HomeMy WebLinkAbout06 TAXABLE WATER REFUNDING REVENUE BONDS SERIES 2020AGENDA REPORT
Agenda Item 6
Reviewed.-
City
eviewed:City Manager
MEETING DATE: FEBRUARY 4, 2020
TO: MATTHEW S. WEST, CITY MANAGER
FROM: JOHN A. BUCHANAN, FINANCE DIRECTOR
SUBJECT: A RESOLUTION AUTHORIZING THE ISSUANCE OF CITY OF TUSTIN
(ORANGE COUNTY, CALIFORNIA) TAXABLE WATER REFUNDING
REVENUE BONDS, SERIES 2020, 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
SUMMARY:
Approval by the City of Tustin ("City") is requested to authorize the issuance of City of
Tustin Taxable Water Refunding Revenue Bonds, Series 2020 (the "2020 Bonds") to
refinance the 2013 Water Revenue Bonds (the "2013 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 20-07 ENTITLED:
RESOLUTION AUTHORIZING THE ISSUANCE OF CITY OF TUSTIN (ORANGE
COUNTY, CALIFORNIA) TAXABLE WATER REFUNDING REVENUE BONDS,
SERIES 2020, 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
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 2013 Bonds on a taxable basis
Taxable Water Refunding Revenue Bonds, Series 2020
Page 2
will reduce annual debt service payments by $91,000 per year, totaling approximately
$1.36 million in net present value savings over the remaining term of the Bonds.
CORRELATION TO THE STRATEGIC PLAN:
The adoption of new water rates implements strategy number five (5) of Goal C: Financial
Strength.
BACKGROUND:
The City, working with its Municipal Advisor, Fieldman, Rolapp & Associates, has
determined that, due to prevailing financial market conditions, it is in the best interests of
the City at this time to refund the 2013 Bonds. The $14.05 million 2013 Bonds were
issued to fund the Water System Improvements Projects. The 2013 Bonds mature in
2043.
ANALYSIS:
The 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. The resolution contains parameters that limit the Underwriter's Discount with
respect to the Bonds to not more than 0.6% of the par amount of the Bonds and that the
Bonds provide net present value savings to the City of at least 5% as compared to the
debt service on the 2013 Bonds. The financing documents will be finalized when the
exact terms of the Bonds are determined at the time the Bonds are sold, anticipated to
occur around February 12th with an anticipated bond closing of February 27th. The forms
of the documents to be approved are:
• Indenture of Trust — The Indenture is a contract between the City and The Bank
of New York Mellon Trust Company, acting as Trustee. The Indenture specifies
the dated date, maturity date or dates, interest rate or rates, interest payment
dates, denominations, forms, registration privileges, manner of execution, place or
places of payment, terms of redemption and other terms of the Bonds.
• Escrow Agreement — The Escrow Agreement is a document between the City
and The Bank of New York Mellon Trust Company, acting as Escrow Agent
specifying the terms and conditions to provide for the payment and redemption
of the outstanding 2013 Bonds.
• Bond Purchase Agreement — The Bond Purchase Agreement is a contract
between the City and Stifel, Nicolaus & Company, as underwriter (the
"Underwriter"), whereby the City agrees to sell the Bonds to the Underwriter and
the Underwriter agrees to buy the Bonds from the City for resale to the public.
Taxable Water Refunding Revenue Bonds, Series 2020
Page 3
• Preliminary Official Statement — The Preliminary Official Statement is the
offering statement used by the Underwriter to inform the marketplace of the terms
of the Bonds and contains all relevant information for the investor to decide
whether to purchase the Bonds.
• Continuing Disclosure Certificate - Contained in the Preliminary Official
Statement is the form of the Continuing Disclosure Certificate, which requires the
City to submit annual continuing disclosure reports and notice of certain listed
events to the marketplace as long as the Bonds are outstanding. Applied Best
Practices, as dissemination agent, assists the City with this responsibility.
Pursuant to the requirements of Section 5852.1 of the California Government Code
("Code"), set forth below are good faith estimates provided by the Municipal Advisor,
based on market conditions as of January 9, 2020. The following estimates and the
final costs .will depend on market conditions and can be expected to vary from the
estimated amounts set forth below.
• The true interest cost of the Bonds is estimated at 3.36% calculated as provided
in Section 5852.1(a)(1)(A) of the Code.
• The finance charge of the Bonds, including all fees and charges paid to third
parties, including underwriter's discount, is estimated at $276,225.
• Proceeds of the Bonds received by the Authority for the sale of the Bonds, less the
finance charge, is equal to $14,954,699.
• The total payment amount calculated as provided in Section 5852.1(a)(1)(D) of the
Code is estimated at $22,778,152.
Refunding Process and Next Steps:
It is anticipated that the refunding will take approximately three months to complete. The
key milestones to complete the refunding are identified below:
• City Council approved the initiation of proceedings to refund outstanding 2013
Bonds and approved the engagement of professionals (November 19, 2019)
• Secured underlying credit rating from Standard & Poor's (January _, 2020)
• City Council Approval of the Preliminary Official Statement and remaining
financing documents and legal documents (Tonight's Action)
• Negotiated sale of Refunding Bonds (February 12, 2020)
• Bond Closing (February 27, 2020)
• Prior Bonds Called (April 2022)
The City Council resolution being presented for approval authorizes the issuance of the
2020 Bonds to refinance the 2013 Water Revenue Bonds (the "2013 Bonds") to take
advantage of lower interest rates to reduce the annual debt service payments.
Taxable Water Refunding Revenue Bonds, Series 2020
Page 4
J n A. Buchanan
anc Director
Attachments
1. Resolution No. 20-07
2. Indenture of Trust
3. Escrow Agreement
4. Bond Purchase Agreement
5. Preliminary Official Statement
6. Continuing Disclosure Certificate
CITY OF TUSTIN
RESOLUTION NO. 20-07
RESOLUTION AUTHORIZING THE ISSUANCE OF CITY OF TUSTIN (ORANGE
COUNTY, CALIFORNIA) TAXABLE WATER REFUNDING REVENUE BONDS, SERIES
2020, 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 $14,045,000 Tustin Public Financing Authority 2013 Water Revenue Bonds, of which
$13,810,000 remains outstanding (the "2013 Bonds"), pursuant to an indenture of trust, dated as
of October 1, 2013, 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 2013 Bonds is paid from revenues comprised of payments
(the "2013 Installment Payments") made by the City under an installment sale agreement, dated
as October 1, 2013, 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 2013 Installment Payments and
refunding of the 2013 Bonds;
WHEREAS, to that end, the City has determined to issue its City of Tustin (Orange
County, California) Taxable Water Refunding Revenue Bonds, Series 2020 (the "2020 Bonds"),
pursuant to an indenture of trust (the "Indenture"), by and between the City and the Trustee;
WHEREAS, the 2020 Bonds will be secured by a pledge of the net revenues generated by
the Enterprise on a parity with its debt service obligations with respect to the outstanding Tustin
Public Financing Authority (Orange County, California) 2012 Refunding Water Revenue Bonds
and the outstanding City of Tustin (Orange County, California) 2016 Water Refunding Revenue
Bonds;
WHEREAS, the firm of Stifel Nicolaus & Company, Incorporated (the "Underwriter") has
proposed to purchase and underwrite the 2020 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 2020 Bonds, the payment and prepayment of the 2013
Installment Payments and the refunding of the 2013 Bonds.
SECTION 2. Issuance of the 2020 Bonds; Approval of Indenture.
(a) The Council hereby authorizes the issuance of the 2020 Bonds.
(b) The 2020 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 2020 Bonds. The Council hereby approves the sale of the 2020 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
2
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 2020 Bonds,
as compared to the debt service with respect to the 2013 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 2020 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 2020 Bonds
shall be not more than 0.6% 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
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
2020 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 2020 Bonds, true and correct in all
material respects and that the Final Official Statement did not, on the date of sale of the 2020
Bonds, and does not, as of the date of delivery of the 2020 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 2020 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
3
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 2020 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.
************
This resolution is hereby approved and adopted at a regular meeting of the City Council
of the City of Tustin held on February 4, 2020, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST
Erica N. Yasuda, City Clerk
Dr. Allan Bernstein, Mayor
4
Quint&Thimmig LLP 11/21/19
12/17/19
01/01/20
INDENTURE OF TRUST
by and between the
CITY OF TUSTIN
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
Dated as of February 1, 2020
Relating to the
City of Tustin
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
20015.09
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS;RULES OF CONSTRUCTION;EQUAL SECURITY
Section 1.01.Definitions 3
ARTICLE II
THE BONDS
Section 2.01.Authorization of Bonds 12
Section 2.02.Terms of Bonds 12
Section 2.03.Form of Bonds 13
Section 2.04.Execution of Bonds 13
Section 2.05.Transfer of Bonds 13
Section 2.06.Exchange of Bonds 14
Section 2.07.Temporary Bonds 14
Section 2.08.Bond Registration Books 14
Section 2.09.Bonds Mutilated,Lost,Destroyed or Stolen 14
Section 2.10.Book-Entry System 15
ARTICLE III
ISSUE OF BONDS;APPLICATION OF PROCEEDS;COSTS OF ISSUANCE FUND
Section 3.01.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
Section 3.04.Validity of Bonds 17
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01.No Redemption 19
Section 4.02.Selection of Bonds for Redemption 19
Section 4.03.Notice of Redemption 19
Section 4.04.Partial Redemption of Bonds 20
Section 4.05.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 24
ARTICLE VI
COVENANTS OF THE CITY
Section 6.01.Punctual Payment 25
Section 6.02.Extension of Payment of Bonds 25
Section 6.03.Discharge of Claims 25
Section 6.04.Operation of Enterprise in Efficient and Economical Manner 25
Section 6.05.Against Encumbrance 25
-i-
Section 6.06.Records and Accounts 26
Section 6.07.Rates and Charges 26
Section 6.08.Limitations on Future Obligations Secured by Net Revenues 27
Section 6.09.Further Assurances 28
Section 6.10.Waiver of Laws 28
Section 6.11.Continuing Disclosure 29
ARTICLE VII
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
Section 7.04.Casualty Insurance 30
Section 7.05.Insurance Net Proceeds;Form of Policies 31
Section 7.06.Eminent Domain 31
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 8.01.Events of Default 32
Section 8.02.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
Section 8.09.Remedies Not Exclusive 35
Section 8.10.No Waiver of Default 35
ARTICLE IX
THE TRUSTEE
Section 9.01.Appointment of Trustee;Duties,Immunities and Liabilities of Trustee 36
Section 9.02.Merger or Consolidation 37
Section 9.03.Liability of Trustee 37
Section 9.04.Right of Trustee to Rely on Documents 39
Section 9.05.Preservation and Inspection of Documents 40
Section 9.06.Compensation of Trustee 40
Section 9.07.Indemnification 40
ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section 10.01.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
-ii-
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
Section 12.04.Waiver of Notice 45
Section 12.05.Destruction of Bonds 45
Section 12.06. Severability of Invalid Provisions 45
Section 12.07.Notices 45
Section 12.08.Evidence of Rights of Bondowners 46
Section 12.09.Disqualified Bonds 46
Section 12.10.Money Held for Particular Bonds 47
Section 12.11.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
Section 12.15. Governing Law 47
EXHIBIT A—FORM OF BOND
-iii-
INDENTURE OF TRUST
This INDENTURE OF TRUST, is dated as of February 1, 2020 (the "Indenture"), 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 $14,045,000 Tustin Public Financing Authority 2013 Water Revenue Bonds, of which
$13,810,000 remains outstanding (the "2013 Bonds"), pursuant to an indenture of trust, dated as
of October 1, 2013, 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 2013 Bonds is paid from revenues comprised of
payments (the "2013 Installment Payments") made by the City under an installment sale
agreement, dated as October 1, 2013,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 2013 Installment Payments and
refunding of the 2013 Bonds;
WHEREAS, to that end, the City has determined to issue its $ City of
Tustin (Orange County, California) Taxable Water Refunding Revenue Bonds, Series 2020 (the
"Bonds"), pursuant to this Indenture;
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:
-2-
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
Bonds and 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 Bonds and 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 Taxable Water Refunding Revenue Bonds, Series 2020, 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, 2020.
"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.
-3-
"Closing Date" means February 27, 2020, 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.
"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.
"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 2013 Installment
Payments and the 2013 Bonds.
"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.
-4-
"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 June 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.
"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;
-5-
(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 water 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 October 1,
2020, 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.
"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.
