes, passwords and/or authentication keys issued by the Trustee, or another
method or system specified by the Trustee as available for use in connection with its services
hereunder); provided, however, that the City shall provide to the Trustee an incumbency
certificate listing officers with the authority to provide such Instructions ("Authorized
Officers") and containing specimen signatures of such Authorized Officers, which incumbency
certificate shall be amended by the City whenever a person is to be added or deleted from the
listing. If the City elects to give the Trustee Instructions using Electronic Means and the Trustee
in its discretion elects to act upon such Instructions, the Trustee's understanding of such
Instructions shall be deemed controlling. The City understands and agrees that the Trustee
cannot determine the identity of the actual sender of such Instructions and that the Trustee shall
conclusively presume that directions that purport to have been sent by an Authorized Officer
listed on the incumbency certificate provided to the Trustee have been sent by such Authorized
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Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such
Instructions to the Trustee and that the City and all Authorized Officers are solely responsible
to safeguard the use and confidentiality of applicable user and authorization codes, passwords
and/or authentication keys upon receipt by the City. 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 directions conflict or are inconsistent
with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the
use of Electronic Means to submit Instructions 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; (ii) that it is fully informed of the protections and risks associated with the
various methods of transmitting Instructions to the Trustee and that there may be more secure
methods of transmitting Instructions than the method(s) selected by the City; (iii) that the
security procedures (if any) to be followed in connection with its transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its particular needs and
circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or
unauthorized use of the security procedures.
(n) The Trustee shall not be liable to the parties hereto or deemed in breach or default
hereunder if and to the extent its performance hereunder is prevented by reason of force
majeure. The term "force majeure" means an occurrence that is beyond the control of the
Trustee and could not have been avoided by exercising due care. Force majeure shall include
but not be limited to acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes,
epidemics or other similar occurrences.
(o) The Trustee's rights to immunities and protection from liability hereunder and its
rights to payment of its fees and expenses shall survive its resignation or removal and final
payment or defeasance of the Bonds.
Section 9.04. Right of Trustee to Rely on Documents. The Trustee shall be protected in
acting upon any notice, resolution, request, requisition, consent, order, certificate, report,
opinion, note or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties. The Trustee may consult with counsel, who may be
counsel of or to the City, with regard to legal questions, and the opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken or suffered by it
hereunder in good faith and in accordance therewith.
Whenever in the administration of the trusts imposed upon it by this Indenture 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 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 to it may seem reasonable.
Section 9.05. Preservation and Inspection of Documents. All documents received by the
Trustee under the provisions of this Indenture shall be retained in its possession and shall be
subject during regular business hours with reasonable prior notice to the inspection of the City
and any Bondowner, and their agents and representatives duly authorized in writing, at the
Trust Office and under reasonable conditions.
Section 9.06. Compensation of Trustee. The City covenants to pay to the Trustee from
time to time, from available moneys of the City, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it in the exercise and performance of any of the
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powers and duties hereunder of the Trustee, and the City will pay or reimburse the Trustee
upon its request, from available moneys of the City, for all expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith.
Section 9.07. Indemnification. The City covenants to indemnify the Trustee and to hold it
harmless against any loss, liability, expenses or advance, including reasonable fees and
expenses of counsel and other experts, incurred or made without negligence or bad faith on the
part of the Trustee, in the exercise and performance of any of the powers and duties hereunder
by the Trustee, including the costs and expenses of defending itself against any claim of liability
arising under this Indenture. Such indemnification shall survive the termination or discharge of
this Indenture and the resignation or removal of the Trustee.
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ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section 10.01. Amendments Permitted.
(a) This Indenture and the rights and obligations of the City 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 a
Supplemental Indenture, which the City and the Trustee may execute when the written consent
of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall
have been filed with the Trustee; provided that if such modification or amendment will, by its
terms, not take effect so long as any Bonds of any particular maturity remain Outstanding, the
consent of the Owners of such Bonds shall not be required and such Bonds shall not be deemed
to be Outstanding for the purpose of any calculation of Bonds Outstanding under this Section
10.01. No such modification or amendment shall (1) extend the fixed maturity of any Bond, or
reduce the amount of principal thereof, provided in this Indenture for the payment of any
Bond, or reduce 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 (2) 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 Net Revenues and other
assets pledged under this Indenture prior to or on a parity with the lien created by this
Indenture, or deprive the Owners of the Bonds of the lien created by this Indenture on such Net
Revenues and other assets (except as expressly provided in this Indenture), or terminate the
insurance of the Bonds, without the consent of the Owners of all of the Bonds then Outstanding.