-6-
"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 2016
Bonds 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
3. Federal Financing Bank
4. Federal Housing Administration Debentures (FHA)
-7-
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 and retains a fee for services provided
to the fund, (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 pursuant to this Indenture may at times duplicate those provided to such funds by
the Trustee or an affiliate of the Trustee.
-8-
(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, 2021, 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.
-9-
"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 Bonds 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 400 South Hope Street,
Suite 500, Los Angeles, CA 90071, or at such other or additional offices as may be specified in
writing to 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.
"2013 Bonds" means the Tustin Public Financing Authority 2013 Water Revenue Bonds,
of which$13,810,000 remains outstanding as of the Closing Date.
"2012 Bonds" means the Tustin Public Financing Authority 2012 Water Refunding
Revenue Bonds.
"2012 Installment Sale Agreement" means the Installment Sale Agreement, dated as of
April 1, 2012,by and between the Authority and the City, securing the 2012 Bonds.
"2016 Bonds" means the City of Tustin (Orange County, California) 2016 Water Revenue
Refunding Bonds.
"Water Fund" means the City's existing water enterprise fund, established and held by
the City with respect to the Enterprise.
Section 1.02. Rules of Construction. All references in this Indenture to "Articles,"
"Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of
this Indenture; and the words "herein," "hereof," "hereunder," and other words of similar
import refer to this Indenture as a whole and not to any particular Article, Section or
subdivision hereof.
Section 1.03. Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof, this Indenture shall be deemed to be and shall constitute a contract between the
City and the Owners from time to time of the Bonds; and the covenants and agreements herein
set forth to be performed on behalf of the City shall be for the equal and proportionate benefit,
security and protection of all Owners of the Bonds without preference, priority or distinction as
-10-
to security or otherwise of any of the Bonds over any of the others by reason of the number or
date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause
whatsoever, except as expressly provided therein or herein.
-11-
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds. At any time after the adoption, execution and
delivery of this Indenture, the City may execute and the Trustee, upon Request of the City, shall
authenticate and deliver Bonds in the aggregate principal amount of dollars
($ ).
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
April 1 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 September 15, 2020, in which event it shall
bear interest from its date of delivery; provided, however, that if, as of the date of authentication
of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest
-12-
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 IV, or any Bonds during
the period established by the Trustee for the selection of Bonds for redemption.
Prior to any transfer of the Bonds outside the book-entry system (including, but not
limited to, the initial transfer outside the book-entry system) the transferor shall provide or
cause to be provided to the Trustee all information necessary to allow the Trustee to comply
with any applicable tax reporting obligations, including without limitation any cost basis
reporting obligations under section 6045 of the Internal Revenue Code of 1986, as amended. The
-13-
Trustee shall conclusively rely on the information provided to it and shall have no
responsibility to verify or ensure the accuracy of such information.
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.
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
-14-
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:
(i) to any successor of The Depository Trust Company or its nominee, or of any
substitute depository designated pursuant to paragraph (ii) of this subsection (a)
("substitute depository"); provided that any successor of The Depository Trust
Company or substitute depository shall be qualified under any applicable laws to
provide the service proposed to be provided by it;
(ii) to any substitute depository designated in a written request of the City, upon
(i) the resignation of The Depository Trust Company or its successor (or any substitute
depository or its successor) from its functions as depository or (ii) 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 any such substitute depository shall be
qualified under any applicable laws to provide the services proposed to be provided by
it;or
(iii)to any person as provided below, upon(A)the resignation of The Depository
Trust Company or its successor (or any substitute depository or its successor) from its
functions as depository or (B) a determination by the 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.
-15-
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'):
(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.
•
-16-
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 $ , 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 Fund 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
-17-
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
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.
-18-
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Redemption.
(a) 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 Principal Amount
(April 1) to be Redeemed
tMaturity
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 forty-
five (45) 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
-19-
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.
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
-20-
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.
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.
-21-
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
-22-
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.
(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.
-23-
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,
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, such amount shall be held in cash,
uninvested. 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.
-24-
ARTICLE VI
COVENANTS OF THE CITY
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
-25-
Bonds shall not be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon,
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 Gross
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
-26-
are sufficient to yield Net Revenues which are at least equal to one hundred twenty percent
(120%)of the total Annual Debt Service 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.
-27-
(iii) The instrument providing for the issuance of such Parity Obligations shall
provide that:
(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.
-28-
Section 6.11. 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.
-29-
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.
-30-
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.
-31-
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
-32-
principal of and installments of interest on the Bonds payment of which is overdue, with
interest on such overdue principal at the rate borne by the respective Bonds, 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
-33-
interest over any other installment of interest, or of any Bond over any other Bond,
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
-34-
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.
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.
-35-
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 a thirty day prior
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
-36-
Trustee, the City shall execute and deliver any and all instruments as may be reasonably
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
-37-
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.
(d) The Trustee shall be under no obligation to exercise any of the rights or powers
vested in 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: 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
-38-
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 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.
(p) The Trustee shall not be responsible for or accountable to anyone for the subsequent
use or application of any moneys which shall be released or withdrawn in accordance with the
provisions hereof.
The Trustee may conclusively rely upon the City's written instructions as to both the
suitability and legality of the directed investments and such written direction shall be deemed
to be a certification that such directed investments constitute Permitted Investments.
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
-39-
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
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.
-40-
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 or
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; and
(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.
-41-
(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.
In executing, or accepting the additional trusts created by, any Supplemental Indenture
permitted by this Article or the modification thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and shall be fully protected in relying upon, an opinion of
counsel stating that the execution of such supplemental indenture is authorized or permitted by
this Indenture and complies with the terms hereof.
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.
-42-
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 non-callable
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
-43-
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.
-44-
ARTICLE XII
MISCELLANEOUS
Section 12.01. Liability of City Limited to Net Revenues. Notwithstanding anything
contained in this Indenture or in the Bonds, the City shall not be required to advance any
moneys derived from any source other than the Net Revenues and other assets pledged under
this Indenture for any of the purposes mentioned in this Indenture, whether for the payment of
the principal 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,
in this 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
-45-
Tustin,CA 92780
Attention: City Manager
. Phone: (714)573-3000
Fax: (714)838-1602
If to the Trustee: The Bank of New York Mellon Trust Company,N.A.
400 South Hope Street,Suite 500
Los Angeles,CA 90071
Attention:Corporate Trust Department
Phone: (213)630-6260
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.
-46-
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
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.
-47-
IN WITNESS WHEREOF, the CITY OF TUSTIN has caused this Indenture to be signed
in its name by the City Manager 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.
CITY OF TUSTIN
By
Matthew S. West
City Manager
Attest:
Erica N. Yasuda
City Clerk
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By
Authorized Officer
-48-
EXHIBIT A
FORM OF BOND
United States of America
State of California
Orange County
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bond, Series 2020
INTEREST RATE MATURITY DATE DATED DATE CUSIP
% April 1, February 27, 2020
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
September 15, 2020, 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 October 1, 2020. 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 February 1, 2020, 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) Taxable Water Refunding Revenue Bonds, Series 2020" (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 February 4, 2020. 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 on a parity with the Bonds may be
issued, subject to the satisfaction of certain conditions precedent set forth in the Indenture.
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
Exhibit A
Page 2
price equal to the principal amount thereof to be redeemed (without premium), together with
interest accrued thereon to the date fixed for redemption; provided, however, that if some but not
all of the Term Bonds have been optionally redeemed as described 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 Principal Amount
(April 1) to be Redeemed
tMaturity
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
Exhibit A
Page 3
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co.,has an interest herein.
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.
CITY OF TUSTIN
By
City Manager
Attest:
City Clerk
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 Note: The signature(s) on this Assignment must
guarantor institution participating in the Securities correspond with the name(s)as written on the face of the
Transfer Agents Medallion Program or in such other within Bond in every particular without alteration or
guarantee program acceptable to the Trustee. enlargement or any change whatsoever.
•
Exhibit A
Page 5
Quint&Thimmig LLP 11/21/19
12/17/19
01/01/20
ESCROW AGREEMENT
by and between the
CITY OF TUSTIN
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Bank
Dated February 27, 2020
Relating to
Tustin Public Financing Authority
2013 Water Revenue Bonds
20015.09
ESCROW AGREEMENT
This ESCROW AGREEMENT is dated February 27, 2020, 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 2013 Water Revenue Bonds, in the original
principal amount of $14,045,000, of which $13,810,000 is currently outstanding (the "2013
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 "2013 Project");
WHEREAS, the 2013 Bonds were issued pursuant to the terms of an indenture of trust,
dated as of October 1, 2013 (the "2013 Indenture"), by and between the Authority and The Bank
of New York Mellon Trust Company, N.A., as trustee(the "2013 Trustee");
WHEREAS, in order to provide for the repayment of the 2013 Bonds, the Authority sold
the 2013 Project to the City pursuant to an installment sale agreement, dated as of October 1,
2013 (the "2013 Installment Sale Agreement"), under which the City agreed to make installment
payments to the Authority (the "2013 Installment Payments") from in sufficient amounts in
each year to pay the full amount of principal of and interest on the 2013 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 2013 Installment Payments and, as a result thereof, to provide for
the payment of the principal of and interest on the 2013 Bonds to and including April 1, 2022,
and for the redemption of all outstanding 2013 Bonds on April 1, 2022, 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) Taxable Water Refunding Revenue
Bonds, Series 2020 (the "2020 Bonds"), pursuant to an indenture of trust, dated as of February 1,
2020 (the "2020 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
defeasing the City's obligation under the 2013 Installment Sale Agreement, providing for the
payment and prepayment of the 2013 Installment Payments in accordance with the instructions
provided by this Escrow Agreement and of applying said 2013 Installment Payments to the
defeasance, payment and redemption of the 2013 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 2013 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 payment and prepayment of
the 2013 Installment Payments, the payment of the principal of, interest on and redemption
price of the 2013 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 2013 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 and prepayment of the 2013 Installment Payments, the payment of the principal of
and interest on the 2013 Bonds to and including April 1, 2022, and to redeem the outstanding
2013 Bonds on April 1, 2022 (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 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 2020 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) $374,160.00 from amounts on deposit with the Trustee received from the City to
pay the scheduled debt service payment on the 2013 Bonds; and
(ii) $ from the proceeds of sale of the 2020 Bonds.
(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 Causey Demgen&Moore, P.C., as
contained in its opinion and accompanying schedules (the "Report") dated February 27, 2020,
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 and prepayment of the 2013 Installment Payments, the payment of the
principal of and interest on the 2013 Bonds to and including April 1, 2022, and to redeem the
outstanding 2013 Bonds on the Redemption Date at the Redemption Price.
-2-
(d) The Escrow Bank shall not be liable or responsible for any loss resulting from its full
compliance with the provisions of this Escrow Agreement.
(e) Any money left on deposit in the Escrow Fund after payment in full of the 2013
Bonds, and the payment of all amounts due to the Escrow Bank hereunder, shall be applied to
the payment of debt service on the 2020 Bonds.
(f) If at any time the Escrow Bank shall receive actual knowledge that the moneys and
the Escrowed Federal Securities in the Escrow Fund will not be sufficient to make any payment
required by Section 4 hereof, the Escrow Bank shall notify the City of such fact and the City
shall immediately cure such deficiency. The Escrow Bank shall have no liability or
responsibility for such insufficiency.
(g) If the Escrow Bank learns that the Department of the Treasury or the Bureau of
Public Debt 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 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 and prepayment of the 2013 Installment
Payments, the payment of the principal of and interest on the 2013 Bonds to and including April
1, 2022, and to redeem the outstanding 2013 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 2013 Trustee, is hereby requested, and the Escrow
Bank, in such capacity, hereby agrees to give notice of the defeasance of the 2013 Bonds to the
owners of the 2013 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 2013 Trustee, is hereby requested, and the Escrow
Bank, in such capacity, hereby agrees to give notice, of the redemption of the 2013 Bonds on
April 1, 2022, in accordance with the applicable provisions of the 2013 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 2013 Installment Payments and the 2013 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
-3-
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 2013 Bonds, and (b) if the City directs such investment or
reinvestment to be made in SLGS, 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 Defeasance Obligations. The City may, at any
time, direct the Escrow Bank in writing to substitute Defeasance Obligations for any or all of the
Escrowed Defeasance Obligations then deposited in the Escrow Fund, or to withdraw and
transfer to the City any portion of the Defeasance Obligations 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 Defeasance Obligations then to be so
deposited in the Escrow Fund together with interest to be derived therefrom, or in the case of
withdrawal, the Defeasance Obligations 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 2013 Bonds. In the event that, following any such substitution of Defeasance
Obligations pursuant to this Section 5, there is an amount of moneys or Defeasance Obligations
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 2013 Funds. On the date of deposit of amounts in the Escrow
Fund pursuant to Section 4, the Escrow Bank, as 2013 Trustee, is hereby directed to withdraw
all amounts on deposit in the 2013 Reserve Fund ($1,764,754.14) and transfer such sum into the
Escrow Fund.
Any amounts remaining in any fund or account created with respect to the 2013 Bonds,
including interest earnings received by the 2013 Trustee, shall, after payment of all fees and
expenses of the 2013 Trustee, be paid to the Trustee and shall be applied to the payment of debt
service on the 2020 Bonds.
Section 8. Application of Certain Terms of 2013 Indenture. All of the terms of the 2013
Indenture relating to the making of payments of principal and interest with respect to the 2013
Bonds are incorporated in this Escrow Agreement as if set forth in full herein. The provisions of
the 2013 Indenture relating to the limitations from liability and protections afforded the 2013
Trustee and the resignation and removal of the 2013 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.
-4-
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 or willful misconduct, 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 prior 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
-5-
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 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
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 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 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 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.
-6-
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 2013 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 2013 Bonds or the 2020 Bonds, and that such amendment will not
cause interest on the 2013 Bonds or the 2020 Bonds to become subject to federal income taxation.
In connection with any contemplated amendment or revocation of this Escrow Agreement, 2013
written notice thereof and draft copies of the applicable legal documents shall be provided by
the City to each rating agency then rating the 2013 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 2013 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 2013 Trustee in accordance
with the provisions of the 2013 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 2013 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
-7-
any company to which the Escrow Bank may sell or transfer all or substantially all of its
corporate trust business, provided such company shall be eligible to act as trustee under the
2013 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.
[The remainder of this page is intentionally left blank]
-8-
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.
CITY OF TUSTIN
By
Matthew S. West
City Manager
Attest:
Erica N. Yasuda
City Clerk
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Escrow Bank
By
Name
Title
-9-
EXHIBIT A
SCHEDULE OF ESCROW SECURITIES
Type Maturity Coupon Par Price Cost Accrued Total
Exhibit A
EXHIBIT B
REDEMPTION SCHEDULE
Interest
Payment Maturing Called Redemption Total
Date Principal Principal Interest Premium Payment
4/1/20 $50,000 — $324,160.00 — $ 374,160.00
10/1/20 — — 323,160.00 — 323,160.00
4/1/21 55,000 — 323,160.00 — 378,160.00
10/1/21 — — 321,785.00 — 321,785.00
4/1/22 55,000 $13,650,000 321,785.00 — 14,026,785.00
Exhibit D
EXHIBIT C
NOTICE OF DEFEASANCE
Tustin Public Financing Authority
(Orange County, California)
2013 Water Revenue Bonds
Maturity Date Amount Defeased Interest Rate CUSIP No.
4/1/20 $ 50,000 4.000% 90105T BD2
4/1/21 55,000 5.000 90105T BE0
4/1/22 55,000 5.000 90105T BF7
4/1/23 55,000 5.000 90105T BG5
4/1/24 320,000 3.800 90105T BH3
4/1/25 335,000 4.000 90105T BJ9
4/1/26 345,000 4.300 90105T BK6
4/1/27 360,000 4.500 90105T BL4
4/1/28 380,000 4.000 90105T BM2
4/1/29 400,000 4.000 90105T BNO
4/1/30 415,000 4.000 90105T BP5
4/1/31 425,000 4.125 901051 BQ3
4/1/32 445,000 4.125 90105T BR1
4/1/33 465,000 4.250 90105T BS9
4/1/38 2,000,000 5.000 90105T BT7
4/1/38 665,000 4.500 90105T BV2
4/1/43 6,000,000 5.000 90105T BU4
4/1/43 1,040,000 4.625 90105T BWO
NOTICE IS HEREBY GIVEN to the owners of the outstanding Tustin Public Financing Authority
2013 Water Revenue Bonds, 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 February 27, 2020, by and between the City of Tustin (the "City") and The
Bank of New York Mellon Trust Company,N.A.,as escrow bank(the"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, 2022, and to redeem the outstanding Bonds in full
on April 1, 2022 (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: ,2020 THE BANK OF NEW YORK
MELLON TRUST COMPANY,
N.A.,as Escrow Bank
Exhibit C
EXHIBIT D
•
NOTICE OF FULL AND FINAL REDEMPTION
Tustin Public Financing Authority
(Orange County,California)
2013 Water Revenue Bonds
Issue Maturity Principal Redemption Redemption
Date Date Amount Premium Price Interest Rate CUSIP No.
10/22/13 4/1/23 $ 55,000 — $ 55,000 5.000% 90105T BG5
10/22/13 4/1/24 320,000 — 320,000 3.800 90105T BH3
10/22/13 4/1/25 335,000 — 335,000 4.000 90105T BJ9
10/22/13 4/1/26 345,000 — 345,000 4.300 90105T BK6
10/22/13 4/1/27 360,000 — 360,000 4.500 90105T BL4
10/22/13 4/1/28 380,000 — 380,000 4.000 90105T BM2
10/22/13 4/1/29 400,000 — 400,000 4.000 90105T BNO
10/22/13 4/1/30 415,000 — 415,000 4.000 90105T BP5
10/22/13 4/1/31 425,000 — 425,000 4.125 90105T BQ3
10/22/13 4/1/32 445,000 — 445,000 4.125 90105T BR1
10/22/13 4/1/33 465,000 — 465,000 4.250 90105T BS9
10/22/13 4/1/38 2,000,000 — 2,000,000 5.000 90105T BT7
10/22/13 4/1/38 665,000 — 665,000 4.500 90105T BV2
10/22/13 4/1/43 6,000,000 — 6,000,000 5.000 90105T BU4
10/22/13 4/1/43 1,040,000 — 1,040,000 4.625 90105T BWO
NOTICE is hereby given that the City of Tustin(the "City")has called for redemption on April 1,
2022 (the "Redemption Date"), the outstanding Tustin Public Financing Authority 2013 Water Revenue
Bonds, described above(the"Bonds"),in the aggregate principal amount of$13,650,000 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:
First Class/Registered/Certified Express Delivery Only By Hand Only
The Bank of New York Mellon The Bank of New York Mellon The Bank of New York Mellon
Global Corporate Trust Global Corporate Trust Global Corporate Trust
P.O.Box 396 111 Sanders Creek Parkway Corporate Trust Window
East Syracuse,NY 13057 East Syracuse,NY 13057 101 Barclay Street 1St Floor East
New York,NY 10286
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 Tax Cuts and Jobs Act of 2017 (the "Act") 24% 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.
Exhibit D
Page
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: ,2022 THE BANK OF NEW YORK
MELLON TRUST COMPANY,
N.A.,as Trustee
Exhibit D
Jones Hall Draft 1-2-20
$
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
BOND PURCHASE AGREEMENT
February_, 2020
City of Tustin
300 Centennial Way
Tustin, California 93654
Ladies and Gentlemen:
Stifel, Nicolaus&Company, Incorporated (the"Underwriter")offers to enter into this Bond
Purchase Agreement (this "Purchase Agreement") with the City of Tustin (the "City") for the
purchase by the Underwriter of the City's Taxable Water Refunding Revenue Bonds, Series 2020
(the "Bonds"). This offer is made subject to the City's acceptance by execution of this Purchase
Agreement and delivery of the same to the Underwriter on or before 11:59 p.m. Pacific Standard
Time on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter
upon notice delivered to the City at any time prior to such acceptance. Upon the City's acceptance
hereof, the Purchase Agreement will be binding upon the City and the Underwriter.
The City acknowledges and agrees that: (i) the purchase and sale of the Bonds (as
hereinafter defined) pursuant to this Purchase Agreement is an arm's-length commercial
transaction between the City and the Underwriter; (ii) in connection therewith and with the
discussions, undertakings and procedures leading up to the consummation of such transaction,
the Underwriter is and has been acting solely as principal and is not acting as agent or Municipal
Advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), and has not assumed any advisory or fiduciary responsibility in favor of the
City with respect to the offering of the Bonds or the process leading thereto (whether or not the
Underwriter has advised or is currently advising the City on other matters); (iii)the only obligations
the Underwriter has to the City with respect to the transaction contemplated hereby expressly are
set forth in this Purchase Agreement; (iv) the City has consulted its own legal, financial,
accounting, tax and other advisors to the extent it has deemed appropriate; (v) the Underwriter
has financial interests that differ from and may be adverse to those of the City; and (vi) the
Underwriter has provided the City with certain disclosures required under the rules of the
Municipal Securities Rulemaking Board (the "MSRB"). The City acknowledges and represents
that it has engaged Fieldman Rolapp & Associates, Inc. as its Municipal Advisor and will rely on
the financial advice of Fieldman Rolapp & Associates, Inc. with respect to the Bonds.
Capitalized terms used in this Purchase Agreement and not otherwise defined herein will
have the respective meanings set forth for such terms in the Indenture (as hereinafter defined).
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations set forth in this Purchase Agreement, the Underwriter agrees to purchase from
the City, and the City agrees to sell and deliver to the Underwriter, all (but not less than all) of the
Bonds at a purchase price of $ (being an amount equal to the principal amount of the
Bonds ($ ), [plus original issue premium of $ ,] and less an underwriter's
discount of $ ). The obligation of the Underwriter to purchase, accept delivery of and
pay for the Bonds will be conditioned on the sale and delivery of all of the Bonds by the City to
the Underwriter at Closing (hereinafter defined).
Section 2. Bond Terms; Purpose; Security.
(a) Bond Terms and Authorization. The Bonds will be dated their date of delivery and
will mature and bear interest as shown on Exhibit A. The Bonds will be as described in, and will
be issued and secured under, an Indenture of Trust, dated as of February 1, 2020 (the
"Indenture"), by and between the City and The Bank of New York Mellon Trust Company, N.A.,
as trustee (the "Trustee"). The Bonds are payable and subject to redemption as shown in Exhibit
A.
The Bonds will be issued pursuant to Article 10 of Chapter 3 of Part 1 of Division 2 of Title
5 (commencing with section 53570) of the California Government Code, and the City Resolution
(as hereinafter defined).
(b) Purpose. The City is issuing the Bonds to provide funds to: (i) prepay in full the
City's outstanding installment payment obligations (the "2013 Installment Payments") under an
Installment Sale Agreement, dated as of October 1, 2013 (the "2013 Installment Sale
Agreement"), by and between the City and the Tustin Public Financing Authority (the
"Authority"), and to redeem all of the outstanding Tustin Public Financing Authority 2013 Water
Revenue Bonds (the "2013 Bonds") in accordance with the Escrow Agreement (as defined
below), and (ii) pay costs incurred in connection with the issuance of the Bonds.
The 2013 Bonds were issued pursuant to an indenture of trust, dated as of October 1,
2013 (the "2013 Indenture"), by and between the Authority and The Bank of New York Mellon
Trust Company, N.A., as trustee. The 2013 Bonds are payable from the 2013 Installment
Payments.
In connection with the payment and prepayment of the 2013 Installment Payments and
the payment and redemption of the 2013 Bonds, the City will cause a portion of the proceeds of
the Bonds to be deposited into an escrow fund held by The Bank of New York Mellon Trust
Company, N.A., as escrow agent(the"Escrow Agent"), pursuant to an Escrow Agreement, dated
February [27], 2020 (the "Escrow Agreement"), by and between the City and the Escrow Agent.
(c) Security. Under the Indenture, the Bonds will be secured by a pledge of "Net
Revenues" (as defined therein)which generally consists of gross revenues of the City's municipal
water system (the "Enterprise") less maintenance and operation costs of the Enterprise, as more
particularly described in the Indenture.
Section 3. Public Offering. The Underwriter agrees to make an initial bona fide public
offering of all of the Bonds, at not in excess of the initial public offering yields or prices set forth
on Exhibit A. Following the initial public offering of the Bonds, the offering prices may be changed
from time to time by the Underwriter, provided that the Underwriter shall not change any of the
principal amounts or the interest rates set forth on Exhibit A. The Bonds may be offered and sold
to certain dealers at prices lower than such initial public offering prices. The Bonds are subject to
redemption as set forth in Exhibit A.