It shall not be necessary for the consent of the Bondowners to approve the particular form of
any Supplemental Indenture, but it shall be sufficient if such consent shall approve the
substance thereof. Promptly after the execution by the City and the Trustee of any
Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a notice, setting
forth in general terms the substance of such Supplemental Indenture to the Bondowners at the
addresses shown on the Bond Registration Books. Any failure to give such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any such Supplemental
Indenture.
(b) This Indenture and the rights and obligations of the City, of the Trustee and of 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 City and the Trustee may execute without the consent of
any Bondowners, but only to the extent permitted by law and only for any one or more of the
following purposes:
(i) to add to the covenants and agreements of the City 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 City, provided, that no such covenant, agreement,
pledge, assignment or surrender shall materially adversely affect the interests of the
Owners of the Bonds;
(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 City may deem necessary or desirable and not inconsistent with this Indenture, and
which shall not materially adversely affect the interests of the Owners of the Bonds; and
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(iii) to make such additions, deletions or modifications as may be necessary to
assure exclusion from gross income for purposes of federal income taxation of interest
on the Bonds.
(c) No such Supplemental Indenture shall modify any of the rights or obligations of the
Trustee without its prior written consent thereto; nor shall the Trustee be required to consent to
any such Supplemental Indenture which affects its rights or obligations hereunder.
Section 10.02. Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article X, 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 City, 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 10.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after
any Supplemental Indenture becomes effective pursuant to this Article X may, and if the
Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by
the City and the Trustee as to any modification or amendment provided for in such
Supplemental Indenture, and, in that case, upon demand of the Owner of any Bond
Outstanding at the time of such execution and presentation of his Bond 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 Bond. If the Supplemental Indenture shall so
provide, new Bonds so modified as to conform, in the opinion of the City and the Trustee, to
any modification or amendment contained in such Supplemental Indenture, shall be prepared
and executed by the City and authenticated by the Trustee, and upon demand of the Owners of
any Bonds then Outstanding shall be exchanged at the Trust Office, without cost to any
Bondowner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in
equal aggregate principal amounts of the same maturity.
Section 10.04. Amendment of Particular Bonds. The provisions of this Article X shall not
prevent any Bondowner from accepting any amendment as to the particular Bonds held by him,
provided that due notation thereof is made on such Bonds.
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ARTICLE XI
DEFEASANCE
Section 11.01. Discharge of Indenture. Bonds may be paid by the City in any of the
following ways; provided that the City also pays or causes to be paid any other sums payable
hereunder by the City:
(a) by paying or causing to be paid the principal of and interest on Bonds Outstanding,
as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or Government
Obligations in the necessary amount (as provided in Section 11.03) to pay Bonds Outstanding;
or
(c) by delivering to the Trustee, for cancellation by it, Bonds Outstanding.
If the City shall pay all Bonds Outstanding and shall also pay or cause to be paid all
other sums payable hereunder by the City, then and in that case, at the election of the City
(evidenced by a Certificate of the City, filed with the Trustee, signifying the intention of the City
to discharge all such indebtedness and this Indenture), and notwithstanding that any Bonds
shall not have been surrendered for payment, this Indenture and the pledge of Net Revenues
and other assets made under this Indenture and all covenants, agreements and other obligations
of the City under this Indenture shall cease, terminate, become void and be completely
discharged and satisfied, except only as provided in Section 11.02. In such event, upon Request
of the City, the Trustee shall cause an accounting for such period or periods as may be
requested by the City to be prepared and filed with the City and shall execute and deliver to the
City all such instruments as may be 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 Indenture which are not required for the
payment of Bonds not theretofore surrendered for such payment.
Section 11.02. 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 11.01) to pay any Outstanding Bond, provided that the provisions of Section 11.04 shall
apply in all events.
The City may at any time surrender to the Trustee for cancellation by it any Bonds
previously issued and delivered which the City may have acquired in any manner whatsoever,
and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.
Section 11.03. 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
Government Obligations in the necessary amount to pay any Bonds, the money or Government
Obligations so to be deposited or held may include money or Government Obligations held by
the Trustee in the funds and accounts established pursuant to this Indenture and shall be:
(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; or
(b) Government Obligations the principal of and interest on which when due will
provide money sufficient in the opinion of a certified public accountant to pay the principal of
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and all unpaid interest to maturity on the Bonds to be paid, as such principal and interest
become due.
Section 11.04. Payment of Bonds After Discharge of Indenture. Notwithstanding any
provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the
principal or interest on, any Bonds and remaining unclaimed for two years after the principal of
all of the Bonds has become due and payable (whether at maturity or by acceleration as
provided in this Indenture), if such moneys were so held at such date, or two 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 City 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, as the case may be,
may (at the cost of the City) first mail a notice, in such form as may be deemed appropriate by
the Trustee, to the Owners of the Bonds so payable and not presented and with respect to the
provisions relating to the repayment to the City of the moneys held for the payment thereof.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. Liability of City Limited to Net Revenues. Notwithstanding anything
lined in this Indenture or in the Bonds, the City shall not be required to advance any
eys derived from any source other than the Net Revenues and other assets pledged under
hdenture for any of the purposes mentioned in this Indenture, whether for the payment of
,rincipal of or interest on the Bonds or for any other purpose of this Indenture.
Section 12.02. Successor Is Deemed Included in All References to Predecessor. Whenever
is Indenture either the City 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 City or the Trustee shall bind and inure to the
benefit of the respective successors and assigns thereof whether so expressed or not.
Section 12.03. Limitation of Rights to Parties and Bondowners. Except as provided in
Article XII hereof, 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 City, the Trustee 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 City, the
Trustee and the Owners of the Bonds.
Section 12.04. Waiver of Notice. Whenever the giving of notice by mail or otherwise is
required in this Indenture, 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.
Section 12.05. Destruction of Bonds. Whenever in this Indenture provision is made for
the cancellation by the Trustee and the delivery to the City of any Bonds, the Trustee shall
destroy such Bonds and deliver a certificate of such destruction to the City.
Section 12.06. 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 such 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 City hereby declares that it would have adopted 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, paragraphs,
sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
Section 12.07. Notices. Any notice, request, complaint, demand, communication or other
paper shall be sufficiently given and shall be deemed given when delivered or mailed by first
class, registered or certified mail, postage prepaid, or sent by confirmed telegram, telecopy or
telex, to the address (or such other address as may have been filed with the Trustee in writing)
set forth below:
If to the City: City of Tustin
300 Centennial Way
Tustin, CA 92780
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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.
400 South Hope Street, Suite 400
Los Angeles, CA 90071
Attention: Corporate Trust Department
Phone: (213) 630-6249
Fax: (213) 630-6480
Any notice provided by the Trustee to the Owners shall also be provided to the City.
Section 12.08. Evidence of Rights of Bondowners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bondowners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bondowners 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 of the City if made in the manner provided in this Section 12.08.
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 registered Bonds shall be proved by the Bond Registration Books held
by the Trustee.
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 City in accordance therewith or reliance thereon.
Section 12.09. 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 owned or held by or for the account of
the City or by any other obligor on the Bonds, or by any person directly or indirectly controlling
or controlled by, or under direct or indirect common control with, 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 12.09 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 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 City shall specify in a certificate to the Trustee those
Bonds disqualified pursuant to this Section and the Trustee may conclusively rely on such
certificate.
Section 12.10. Money Held for Particular Bonds. The money held by the Trustee for the
payment of the interest, principal due on any date with respect to particular Bonds shall, on and
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after such date and pending such payment, be set aside on its books and held in trust by it
without liability for interest thereon for the Owners of the Bonds entitled thereto, subject,
however, to the provisions of Section 11.04.
Section 12.11. Funds and Accounts. Any fund 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 shall at all
times be maintained in accordance with customary standards of the industry, to the extent
practicable, and with due regard for the protection of the security of the Bonds and the rights of
every holder thereof.
Section 12.12. 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 Indenture.
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, and words of the masculine gender
shall mean and include words of the feminine and neuter genders.
Section 12.13. 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 the
principal of or interest 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 of
the City Council, officer, agent or employee from the performance of any official duty provided
by law or by this Indenture.