2
Section 4. Official Statement; Continuing Disclosure. (a)The City has delivered to the
Underwriter the Preliminary Official Statement dated [February 6], 2020 (the"Preliminary Official
Statement") and will deliver to the Underwriter a final official statement dated the date of this
Purchase Agreement (as amended and supplemented from time to time pursuant to Section 5(i)
of this Purchase Agreement, the "Official Statement"). Subsequent to its receipt of the City's
15c2-12 Certificate, in substantially the form attached hereto as Exhibit B, deeming the
Preliminary Official Statement final for purposes of Rule 15c2-12 of the Securities and Exchange
Commission, as amended ("Rule 15c2-12"), the Underwriter has distributed copies of the
Preliminary Official Statement. The City hereby ratifies the use by the Underwriter of the
Preliminary Official Statement and authorizes the Underwriter to use and distribute in printed
and/or electronic format the Official Statement (including all information previously permitted to
have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have
been approved by the City as evidenced by the execution and delivery of such document by an
officer of the City), the Indenture, the Escrow Agreement, this Purchase Agreement, the
Continuing Disclosure Certificate (hereinafter defined), and all information contained therein, and
all other documents, certificates and written statements furnished by the City to the Underwriter
in connection with the transactions contemplated by this Purchase Agreement, in connection with
the offer and sale of the Bonds by the Underwriter.
The Underwriter hereby agrees to deliver a copy of the Official Statement to the MSRB
through the Electronic Municipal Marketplace Access website of the MSRB on or before the date
of the Closing and otherwise to comply with all applicable statutes and regulations in connection
with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule
15c2-12. The City agrees to deliver to the Underwriter as many copies of the Official Statement
as the Underwriter will reasonably request as necessary to comply with paragraph (b)(4) of Rule
15c2-12. The City agrees to deliver the final Official Statement within seven business days after
the execution hereof, or such earlier date identified by the Underwriter to be necessary to allow
the Underwriter to meet its obligations under Rule 15c2-12 and Rule G-32 of the MSRB.
(b) The Underwriter agrees to: (1) provide the City with final pricing information on the
Bonds on a timely basis prior to the Closing; and (2) take any and all other actions necessary to
comply with applicable Securities and Exchange Commission rules and MSRB rules governing
the offering, sale and delivery of the Bonds to ultimate purchasers.
(c) In connection with issuance of the Bonds, and in order to assist the Underwriter
with complying with the provisions of Rule 15c2-12, the City will execute a Continuing Disclosure
Certificate (the "Continuing Disclosure Certificate"), under which the City will undertake to
provide certain financial and operating data as required by Rule 15c2-12. The form of the
Continuing Disclosure Certificate is attached as an appendix to the Preliminary Official Statement
and will be attached as an appendix to the final Official Statement.
Section 5. Representations, Warranties and Covenants of the City. The City hereby
represents, warrants and agrees with the Underwriter that:
(a) The City is a municipal corporation that is duly organized and existing under and
by virtue of the general laws of the State of California (the "State") and has all necessary power
and authority to adopt its resolution adopted on [February 4, 2020] (the "City Resolution"), to
enter into and perform its duties under the Indenture, the Continuing Disclosure Certificate, the
Escrow Agreement, and this Purchase Agreement (the "City Agreements") and, when executed
and delivered by the respective parties thereto, the City Agreements will constitute legal, valid
and binding obligations of the City enforceable in accordance with their respective terms.
3
(b) The city council (the"City Council")of the City has taken official action by adopting
the City Resolution by a majority of the members of the City Council at a meeting duly called,
noticed and conducted, at which a quorum was present and acting throughout, authorizing the
execution, delivery and due performance of the City Agreements and the Official Statement and
the taking of any and all such action as may be required on the part of the City to carry out, give
effect to and consummate the transactions contemplated hereby.
(c) By all necessary official action, the City has duly adopted the City Resolution, has
duly authorized the preparation and delivery of the Preliminary Official Statement and the
preparation, execution and delivery of the Official Statement, has duly authorized and approved
the execution and delivery of, and the performance of its obligations under, the City Agreements,
and the consummation by it of all other transactions contemplated by the City Resolution, the City
Agreements, the Preliminary Official Statement and the Official Statement. When executed and
delivered by the respective parties thereto, the City Agreements (assuming due authorization,
execution and delivery by and enforceability against the other parties thereto) will be in full force
and effect and each will constitute legal, valid and binding agreements or obligations of the City,
enforceable in accordance with their respective terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors rights generally, the application of equitable principles,
the exercise of judicial discretion and the limitations on legal remedies against public entities in
the State.
(d) At the time of the City's acceptance hereof and at all times subsequent thereto up
to and including the time of the Closing, the information and statements in the Official Statement
(other than any information concerning The Depository Trust Company and the book-entry system
for the Bonds or provided by the Underwriter) do not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.
(e) As of the date hereof, there is no action, suit, proceeding or investigation before or
by any court, public board or body pending against the City or, to the best knowledge of the City,
threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation,
organization, existence or powers of the City, or the titles of its members or officers; (ii) in any
way question or affect the validity or enforceability of City Agreements or the Bonds, or(iii) in any
way question or affect the Purchase Agreement or the transactions contemplated by the Purchase
Agreement, the Official Statement, or any other agreement or instrument to which the City is a
party relating to the Bonds.
(f) There is no consent, approval, authorization or other order of, or filing or
registration with, or certification by, any regulatory authority having jurisdiction over the City
required for the execution and delivery of this Purchase Agreement or the consummation by the
City of the other transactions contemplated by the Official Statement or the City Agreements.
(g) Any certificate signed by any official of the City authorized to do so will be deemed
a representation and warranty by the City to the Underwriter as to the statements made therein.
(h) Except as previously disclosed to the Underwriter, the City is not in default, and at
no time has the City defaulted in any material respect, on any bond, note or other obligation for
borrowed money or any agreement under which any such obligation is or was outstanding.
4
(i)
(1) Except as disclosed in the Official Statement or otherwise disclosed in writing
to the Underwriter, there has not been any materially adverse change in the financial
condition of the City since June 30, 2019, and there has been no occurrence or
circumstance or combination thereof that is reasonably expected to result in any such
materially adverse change.
(2) If between the date of this Purchase Agreement and the date which is 25 days
following the End of the Underwriting Period, any event will occur which might or would
cause the Official Statement, as then supplemented or amended, to contain any untrue
statement of a material fact or to omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading, the City will immediately notify the Underwriter, and if, in
the opinion of the Underwriter, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the City will at its expense
supplement or amend the Official Statement in a form and in a manner approved by the
Underwriter.
(3)After the Closing, the City will not participate in the issuance of any amendment
of or supplement to the Official Statement to which, after being furnished with a copy, the
Underwriter reasonably objects in writing or which is disapproved by Underwriter's
Counsel. If any event relating to or affecting the City occurs as a result of which it is
necessary, in the opinion of the Underwriter, to amend or supplement the Official
Statement in order to make the Official Statement not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the City will use its best
efforts to assist the Underwriter in preparing (at the expense of the City for 90 days after
the date of the Closing, and thereafter at the expense of the Underwriter) a reasonable
number of copies of an amendment of or supplement to the Official Statement (in form
and substance satisfactory to the Underwriter)which will amend or supplement the Official
Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Official Statement is delivered to a purchaser, not
misleading. For the purposes of this subsection, the City will furnish such information with
respect to itself as the Underwriter may from time to time reasonably request.
0) Except as disclosed in the Official Statement or otherwise disclosed in writing to
the Underwriter, the City has not previously failed to comply in all material respects with any
undertakings under Rule 15c2-12 in the past five years. The report of Lumesis, Inc. dated as of
, 2020 (the "Continuing Disclosure Due Diligence Report") identifies all of the issues
for which the City was obligated to provide continuing disclosure under Rule 15c2-12 during the
past five years and all of the material event filings that were required with respect to such issues
during the five-year period.
(k) The City does not need the consent of its auditor to include its comprehensive
annual financial report for the fiscal year ended June 30, 2019 as an appendix to the Official
Statement.
(I) The City will comply with the security provisions of the 2013 Installment Sale
Agreement and the redemption provisions of the 2013 Bonds in connection with the payment and
5
prepayment of all of the outstanding 2013 Installment Payments and the payment and redemption
of the 2013 Bonds.
(m) The City covenants with the Underwriter that the City will cooperate with the
Underwriter(at the cost and written directions of the Underwriter), in qualifying the Bonds for offer
and sale under the securities or Blue Sky laws of such jurisdiction of the United States as the
Underwriter may reasonably request; provided, however, that the City shall not be required to
consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The City
consents to the use by the Underwriter of the City Agreements, the Preliminary Official Statement
and the Official Statement in the course of its compliance with the securities or Blue Sky laws of
the various jurisdictions related to the offering and sale of the Bonds.
Section 6. The Closing. (a) At 8:30 A.M., Pacific Standard Time, on [February 27],
2020, or on such earlier or later time or date as may be agreed upon by the Underwriter and the
City (the "Closing"), the City will deliver the Bonds to the Underwriter, through the book-entry
system of The Depository Trust Company ("DTC"). Prior to the Closing, the City will deliver, at
the offices of Quint&Thimmig LLP ("Bond Counsel"), in Larkspur, California, or such other place
as is mutually agreed upon by the Underwriter and the City, the other documents described in
this Purchase Agreement. On the date of the Closing, the Underwriter will pay the purchase price
of the Bonds as set forth in Section 1 of this Purchase Agreement in immediately available funds
to the order of the Trustee.
(b) The Bonds will be issued in fully registered form and will be prepared and delivered
as one Bond for each maturity registered in the name of a nominee of DTC. It is anticipated that
CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such
numbers nor any error with respect thereto will constitute a cause for failure or refusal by the
Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase
Agreement.
Section 7. Conditions to Underwriter's Obligations. The Underwriter has entered into
this Purchase Agreement in reliance upon the representations and warranties of the City
contained herein and to be contained in the documents and instruments to be delivered on the
date of the Closing, and upon the performance by the City of its obligations to be performed
hereunder and under such documents and instruments to be delivered at or prior to the date of
the Closing. The Underwriter's obligations under this Purchase Agreement are and will also be
subject to the sale, issuance and delivery of the Bonds as well as the following conditions:
(a) The representations and warranties of the City contained in this Purchase
Agreement will be true and correct in all material respects on the date of this Purchase Agreement
and on and as of the date of the Closing as if made on the date of the Closing;
(b) As of the date of the Closing, the Official Statement may not have been amended,
modified or supplemented, except in any case as may have been agreed to by the Underwriter;
(c) (i) As of the date of the Closing, the City Resolution and the City Agreements will
be in full force and effect, and will not have been amended, modified or supplemented, except as
may have been agreed to by the Underwriter; and (iii) the City will perform or have performed all
of its obligations required under or specified in the City Resolution, the City Agreements and this
Purchase Agreement to be performed at or prior to the date of the Closing;
6
(d) As of the date of the Closing, all necessary official action of the City relating to the
City Agreements, the City Resolution, and the Official Statement, will have been taken and will be
in full force and effect and will not have been amended, modified or supplemented in any material
respect, except as may have been agreed to by the City and Underwriter; and
(e) As of or prior to the date of the Closing, the Underwriter will have received each of
the following documents:
(1) A certified copy of the City Resolution.
(2) Duly executed copies of the City Agreements.
(3) The Preliminary Official Statement and the Official Statement, with the
Official Statement duly executed on behalf of the City.
(4) An approving opinion of Bond Counsel, dated as of the Closing, as to the
validity of the Bonds, the exclusion of interest on the Bonds from State income taxation
addressed to the City substantially in the form attached as an appendix to the Official
Statement, and a reliance letter with respect thereto addressed to the Underwriter and the
Trustee.
(5) A supplemental opinion of Bond Counsel, addressed to the Underwriter, to
the effect that:
(i) The Escrow Agreement, the Continuing Disclosure Certificate, and
this Purchase Agreement have been duly executed and delivered by City and are
each valid and binding upon the City, subject to laws relating to bankruptcy,
insolvency, reorganization or creditors' rights generally and to the application of
equitable principles;
(ii) The Bonds are exempt from registration pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), and the Indenture is exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended; and
(iii) The statements contained in the Official Statement on the cover and
under the headings "INTRODUCTION," "THE REFUNDING PLAN," "THE
BONDS," "SECURITY FOR THE BONDS," "TAX MATTERS," in "APPENDIX A —
SUMMARY OF THE INDENTURE" and "APPENDIX F— FORM OF OPINION OF
BOND COUNSEL," insofar as such statements purport to describe certain
provisions of the Bonds, the Indenture, and the Escrow Agreement, or to state
legal conclusions and the opinion of Bond Counsel regarding the tax-exempt
nature of the Bonds from State income taxation, present a fair and accurate
summary of the provisions thereof.
(6) An opinion of Quint & Thimmig LLP, as disclosure counsel to the City,
addressed to the Underwriter, to the effect that: We are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Official Statement or the Official Statement and make no
representation that we have independently verified the accuracy,completeness or fairness
of any such statements. However, in our capacity as disclosure counsel to the City, we
have reviewed certain documents as described above and have participated in
7
conferences during which the contents of the Preliminary Official Statement and the
Official Statement and related matters were discussed. Based on our review of documents
and our participation in the above-mentioned conferences, and with the assumptions
described in the second preceding paragraph, we advise you that, during the course of
our assistance in the preparation of the Preliminary Official Statement and the Official
Statement, no facts have come to the attention of the attorneys in our firm rendering legal
services in connection with such representation that caused us to believe that the
Preliminary Official Statement and the Official Statement, as of their date and as of the
date of this letter contained or contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading (except that
we express no opinion or belief with respect to: (i) the expressions of opinion, the
assumptions, the projections, the financial statements or other financial, numerical,
economic, demographic or statistical data contained in the Preliminary Official Statement
and the Official Statement, (ii) any CUSIP numbers or information relating thereto
contained in the Preliminary Official Statement and the Official Statement, (iii) any
information contained in the appendices to the Preliminary Official Statement and the
Official Statement, (iv) any information with respect to the Depository Trust Company and
its book entry system for the Bonds contained or incorporated in the Preliminary Official
Statement and the Official Statement, (v) any information incorporated by reference into
the Preliminary Official Statement and the Official Statement, (vi) information with respect
to the rating on the Bonds and the rating agency referenced in the Preliminary Official
Statement and the Official Statement, and (vii) compliance by the City with its obligations
to provide notices of the events described in Part (b)(5)(i)(C)of Rule 15c2-12 of the United
States Securities and Exchange Commission, as amended (the "Rule") or to file annual
reports described in Part (b)(5)(i)(A) of the Rule, which compliance we have not reviewed
pursuant to your direction).
(7) An opinion or opinions of Woodruff, Spradlin & Smart, P.C., Costa Mesa, California, as
City Attorney, dated as of the Closing addressed to the City, the Trustee and the
Underwriter, in form and substance acceptable to the Underwriter, to the effect that:
(i) The City is a municipal corporation duly organized and existing
under and by virtue of the general laws of the State. The City Council is the
governing body of the City.
(ii) The City has all necessary power and authority to adopt the City
Resolution, to enter into and perform its duties under the City Agreements, and,
when executed and delivered by the respective parties thereto, the City
Agreements will each constitute a legal, valid and binding obligation of the City
enforceable in accordance with its respective terms, except as such enforcement
may be limited by bankruptcy, moratorium and the exercise of equitable principles
where equitable remedies are sought.
(iii) The City Resolution was duly adopted at a meeting of the City
Council, which was 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
City Resolution is in full force and effect and has not been modified, amended or
rescinded since the date of its adoption.
8
(iv) The execution and delivery by the City of the City Agreements, the
Official Statement and the other instruments contemplated by any of such
documents to which the City is a party, and compliance with the provisions of each
thereof, will not conflict with or constitute a breach of or default under any
applicable law or administrative rule or regulation of the State, the United States
or any department, division, agency or instrumentality of either thereof, or any
applicable court or administrative decree or order or any loan agreement, note,
resolution, indenture, contract, agreement or other instrument to which the City is
a party or is otherwise subject or bound in a manner which could materially
adversely affect the City's performance under the City Agreements.
(v) All approvals, consents, authorizations, elections and orders of or
filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to, or
the absence of which could materially adversely affect, the performance by the
City of its obligations under the City Agreements have been obtained and are in
full force and effect.
(vi) To the best of the City Attorney's knowledge, after due inquiry, no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by
any court, public board or body, is pending or threatened in any way against the
City (A) affecting the existence of the City or the titles of its City Council members
or its officers to their respective offices, (B) seeking to restrain or to enjoin the
issuance or sale of the Bonds, (C) in any way contesting or affecting the validity or
enforceability of the City Resolution or the City Agreements, (D) in any way
contesting the powers of the City to issue or sell the Bonds or its authority with
respect to the City Resolution or the City Agreements, (E) in any way contesting
or affecting any of the rights, powers, duties or obligations of the City with respect
to the money or property pledged or to be pledged under the Indenture or (F) in
any way questioning the accuracy of the statements in the Preliminary Official
Statement or the Official Statement.
(8) A letter of Jones Hall, A Professional Law Corporation ("Underwriter's
Counsel"), addressed to the Underwriter, in form and substance acceptable to the
Underwriter.
(9) An executed certificate of the City, dated as of the date of the Preliminary
Official Statement, in the form attached as Exhibit B.
(10) An executed closing certificate of the City, dated as of the Closing, in the
form attached as Exhibit C.
(11) The opinion of counsel to The Bank of New York Mellon Trust Company,
N.A. ("BNY"), as Trustee and Escrow Agent, dated as of the Closing, addressed to the
City and the Underwriter to the effect that:
(i) BNY is a national banking association duly organized and validly
existing under the laws of the jurisdiction of its organization, and has the corporate
power to execute and deliver, and to perform its obligations under, the Indenture
and the Escrow Agreement;
9
(ii) The Indenture and the Escrow Agreement have been duly
authorized, executed and delivered by BNY, and, assuming due authorization,
execution and delivery by the other parties thereto, the Indenture and the Escrow
Agreement constitute the valid and legally binding agreements of BNY enforceable
in accordance with their terms, subject to laws relating in bankruptcy, insolvency
or other laws affecting the enforcement of creditors' rights generally and the
application of equitable principles if equitable remedies are sought; and
(iii) The Trustee has duly authenticated the Bonds
(12) A certificate of BNY, as Trustee and Escrow Agent, dated as of the Closing,
in the form attached as Exhibit D.
(13) Evidence of required filings with the California Debt and Investment
Advisory Commission.
(14) A copy of the executed Blanket Issuer Letter of Representations by and
between the City and DTC relating to the book-entry system.
(15) Evidence that the Bonds have received the ratings described in the Official
Statement.
(16) A defeasance opinion of Bond Counsel, in form and substance acceptable
to the Underwriter, relating to the 2013 Installment Sale Agreement and the 2013 Bonds.
(17) A copy of the Continuing Disclosure Due Diligence Report.
(18) A certificate of Fieldman Rolapp & Associates, Inc., the City's municipal
advisor, in substantially the form attached hereto as Exhibit E.
(19) A letter addressed to the City, the Underwriter, and Bond Counsel, dated
the date of the Closing, from Causey Demgen & Moore P.C. (the "Verification Agent"),
verifying the accuracy of the mathematical computations concerning the adequacy of the
moneys to be deposited with the Escrow Agent to provide for the payment and prepayment
of the 2013 Installment Payments and the payment and redemption of the 2013 Bonds.
(20) Such additional legal opinions, certificates, proceedings, instruments and
other documents as the Underwriter or Bond Counsel may reasonably request to evidence
compliance by the City with legal requirements, the truth and accuracy, as of the date of
the Closing, of the representations of the City herein contained and of the Official
Statement and the due performance or satisfaction by the City at or prior to such time of
all agreements then to be performed and all conditions then to be satisfied by the City.
All of the opinions, letters, certificates, instruments and other documents mentioned in this
Purchase Agreement will be deemed to be in compliance with the provisions of this Purchase
Agreement if, but only if, they are in form and substance satisfactory to the Underwriter. If the
City is unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept
delivery of and to pay for the Bonds contained in this Purchase Agreement or if the obligations of
the Underwriter to purchase, to accept delivery of and to pay for the Bonds will be terminated for
any reason permitted by this Purchase Agreement, this Purchase Agreement will terminate and
neither the Underwriter nor the City will be under further obligations hereunder, except that the
10
respective obligations of the City and the Underwriter set forth in Section 11 of this Purchase
Agreement will continue in full force and effect.
Section 8. Conditions to City's Obligations. The performance by the City of its
respective obligations under this Purchase Agreement are conditioned upon: (i)the performance
by the Underwriter of its obligations hereunder and (ii) receipt by the City of opinions addressed
to the City, and receipt by the Underwriter of opinions addressed to the Underwriter, and the
delivery of certificates being delivered on the date of the Closing by persons and entities other
than the City.
Section 9. [Reserved].
Section 10. Termination Events. The Underwriter will have the right to terminate the
Underwriter's obligations under this Purchase Agreement to purchase, to accept delivery of and
to pay for the Bonds by notifying the City of its election to do so if, after the execution hereof and
prior to the Closing, any of the following events occurs:
(a) the marketability of the Bonds or the market price thereof, in the opinion of
the Underwriter, has been materially and adversely affected by any decision issued by a
court of the United States (including the United States Tax Court) or of the State, by any
ruling or regulation (final, temporary or proposed)issued by or on behalf of the Department
of the Treasury of the United States, the Internal Revenue Service, or other governmental
agency of the United States, or any governmental agency of the State, or by a tentative
decision or announcement by any member of the House Ways and Means Committee,
the Senate Finance Committee, or the Conference Committee with respect to
contemplated legislation or by legislation enacted by, pending in, or favorably reported to
either the House of Representatives or either House of the Legislature of the State, or
formally proposed to the Congress of the United States by the President of the United
States or to the Legislature of the State by the Governor of the State in an executive
communication, affecting the tax status of the City, its property or income, its bonds
(including the Bonds) or the interest thereon or any tax exemption granted or authorized
by the Internal Revenue Code of 1986, as amended;
(b) the United States becomes engaged in hostilities that result in a declaration of
war or a national emergency, or any other outbreak of hostilities occurs, or a local, national
or international calamity or crisis occurs,financial or otherwise,the effect of such outbreak,
calamity or crisis being such as, in the reasonable opinion of the Underwriter, would affect
materially and adversely the ability of the Underwriter to market the Bonds;
(c)there occurs a general suspension of trading on the New York Stock Exchange
or the declaration of a general banking moratorium by the United States, New York State
or State authorities;
(d) a stop order, ruling, regulation or official statement by, or on behalf of, the
Securities and Exchange Commission is issued or made to the effect that the issuance,
offering or sale of the Bonds is or would be in violation of any provision of the Securities
Act of 1933, as then in effect, or of the Securities Exchange Act of 1934, as then in effect,
or of the Trust Indenture Act of 1939, as then in effect;
(e) legislation is enacted by the House of Representatives or the Senate of the
Congress of the United States of America, or a decision by a court of the United States of
11
America is rendered, or a ruling or regulation by or on behalf of the Securities and
Exchange Commission or other governmental agency having jurisdiction of the subject
matter is made or proposed to the effect that the Bonds are not exempt from registration,
qualification or other similar requirements of the Securities Act of 1933, as then in effect,
or of the Trust Indenture Act of 1939, as then in effect;
(f) in the reasonable judgment of the Underwriter, the market price of the Bonds,
or the market price generally of obligations of the general character of the Bonds, might
be materially and adversely affected because additional material restrictions not in force
as of the date hereof is imposed upon trading in securities generally by any governmental
authority or by any national securities exchange;
(g) the Comptroller of the Currency, The New York Stock Exchange, or other
national securities exchange, or any governmental authority, imposes, as to the Bonds or
obligations of the general character of the Bonds, any material restrictions not now in force,
or increase materially those now in force, with respect to the extension of credit by, or the
charge to the net capital requirements of, or financial responsibility requirements of the
Underwriter;
(h) a general banking moratorium is established by federal, New York or State
authorities;
(i) any legislation, ordinance, rule or regulation is introduced in or be enacted by
any governmental body, department or agency in the State or a decision of a court of
competent jurisdiction within the State is rendered, which, in the opinion of the
Underwriter, after consultation with the City, materially adversely affects the market price
of the Bonds;
(j) any federal or State court, authority or regulatory body takes action materially
and adversely affecting the payment or receipt of the principal and interest on the Bonds;
(k) any withdrawal, downgrading or placement on credit watch negative of any
underlying rating of any securities of the City by a national municipal bond rating agency
that, in the opinion of the Underwriter, adversely affects the market price of the Bonds; or
(I) an event occurs which in the reasonable opinion of the Underwriter makes
untrue or misleading in any material respect any statement or information contained in the
Official Statement (other than any information relating to the Underwriter).
Section 11. Payment of Expenses. (a) The Underwriter will be under no obligation to
pay, and the City will pay the following expenses incident to the performance of the City's
obligations hereunder:
(i)the fees and disbursements of the City's municipal advisor and of Bond Counsel
and Disclosure Counsel;
(ii)the cost of printing and delivering the Bonds, the Preliminary Official Statement
and the Official Statement (and any amendment or supplement prepared pursuant to
Sections 5(i) of this Purchase Agreement);
12
(iii) the fees and disbursements of accountants, advisers and of any other experts
or consultants retained by the City; and
(iv) any other expenses and costs of the City incident to the performance of its
obligations in connection with the authorization, issuance and sale of the Bonds, including
out-of-pocket expenses and regulatory expenses, and any other expenses agreed to by
the parties.