Section 12.14. 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 City and the Trustee shall
preserve undestroyed, shall together constitute but one and the same instrument.
Section 12.15. Governing Law. This Indenture shall be construed in accordance with and
governed by the Constitution and laws of the State. If this Indenture shall be the subject of
litigation, venue shall reside in the federal or state courts of California.
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IN WITNESS WHEREOF, the CITY OF TUSTIN has caused this Indenture to be signed
in its name by the Director of Finance & Administrative Services of the City and attested by the
City Clerk, and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., in token of its
acceptance of the trust created hereunder, has caused this Indenture to be signed in its
corporate name by one of its authorized officers, all as of the day and year first above written.
Attest:
Erica N. Rabe
City Clerk
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CITY OF TUSTIN
By
Jeffrey C. Parker
City Manager
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By
Name
Title
EXHIBIT A
FORM OF BOND
United States of America
State of California
Orange County
CITY OF TUSTIN
2016 Water Refunding Revenue Bond
INTEREST RATE MATURITY DATE DATED DATE CUSIP
% I April 1, October 4, 2016
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
DOLLARS
The CITY OF TUSTIN, a municipal corporation and general law city duly organized and
existing under the laws of the State of California (the "City"), for value received, hereby
promises to pay to the Registered Owner named above or registered assigns (the "Owner"), on
the Maturity Date stated above, the Principal Amount stated above in lawful money of the
United States of America, and to pay interest thereon in like lawful money from the April 1 or
October 1 (each an "Interest Payment Date") next preceding the date of authentication hereof,
unless said date of authentication is an Interest Payment Date, in which event such interest is
payable from such date of authentication, and unless said date of authentication is prior to
March 15, 2017, in which event such interest is payable from the Dated Date stated 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 date to which interest has previously been paid or
made available for payment on this Bond in full at the Interest Rate per annum stated above,
payable semiannually on each Interest Payment Date, commencing April 1, 2017. The principal
amount of this Bond is payable at the principal corporate trust office of The Bank of New York
Mellon Trust Company, N.A., as trustee (the "Trustee"), in Los Angeles, California, or at such
office as the Trustee may designate, upon presentation and surrender of this Bond to the
Trustee. Payment of the interest on this Bond will be made to the person whose name appears
on the bond registration books of the Trustee as the Owner thereof as of the fifteenth day of the
month immediately preceding an Interest Payment Date whether or not said day is a business
day (the "Record Date"), such interest to be paid by check mailed on the Interest Payment Date
to the Owner or, at the option of any Owner of at least $1,000,000 aggregate principal amount of
Bonds and upon written notice received by the Trustee prior to the Record Date, by wire
transfer, at the Owner's address as it appears on such bond registration books or to such
account as shall have been identified by the Owner in the notice requesting payment by wire
transfer.
Capitalized terms used herein and not otherwise defined are used with the meanings
ascribed to them in the Indenture of Trust (the "Indenture"), dated as of October 1, 2016, by and
between the City and the Trustee.
Exhibit A
Page 1
This Bond is one of a series of Bonds of various maturities designated as "City of Tustin
(Orange County, California) 2016 Water Refunding Revenue Bonds" (the "Bonds"), issued
pursuant to the provisions of Article 10 of Chapter 3 of Part 1 of Division 2 of Title 5
(commencing with section 53570) of the California Government Code (the "Refunding Bond
Law") in the aggregate principal amount of $ all of like tenor (except for such
variations, if any, as may be required to designate varying numbers, maturities or interest
rates), issued under and pursuant to the Indenture and approved by the City by Resolution No.
adopted by the City Council of the City on August 16, 2016. A copy of the Indenture is
on file at the office of the Trustee, and reference to the Indenture and any and all supplements
thereto and modifications and amendments thereof and to the Refunding Bond Law is made for
a description of the terms on which the Bonds are issued, the provisions with regard to the
nature and extent of the net revenues (the "Net Revenues") of the City's municipal Water
enterprise (the "Enterprise"), as more particularly described in the Indenture, and the rights of
the Owners of the Bonds. All the terms of the Indenture and the Refunding Bond Law are
hereby incorporated herein and constitute a contract between the City and the Owners from
time to time of this Bond, and to all the provisions thereof the Owner of this Bond, by his
acceptance hereof, consents and agrees. Each taker and subsequent Owner hereof shall have
recourse to all of the provisions of the Refunding Bond Law and the Indenture and shall be
bound by all of the terms and conditions thereof.