(b) The City will be under no obligation to pay, and the Underwriter will pay, any fees
of the California Debt and Investment Advisory Commission, the cost of obtaining CUSIP
numbers, the cost of preparation of any "blue sky" or legal investment memoranda and this
Purchase Agreement; and all other expenses incurred by the Underwriter in connection with its
public offering and distribution of the Bonds (except those specifically enumerated in paragraph
(a) of this section), including the fees and disbursements of Underwriter's Counsel, meals,
transportation and lodging (but not entertainment expenses), and any advertising expenses in
connection with the public offering of the Bonds.
Section 12. Notices. Any notice or other communication to be given to the City under
this Purchase Agreement may be given by delivering the same in writing to the City, to the
attention of the Finance Director or City Manager, at the address set forth on the first page of this
Purchase Agreement, and any notice or other communication to be given to the Underwriter under
this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus &
Company, Incorporated, One Montgomery Street, 35th Floor, San Francisco, California 94104,
Attention: Sara Brown.
Section 13. Survival of Representations, Warranties, Agreements. All of the City's
representations, warranties and agreements contained in this Purchase Agreement will remain
operative and in full force and effect regardless of: (a) any investigations made by or on behalf of
the Underwriter; or (b) delivery of and payment for the Bonds pursuant to this Purchase
Agreement. The agreements contained in this Section and in Section 11 will survive any
termination of this Purchase Agreement.
Section 14. Benefit; No Assignment. This Purchase Agreement is made solely for the
benefit of the City and the Underwriter(including its successors and assigns), and no other person
will acquire or have any right hereunder or by virtue hereof. The rights and obligations created
by this Purchase Agreement are not subject to assignment by the Underwriter or the City without
the prior written consent of the other parties hereto.
Section 15. Severability. In the event that any provision of this Purchase Agreement is
held invalid or unenforceable by any court of competent jurisdiction, such holding will not
invalidate or render unenforceable any other provision of this Purchase Agreement.
Section 16. Counterparts. This Purchase Agreement may be executed in any number
of counterparts, all of which taken together will constitute one agreement, and any of the parties
hereto may execute the Purchase Agreement by signing any such counterpart.
Section 17. Governing Law. This Purchase Agreement will be governed by the laws of
the State.
13
Section 18. Effectiveness. This Purchase Agreement will become effective upon the
execution of the acceptance hereof by an authorized officer of the City, and will be valid and
enforceable as of the time of such acceptance.
Very truly yours,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Underwriter
By:
Authorized Officer
Accepted:
CITY OF TUSTIN
By:
Authorized Representative
Time of Execution:
S-1
EXHIBIT A
MATURITY SCHEDULE
Maturity Principal Interest
(April 1) Amount Rate Yield Price
C: Priced to optional redemption date of April 1, 20_, at par.
T: Term Bonds
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.
Mandatory 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.
Redemption Date Principal Amount
(April 1) to be Redeemed
* Maturity.
A-1
EXHIBIT B
$
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
15c2-12 CERTIFICATE
The undersigned hereby certifies and represents that he is the duly appointed City
Manager of the City of Tustin (the "City"), and as such is duly authorized to execute and deliver
this Certificate and further hereby certifies and confirms on behalf of the City as follows:
(1) This Certificate is delivered in connection with the offering and sale of the
bonds captioned above (the "Bonds"), in order to enable the underwriter of the Bonds to
comply with Securities and Exchange Commission Rule 15c2-12 under the Securities
Exchange Act of 1934, as amended (the "Rule").
(2) In connection with the offering and sale of the Bonds, there has been
prepared a Preliminary Official Statement, setting forth information concerning the Bonds
and the City (the "Preliminary Official Statement").
(3) As used herein, "Permitted Omissions" means the offering price(s), interest
rate(s), selling compensation, aggregate principal amount, principal amount per maturity,
delivery dates, ratings and other terms of the Bonds depending on such matters, all with
respect to the Bonds.
(4) The Preliminary Official Statement is, except for the Permitted Omissions,
deemed final within the meaning of Rule 15c2-12, and the information therein is accurate
and complete except for the Permitted Omissions.
Dated: , 2020
CITY OF TUSTIN
By:
Matthew S. West
City Manager
B-1
EXHIBIT C
$
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
CLOSING CERTIFICATE OF THE CITY
The undersigned hereby certifies and represents that he or she is the duly appointed and
acting representative of the City of Tustin (the"City"), and is duly authorized to execute and deliver
this Certificate and further hereby certifies and reconfirms on behalf of the City as follows:
(i)The representations, warranties and covenants of the City contained in the Bond
Purchase Agreement dated February _, 2020, between the City and Stifel, Nicolaus &
Company, Incorporated, as underwriter (the "Purchase Agreement"), are true and correct
and in all material respects on and as of the date of the Closing with the same effect as if
made on the date of the Closing.
(ii) The City Resolution is in full force and effect at the date of the Closing and has
not been amended, modified or supplemented.
(iii) The City has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied on or prior to the date of the Closing.
(iv) Subsequent to the date of the Official Statement and on or prior to the date of
such certificate, there has been no material adverse change in the condition (financial or
otherwise) of the City, whether or not arising in the ordinary course of operations, as
described in the Official Statement.
(v) The Preliminary Official Statement as of its date and the date of the Purchase
Agreement and the Official Statement as of its date and the date of the Closing (other than
any information it contains concerning The Depository Trust Company and the book-entry
system for the Bonds or provided by the Underwriter) do not contain any untrue or
misleading statement of a material fact and do not omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which they are
made, not misleading.
Capitalized terms used but not defined herein have the meanings given in the Purchase
Agreement.
Dated: [February 27, 2020]
CITY OF TUSTIN
By:
Authorized Officer
C-1
EXHIBIT D
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
CLOSING CERTIFICATE OF
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
The undersigned hereby certifies and represents that he or she is the duly appointed and
acting representative of The Bank of New York Mellon Trust Company, N.A. ("BNY"), and is duly
authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on
behalf of BNY as follows:
(i) BNY has all necessary power to enter into the following documents (collectively, the
"BNY Documents"): (A)the Indenture of Trust, dated as of February 1, 2020, by and between the
City of Tustin (the "City") and BNY, as trustee (the "Indenture") and (B) the Escrow Agreement,
dated [February 27, 2020], by and among the City and BNY, as escrow agent, relating to the 2013
Bonds;
(ii)The BNY Documents have been duly authorized, executed and delivered by BNY, and
the BNY Documents constitute the legal, valid and binding obligations of BNY enforceable in
accordance with their 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;
(iii) No consent, approval, authorization or other action by any governmental or regulatory
authority having jurisdiction over BNY that has not been obtained is or will be required for the
execution and delivery of BNY or the performance by BNY of its duties and obligations under the
BNY Documents;
(iv) The execution and delivery by BNY of the BNY Documents and compliance with the
terms thereof will not conflict in any material respect with, or result in a violation or breach of, or
constitute a default under, any material agreement or material instrument to which BNY is a party
or by which it is bound, or any law or any rule, regulation, order or decree of any court or
governmental agency or body having jurisdiction over BNY or any of its activities or properties
(except that no representation, warranty or agreement need be made by such counsel with
respect to any federal or State securities or blue sky laws or regulations); and
(v) To the knowledge of BNY, after due inquiry, there is no action, suit, proceeding or
investigation, at law or in equity, before or by any court or governmental agency, public board or
body pending, or threatened against BNY which in the reasonable judgment of BNY would affect
the existence of BNY or in any way contesting or affecting the validity or enforceability of the BNY
Documents or contesting the powers of BNY or its authority to enter into and perform its
obligations thereunder.
D-1
Capitalized terms used but not defined herein have the meanings given in the Bond
Purchase Agreement dated February_, 2020, between the City and Stifel, Nicolaus &Company,
Incorporated, as underwriter.
Dated: [February 27, 2020]
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
and Escrow Agent
By:
Authorized Officer
D-2
EXHIBIT E
$
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
CERTIFICATE OF MUNICIPAL ADVISOR
The undersigned hereby states and certifies:
(i) that the undersigned is an authorized officer of Fieldman Rolapp &
Associates, Inc. (the "Municipal Advisor"), which has acted as municipal advisor to the City of
Tustin (the "City") in connection with the issuance of the above-referenced bonds (the "Bonds"),
and as such, is familiar with the facts herein certified and is authorized and qualified to certify the
same;
(ii) that the Municipal Advisor has reviewed the Preliminary Official Statement
dated , 2020 (the "Preliminary Official Statement") and the final Official Statement
dated , 2020 (the "Official Statement") relating to the Bonds; and
(iii) that nothing has come to the attention of the Municipal Advisor which would
lead it to believe that the Preliminary Official Statement as of the date of the pricing of the Bonds
or its date or the Official Statement as of its date or the date hereof contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Dated: [February 27, 2019] FIELDMAN ROLAPP & ASSOCIATES, INC.,
as Municipal Advisor
By:
Authorized Officer
E-1
Quint & Thimmig LLP 11/21/19
12/17/19
01/01/20
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) Taxable Water Refunding
Revenue Bonds, Series 2020 (the 'Bonds"). The Bonds are being issued pursuant to an indenture
of trust, dated as of February 1, 2020 (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 above and, 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:
"Annual Report" means any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Annual Report Date" means the March 31 after the end of the City's fiscal year.
"Dissemination Agent" shall mean, initially, Applied Best Practices, LLC, or any successor
Dissemination Agent designed in writing by the City and which has been filed with the then
current Dissemination Agent a written acceptance of such designation.
"Fiscal Year" means any twelve-month period beginning on July 1 in any year and
extending to the next succeeding June 30, both dates inclusive, or any other twelve-month
period selected and designated by the City as its official fiscal year period under a Certificate of
the City filed with the Trustee.
"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 that may be designated
by the Securities and Exchagge Commission as such for purposes of the Rule in the future.
"Official Statement" means the final official statement executed by the City in connection
with the issuance of the Bonds.
"Participating Underwriter" means Stifel, Nicolaus & Company, Incorporated, the original
underwriter of the Bonds.
"Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as it may be amended from time to time.
"Significant Events" means any of the events listed in Section 5(a) of this Disclosure
Certificate.
Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the holders and beneficial owners of the
20015.09
Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2 -
12(b)(5).
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later- than the Annual
Report Date, commencing March 31, 2020, with the report for fiscal year 2018-19 provide to the
MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent
with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days
prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination
Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the
Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the
Dissemination Agent shall contact the City to determine if the City is in compliance with the
previous sentence. The Annual Report may be submitted as a single document or as separate
documents comprising a package and may include by 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
Annual Report Date, if not available by that date. If the City's fiscal year changes, it shall give
notice of such change in the same manner as for a Significant Event under Section 5(b). The City
shall provide a written certification with each Annual Report furnished to the Dissemination
Agent to the effect that such Annual Report constitutes the Annual Report required to be
furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual
Report by the Annual Report Date, the City in a timely manner shall provide (or cause the
Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the
MSRB, a notice in substantially the form attached as Exhibit A.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then—applicable rules
and electronic format prescribed by the MSRB for the filing of annual continuing
disclosure reports; and
(ii) if the Dissemination Agent is other than the City, file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The City's Annual Report shall contain or
incorporate by reference the following:
(a) The City's audited financial statements prepared in accordance with generally
accepted accounting principles as promulgated to apply to governmental entities from time to
time by the Governmental Accounting Standards Board. If the City's audited financial
statements are not available by the Annual Report Date, 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.
-2-
(b) Unless otherwise provided in the audited financial statements filed on or prior to the
annual filing deadline for Annual Reports provided for in Section 3 above, financial information
and operating data with respect to the City for preceding fiscal year, substantially similar to that
provided in the Official Statement, 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 2016 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) In addition to any of the information expressly required to be provided under this
Disclosure Certificate, the City shall provide such further material 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.
(d) 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 the MSRB's Internet web site or filed with the Securities and
Exchange Commission. The City shall clearly identify each such other document so included by
reference.
Section 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the
following Significant Events with respect to the Bonds:
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults, if material;
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers, or their failure to perform;
(vi) 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;
-3-
(vii) Modifications to rights of security holders, if material;
(viii) Bond calls, if material, and tender offers;
(ix) Defeasances;
(x) Release, substitution, or sale of property securing repayment of the securities,
if material;
(xi) Rating changes;
(xii) Bankruptcy, insolvency, receivership or similar event of the City or other
obligated person,
(xiii) The consummation of a merger, consolidation, or acquisition involving the
City or an obligated person, or the sale of all or substantially all of the assets of the City
or an 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, if material;
(xiv) Appointment of a successor or additional trustee or the change of name of a
trustee, if material;
(xv) The incurrence of a financial obligation of the City, if material, or agreement
to covenants, events of default, remedies, priority rights, or other similar terms of a
financial obligation of the City, any of which affect security holders, if material; or
(xvi) A default, event of acceleration, termination event, modification of terms, or
other similar events under the terms of a financial obligation of the City, any of which
reflect financial difficulties.
(b) Whenever the City obtains knowledge of the occurrence of a Significant Event, the
City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such
occurrence with the MSRB, 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 Significant Event.
Notwithstanding the foregoing, notice of Significant Events described in subsection (a)(viii)
above need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to holders of affected Bonds under the Indenture.
(c) The City acknowledges that the events described in subparagraphs (a)(ii), (a)(vii),
(a)(viii) (if the event is a bond call), (a)(x), (a)(xiii), (a)(xiv) and (a) (xv) of this Section 5 contain
the qualifier "if material." The City shall cause a notice to be filed as set forth in paragraph (b)
above with respect to any such event- only to the extent that the City determines the event's
occurrence is material for purposes of U.S. federal securities law. The City intends that the
words used in paragraphs (xv) and (xvi) and the definition of "financial obligation" to have the
meanings ascribed thereto in the Rule.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(xii)
above is considered to occur when any of the following occur:, the appointment of a receiver,
fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy
Code or in any other proceeding under state or federal law in which a court or governmental
has assumed jurisdiction over substantially all of the assets or business of the City, or if such
jurisdiction has been assumed by leaving the existing governing body and officials or officers in
-4-
possession but subject to the supervision and orders of a court or governmental, or the entry of
an order confirming a plan of reorganization, arrangement, or liquidation by a court or
governmental having supervision or jurisdiction over substantially all of the assets or business
of the City.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to
the MSRB 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 legal 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 Significant Event under
Section 5(b).
Section 8. 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 Dissemination Agent, with or without appointing a successor
Dissemination Agent. Any Dissemination Agent may resign by providing 30 days' written
notice to the City.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), 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 type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the
Rule at the time of the primary offering of the Bonds, after taking into account any amendments
or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in
the manner provided in the Indenture for amendments to the Indenture with the consent of
holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair
the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual
Report is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall explain,
in narrative form, the reasons for the amendment and the impact of the change in the type of
operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in
which the change is made shall present a comparison between the financial statements or
information prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles. The comparison shall include a qualitative discussion
of the differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
-5-
investors to enable them to evaluate the ability of the City to meet its obligations. To the extent
reasonably feasible, the comparison shall be quantitative.
The Dissemination Agent shall not be obligated to enter into any amendment increasing
or affecting its duties or obligations hereunder.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same
manner as for a Significant Event under Section 5(b).
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 Significant
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 Significant 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 Significant Event.
Section 11. Default. If the City fails to comply with any provision of this Disclosure
Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds 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. A default under this Disclosure Certificate shall not be deemed an Event
of Default under the Indenture, and 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. Duties, Immunities and Liabilities of Dissemination Agent.
(a) Section 9.01 of the Indenture is hereby made applicable to this Disclosure Certificate
as if this Disclosure Certificate were (solely for this purpose) contained in the Indenture. The
Dissemination Agent shall be entitled to the protections and limitations from liability afforded
to the Trustee thereunder. The Dissemination Agent shall have only such duties as are
specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the
Dissemination Agent, its officers, directors, employees and agents, harmless against any loss,
expense and liabilities which they may incur arising out of or in the exercise or performance of
its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of
defending against any claim of liability, but excluding liabilities .due to the Dissemination
Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or
obligation to review any information provided to it by the City hereunder and shall not be
deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party.
The obligations of the City under this Section shall survive resignation or removal of the
Dissemination Agent and payment of the Bonds.
(b) The Dissemination Agent shall be paid compensation by the City for its services
provided hereunder in accordance with its schedule of fees as amended from time to time, and
shall be reimbursed for all expenses, legal fees and advances made or incurred by the
Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial
owners from time to time of the Bonds and shall create no rights in any other person or entity.
M
Section 14. Counterparts. This Disclosure Certificate 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 instrument.
Date: February 27, 2020
ACKNOWLEDGED:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Authorized Officer
-7-
CITY OF TUSTIN
By
.Matthew S. West
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) Taxable Water Refunding
Revenue Bonds, Series 2020
Date of Issuance: February 27, 2020
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
February 27, 2020, furnished by the Issuer in connection with the Issue. The Issuer anticipates
that the Annual Report will be filed by
Dated:
cc: Trustee
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By _
Title
Exhibit A
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 6, 2020
NEW ISSUE—FULL BOOK -ENTRY RATING:
v S&P: « n
u u
s = (See "RATING" herein)
u 7
E Y In the opinion of Quint & Thinunig LLP, Larkspur, California, Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. Interest on the
v Bonds is includible in gross income of the owners thereof for federal income tax purposes. See "TA%MATTERS" herein.
u
O
o U $ #
v CITY OF TUSTIN
bT
a�
(Orange County, California)
p Taxable Water Refunding Revenue Bonds, Series 2020
� U
7 _ Dated: As of Date of Delivery Due: April 1, as shown below
o v The $ * City of Tustin (Orange County, California) Taxable Water Refunding Revenue Bonds, Series 2020 (the "Bonds") are being issued by the City of Tustin, California (the
c "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, New York, New York ("DTC").
W T 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,
o dated as of February 1, 2020 (the "Indenture"), by and between the City and the Trustee. Interest on the Bonds will be payable semi-annually on each April 1 and October 1, commencing on
October 1, 2020.
o .«
oo The Bonds are being issued to provide funds to (i) prepay the City's remaining installment payment obligations under an Installment Sale Agreement, dated as of October 1, 2013, between the City
o
and the Tustin Public Financing Authority, and thereafter refund the outstanding Tustin Public Financing Authority (Orange County, California) 2013 Water Revenue Bonds, the proceeds of
p ° 'y which were issued to fmance the improvement, betterment, renovation and expansion of certain facilities within the City's municipal water enterprise (the "Water System"), and (ii) pay the costs
c° of issuing the Bonds.
C
E 'o v The Bonds are payable from the net revenues (the "Net Revenues") of the Water System, derived primarily from charges and revenues received by the City from the operation of the Water
c System, less the costs of the operation and maintenance of the Water System. The Net Revenues are pledged, as a first and prior lien thereon, to pay the principal of and interest on the Bonds and
a o 3 any parity obligations issued or incurred by the City, as described herein (the "Parity Debt"). The City has covenanted to set rates and charges for the service and facilities of the Water System
N m sufficient to provide Net Revenues 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 Debt. The City's obligation to pay
y the principal of and interest on the Bonds is on a parity with its debt service obligation with respect to the City's outstanding installment payment obligations under an Installment Sale Agreement,
dated as of April 1, 20123 by and between the Authority and the City, which payments secure the outstanding Tustin Public Financing Authority (Orange County, California) 2012 Refunding
s Water Revenue Bonds and the outstanding City of Tustin (Orange County, California) 2016 Water Refunding Revenue Bonds, together with any additional Parity Debt incurred by the City in the
E" o future.
U AL
°E 2 The Bonds are subject to redemption prior to maturity as described herein. See "THE BONDS—Redemption."
� = c
E c ° 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
a o o CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE
° m FULL FAITH AND CREDIT OF THE CITY. THE BONDS ARE SECURED SOLELY BY THE PLEDGE OF NET REVENUES AND CERTAIN FUNDS HELD' UNDER THE
C U W
u E INDENTURE. THE BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY.
� m
ELn p
to
° r MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND PRICES
T, 0
R . $ Serial Bonds
VI c ti
° E o CUSIPt Prefix:
A�4
P:'r Maturity Principal Interest CUSIPt
s r w April 1 Amount Rate Yield Price Suffix
•a°, m3
°—aP
� 7
O V ?
G A �
O y 7
E�3
u
O 0 N
C O
u C p
« 1 O
° ° F $ % Term Bonds due April 1, , Price: %, to Yield %; CUSIPt
c�
u � y
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NQT A SUMMARY OF THIS ISSUE OF BONDS. INVESTORS MUST READ
c THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE
r L L PURCHASE OF THE BONDS.
� C y
.b
w
E! The Bonds are offered when, as and if issued and received by the Underwriter and subject to the approval as to their legality by Quint & Thimmig LLP, Larkspur, California, as Bond Counsel. Certain legal
C > matters will also be passed upon for the Ciy by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel, and by Woodruff, Spradlin & Smart, PC., Costa Mesa, California, City Attorn
y.
c d c Certain matters will be parsed upon for the Underwriter by Jones Hall, AProfessional Law Corporation, San Francisco, California It is anticipated that the Bonds will be delivered in definitive form through the
.o facilities ofDTC on or about February 27, 2020.
° E U
Nvb STIFEL
F cn
Dated: February _, 2020
*Preliminary, subject to change.
tCopyright 2020, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by S&P Capital IQ. This data is not
intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the City and are 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 an representation is made as to their correctness on the Bonds or as
included herein. The CUSIP number 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 refunding in whole or in part 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 of certain 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 "official statement" of the City with respect to the Bonds that has been deemed "final"
by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-12.
Use of Official 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 andForecasts. 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 Q,e`ering. 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.
TABLE OF CONTENTS
INTRODUCTION........................................................................1
General.......................................................................................1
TheCity .....................................:...............................................1
TheEnterprise...........................................................................1
Purposeof the Bonds.................................................................2
Authority for Issuance................................................................2
Pledge of Net Revenues.............................................................2
RateCovenant............................................................................2
Additional Obligations...............................................................2
Payment..................................................................................... 3
Redemption................................................................................ 3
Formof Bonds........................................................................... 3
Book -Entry System....................................................................3
Risks of Investment.................................................................... 3
Continuing Disclosure............................................................... 3
Forward -Looking Statements.....................................................4
OtherMatters............................................................................ 4
OtherInformation......................................................................5
ESTIMATED SOURCES AND USES OF FUNDS.....................5
THE REFUNDING PLAN...........................................................5
DEBT SERVICE REQUIREMENTS............................................7
THEBONDS................................................................................. 8
Authority for Issuance................................................................ 8
General Provisions..................................................................... 8
Redemption................................................................................ 9
Book -Entry Only System..........................................................10
SECURITY FOR THE BONDS..................................................11
Pledge of Net Revenues...........................................................11
No Bond Reserve Fund............................................................12
Receipt, Deposit and Application of Gross Revenues
andNet 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
THE ENTERPRISE.....................................................................17
History and Overview of the Enterprise...................................17
Management............................................................................17
Employee Relations..................................................................17
ServiceArea.............................................................................18
WaterSupply...........................................................................19
WaterUse................................................................................24
Enterprise Facilities.................................................................24
Historical and Planned Capital Improvements .........................25
WaterRates............................................................................. 26
WaterUsers............................................................................. 30
FinancialStatements............................................................... 31
Historical and Projected Operating Results and Debt
ServiceCoverage..................................................................... 34
Water Conservation and Supply Shortage
ContingencyMeasures............................................................ 36
EmployeePension Plans.......................................................... 37
Other Post -Employment Benefits ............................................ 40
INVESTMENT OF CITY FUNDS ............................................ 41
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS
ANDFEES.................................................................................. 42
Article XIIIA............................................................................ 42
Article XIIIB............................................................................ 42
Proposition218........................................................................ 43
Effect of Proposition 218 on the City; Possible
Limitations on Enforcement Remedies ................................... 45
Proposition26......................................................................... 45
Future Initiatives...................................................................... 46
RISK FACTORS RELATING TO THE BONDS ...................... 46
General.................................................................................... 46
Limited Obligations................................................................. 47
Seismic Considerations........................................................... 47
Environmental Regulation....................................................... 47
Maintenance and Operation Costs .......................................... 47
Demand and Usage; Drought .................................................. 48
Limited Recourse on Default ................................................... 48
Limitations on Remedies......................................................... 48
Initiatives................................................................................. 48
Bankruptcy.............................................................................. 48
RateProcess............................................................................ 49
Insurance................................................................................. 49
ParityObligations.................................................................... 49
Public Safety Power Shutoffs ................................................... 49
Risks Related to Cyber Security ............................................... 49
SecondaryMarket................................................................... 50
TAXMATTERS......................................................................... 50
CERTAIN LEGAL MATTERS .................................................. 50
LITIGATION.......................................................................I...... 5o
RATING............................................ ............... I.......................... 51
MUNICIPAL ADVISOR............................................................. 51
CONTINUING DISCLOSURE .................................................. 51
AUDITED FINANCIAL STATEMENTS ................................ 52
VERIFICATION OF MATHEMATICAL .COMPUTATIONS 52
UNDERWRITING..................................................................... 52
MISCELLANEOUS.................................................................... 52
APPENDIX A: SUMMARY OF THE INDENTURE
APPENDIX B: COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL
YEAR ENDED JUNE 30, 2019
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
CITY OF TUSTIN LOCATION MAP
TUSTIN a CALIFORNIA
4�
114, Pasadena �MdUFU u
dr. 0 Arcedia❑ Azusa,, a lendora ,:� Rancho
West gant)imas oLaVeme Cucamonga
Hollywood Alhambrao o an Gabriel n ❑ _
Los Angelesq (.:,El Monte Claremont Riau
._Ontario .,
' ❑Monterey Park Valirda 57 C,
Curvor City, G Pomona
East Los Angeles Hacienda Rowland o
eight . el Glop Ave-)
Hs
Santa n o �I ghts Chino JR
Inglewood . Maywood o Bell Gardens A l2 1 F O � I Ar Riversick
Inglewood,...,
Cudahy ,,Downey 71.