The Bonds are issued to provide for the refunding of certain outstanding obligations of
the City. The Bonds are special obligations of the City and are payable, as to interest thereon
and principal thereof, from the Net Revenues. All of the Bonds are equally secured by a pledge
of, and charge and lien upon, that portion of the Net Revenues necessary to pay the principal of
and interest on the Bonds in any Fiscal Year, and the Net Revenues constitute a trust fund for
the security and payment of the principal of and interest on all of the Bonds. Additional
obligations of the City payable from the Net Revenues may be issued but only on a subordinate
basis to the Bonds.
The principal of and interest on the Bonds are payable solely from the Net Revenues,
and the City is not obligated to pay the Bonds except from the Net Revenues. The general fund
of the City is not liable, and the full faith and credit or taxing power of the City is not pledged,
for the payment of the principal of and interest on the Bonds. The Bonds are not secured by a
legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the
City or any of its income or receipts, except the Net Revenues.
The City covenants that, so long as any of the Bonds are outstanding, it will fix,
prescribe and collect charges so as to yield Net Revenues at least equal to the amounts thereof
prescribed by the Indenture and sufficient to pay the principal of and interest on the Bonds in
accordance with the provisions of the Indenture.
The Bonds maturing on or after April 1, . are subject to redemption prior to their
respective maturity dates, at the option of the City, as a whole or in part on any date or in part,
in such order of maturity as shall be selected by the City (or in inverse order of maturity if the
City shall fail to select a particular order) and by lot within a maturity, on or after April 1,
from any source of available funds, at a redemption price equal to the principal amount of the
Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without
premium.
The 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 each April 1 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
Exhibit A
Page 2
all of the Term Bonds have been redeemed pursuant to subsection (a) above, 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 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 City with the
Trustee.
Sinking Account
Redemption Date
(April 1)
Waturity
Principal Amount
to be Redeemed
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, as provided in the Indenture, only upon the books of the City
kept for that purpose at the office of the Trustee, by the Owner hereof in person, or by his
attorney duly authorized in writing, upon the surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the registered Owner or his
attorney duly authorized in writing, and thereupon a new Bond or Bonds, without coupons,
and in the same aggregate principal amount and of the same maturity, shall be issued to the
transferee in exchange herefor, as provided in the Indenture, and upon the payment of charges,
if any, including, after the first exchange, the cost of preparing new Bonds therein prescribed.
The rights and obligations of the City and of 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. No such modification or amendment shall permit a change in the maturity of the
principal of any outstanding Bond or of any installment of interest thereon or a reduction in the
principal amount or in the rate of interest thereon without the consent of the Owner of such
Bond, or shall reduce the percentages or otherwise affect the classes of Bonds, the consent of the
Owners of which is required to effect any such modification or amendment, all as more fully set
forth in the Indenture.
It is hereby certified that all of the conditions, things 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 time, form and manner as required by law and
that the amount of this Bond, together with all other indebtedness of the City, does not exceed
any limit prescribed by the Constitution or laws of the State of California, and is not in excess of
the amount of Bonds permitted to be issued under the Indenture.
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
Exhibit A
Page 3
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
IN WITNESS WHEREOF, the City of Tustin has caused this Bond to be executed in its
name and on its behalf with the manual or facsimile signature of its City Manager and the
manual or facsimile signature of its City Clerk all as of the Dated Date stated above.
Attest:
CITY OF TUSTIN
By
City Clerk
City Manager
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within -mentioned Indenture, which has been
authenticated and registered on
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By
Authorized Officer
Exhibit A
Page 4
ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
whose address and social security or other tax identifying number is
the within -mentioned Bond and hereby irrevocably constitute(s) and appoint(s)
attorney, to transfer the same on the Bond registration books of the Trustee with full power of
substitution in the premises.
Dated:
Signature Guaranteed:
Notice: Signature guarantee shall be made by a
guarantor institution participating in the Securities
Transfer Agents Medallion Program or in such other
guarantee program acceptable to the Trustee.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of the
within Bond in every particular without alteration or
enlargement or any change whatsoever.
Exhibit A
Page 5