Willow Brook o ,La Habra-,, _
Manhattan o ❑
CLY"'
��� �
Beach. ❑ y Norwalk Brea ,a Norco Wood
ci
Compton a
P a Paramount Fullerton 91 o Home Ga
Hermosa Beach ❑ �uena op n OfOfti
q�o� arson Lakewood Park Anaheim
Wnt Carson
Torrance o Stanton I �.` R I V
Lomita Garden Grove
Long Beach „.
a z+a Q Tusgn -
Rancho Palos seal seacho Santa Ansi 261
Sart apo Peat.
Verdes N9e�s' t:�,+T "'' _1ry � _
Huntingtonbor
- 139
Beach
Costa M 1t Cleveland
o)
National,
n a Faros{}
Beach Aliso Hills -
un Iguelr`
I.
Laguna Beacf °
CITY OF TUSTIN
300 Centennial Way
Tustin, CA 92780
(714) 573-3000
http://www.tustinca.org
CITY COUNCIL MEMBERS
Dr. Allan Bernstein, Mayor
Letitia Clark, Mayor Pro Tem
Barry W. Cooper, Councilmember
Austin Lumbard, Councilmember
Charles E. Pucket, Councilmember
CITY OFFICIALS
Matthew S. West, City Manager
John A. Buchanan, Director ofEconomic Development and Director ofFinance
Douglas Stack, Public Works Director/City Engineer
Michael Grisso, Water Service Manager
Stacey Cuevas, Public Works Manager
Eric Johnson, P.E., Principal Engineer, Public Works, Engineering
Erica N. Yasuda, City Clerk
David E. Kendig, Esq., City Attorney
SPECIAL SERVICES
Municipal Advisor
Fieldman Rolapp & Associates
Irvine, California
Bond and Disclosure Counsel
Quint & Thimmig LLP
Larkspur, California
Trustee and Escrow Bank
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Verification Agent
Causey Demgen & Moore, P.C.
Denver, Colorado
OFFICIAL STATEMENT
CITY OF TUSTIN
(Orange County, California)
Taxable Water Refunding Revenue Bonds, Series 2020
INTRODUCTION
General
This Official Statement, which includes the cover page and appendices hereto, provides
information in connection with the sale of the Taxable Water Refunding Revenue Bonds, Series 2020 (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 is located in the central part of 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, at the
intersection of the 5 and 55 freeways. The City covers over eleven square miles and adjoins the cities of
Orange, Santa Ana, and Irvine. While the City is surrounded by much of the County's main industrial
employment, the City is essentially a residential community. Incorporated in 1927, the City operates as a
general law city with a Council -Manager form of government. The elected City Council is responsible for
policy making, and a professional City Manager is appointed by the Council. The City Council is a five -
member governmental body that includes the Mayor, Mayor Pro Tem, and three Council Members. See
"THE CITY" and APPENDIX E—GENERAL INFORMATION REGARDING THE CITY OF
TUSTIN AND ORANGE COUNTY.
The Enterprise
The City's municipal water enterprise (the "Enterprise") includes water treatment, storage and
distribution facilities. See "THE ENTERPRISE" herein.
* Preliminary, subject to change.
Purpose of the Bonds
The Bonds are being issued to provide funds to (i) prepay the City's remaining installment
payment obligations (the "2013 Installment Payments" under an Installment Sale Agreement, dated as of
October 1, 2013 (the "2013 Installment Sale Agreement"), between the City and the Tustin Public
Financing Authority on May 15, 2022, and thereafter refund, on an advance basis, the outstanding Tustin
Public Financing Authority Water Revenue Bonds, 2013 Series A (the "2013 Bonds"), which were
delivered for the purpose of financing the improvement, betterment, renovation and expansion of certain
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 February 4, 2020 (the
"Resolution"), and an Indenture of Trust (the "Indenture"), dated as of February 1, 2020, 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 City's outstanding installment payment obligations under an Installment Sale
Agreement, dated as of April 1, 2012 (the "2012 Installment Sale Agreement"), by and between the
Authority and the City, which payments secure the outstanding Tustin Public Financing Authority
(Orange County, California) 2012 Refunding Water Revenue Bonds, and the outstanding City of Tustin
(Orange County, California) 2016 Water Refunding Revenue Bonds, together with any additional Parity
Debt incurred by the City in the future (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."
-2-
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."
Redemption
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
-3-
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
"THE REFUNDING PLAN," "ESTIMATED SOURCES AND USES OF FUNDS," "SECURITY
FOR THE BONDS," "THE ENTERPRISE" AND APPENDIX E—GENERAL INFORMATION
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.
-4-
Other Information
This Official Statement speaks only as of its date and the information contained herein is subject
to change without notice. Copies of the Indenture are available from the City upon written request to the
City, 300 Centennial Way, Tustin, CA 92780, Attention: City Manager. The City may impose a charge
for copying, mailing and handling expenses related to any request for documents.
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds are as follows:
Sources:
Principal Amount of Bonds
Cash on Hand(')
Plus/Less: Original Issue Premium/Discount
TOTAL SOURCES
>,=:
Deposit to Escrow Fund(')
Costs of Issuance (3)
TOTAL USES
(1) Represents budgeted debt service payment due on the 2013 Bonds on April 1, 2020.
(2) Amount required to prepay the 2013 Installment Payments on March 15, 2022, and thereafter redeem the 2013 Bonds on
April 1, 2022. See "THE REFUNDING PLAN."
(3) 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) prepay the 2013 Installment Payments on May 15, 2022,
and thereafter refund the 2013 Bonds, and (b) pay costs incurred in connection with the issuance and sale
of the Bonds.
A portion of the proceeds of the Bonds and certain moneys held by the Trustee for the 2013
Bonds will be used to purchase United States Treasury Securities (the "Treasuries"), to be held in a
separate fund for the 2013 Installment Payments and the 2013 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 "—Estimated Sources
and Uses of Funds." The maturing Treasuries, the interest income thereon and the uninvested cash in the
Escrow Fund will be applied to pay 2013 Installment Payments to and including March 15, 2022, which
will be used to pay the interest on the 2013 Bonds to and including April 1, 2022, and to prepay all of the
then remaining 2013 Installment Payments on March 15, 2022, which will then be used to redeem all
2013 Bonds in full on April 1, 2022, at a redemption price equal to 100% of the par amount thereof. The
sufficiency of the moneys, investment earnings and maturing Treasuries for such purposes will be verified
by Causey Demgen & Moore, P.C. (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
-5-
obligations of the Authority and the City with respect to the 2013 Installment Payments and the 2013
Bonds will be defeased and discharged.
The 2013 Bonds to be refunded are shown in the following table:
Maturity
Amount
Interest
Call
Call
CUSIP
Date
Refunded
Rate
Date
Price
Number
4/1/20
$ 50,000
4.000%
-
-
90105T BD2
4/1/21
55,000
5.000
-
-
90105T BEO
4/1/22
55,000
5.000
-
-
90105T BF7
4/1/23
55,000
5.000
4/1/22
100.000
90105T BC5
4/1/24
320,000
3.800
4/1/22
100.000
90105T BI -13
4/1/25
335,000
4.000
4/1/22
100.000
90105T BJ9
4/1/26
345,000
4.300
4/1/22
100.000
90105T BK6
4/1/27
360,000
4.500
4/1/22
100.000
90105T BL4
4/1/28
380,000
4.000
4/1/22
100.000
90105T BM2
4/1/29
400,000
4.000
4/1/22
100.000
90105T BNO
4/1/30
415,000
4.000
4/1/22
100.000
90105T BP5
4/1/31
425,000
4.125
4/1/22
100.000
90105T BQ3
4/1/32
445,000
4.125
4/1/22
100.000
90105T BR1
4/1/33
465,000
4.250
4/1/22
100.000
90105T BS9
4/1/38
2,000,000
5.000
4/1/22
100.000
90105T BT7
4/1/38
665,000
4.500
4/1/22
100.000
90105T BV2
4/1/43
6,000,000
5.000
4/1/22
100.000
90105T BU4
4/1/43
1,040,000
4.625
4/1/22
100.000
90105T BWO
The maturing Treasuries, the interest income thereon and the uninvested cash in the Escrow Fund will be
held in trust solely for the 2013 Installment Payments and the 2013 Bonds and will not be available to pay
principal of or interest on the Bonds or any obligations other than the 2013 Installment Payments and the 2013
Bonds.
0
DEBT SERVICE REQUIREMENTS
Annual debt service on the Bonds (assuming no redemptions of the Bonds) is presented below.
Maturity
(April 1) Principal
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
TOTALS
-7-
Interest Total
Set forth below is the combined annual debt service on the 2012 Installment Sale Agreement, the
2016 Bonds and the Bonds.
2042
2043
TOTALS $3,987,700.00 $31,391,862.50
THE BONDS
Authority for Issuance
Bonds Total
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 February 4, 2020, 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.
Repayment of the Bonds. Interest on the Bonds will be payable on April 1 and October 1 in each
year, beginning October 1, 2020 (each an "Interest Payment Date"), to the person whose name appears
2012
Installment
Maturity
Sale
2016
(April 1)
Agreement
Bonds
2020
2021
995,600.00
687,300.00
2022
995,200.00
687,300.00
2023
998,400.00
687,300.00
2024
—
1,592,300.00
2025
—
1,594,200.00
2026
—
1,595,450.00
2027
—
1,590,450.00
2028
—
1,591,450.00
2029
—
1,586,075.00
2030
—
1,587,612.50
2031
—
4595,012.50
2032
—
1,595,412.50
2033
—
1,589,012.50
2034
—
4591012.50
2035
—
1,591,012.50
2036
—
1,590,262.50
2037
—
1,588,550.00
2038
—
1,592,450.00
2039
—
4595000.00
2040
—
4591,200.00
2041
—
1,586,200.00
2042
2043
TOTALS $3,987,700.00 $31,391,862.50
THE BONDS
Authority for Issuance
Bonds Total
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 February 4, 2020, 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.
Repayment of the Bonds. Interest on the Bonds will be payable on April 1 and October 1 in each
year, beginning October 1, 2020 (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 10 days
preceding such special record date. Principal of any Bond will be paid upon presentation and surrender
thereof at the Trust Office of the Trustee in Los Angeles, California. 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 September 15, 2020, 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, (the "Term Bonds"), 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; provided, however, that if some but
not all of the Term Bonds have been optionally redeemed as described 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.
in
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 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.
-10-
SECURITY FOR THE BONDS
The general fund of the City is not liable and the creditor taxing power of the City is not pledged 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 Ciy, nor a legal or equitablepledge, charge, lien or encumbrance, upon any of itsprVerD, 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
-11-
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 of Net 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
-12-
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
-13-
(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 Gross 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 (1203) of the total Annual Debt Service
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 the 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 (1203) 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 (703) 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
-14-
that:
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 l 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 is located in the central part of Orange County, approximately 41 miles south of the City
of Los Angeles and approximately 90 miles north of the City of San Diego, at the intersection of the 5 and
55 freeways. The City covers over eleven square miles and adjoins the cities of Orange, Santa Ana, and
Irvine. While the City is surrounded by much of the County's main industrial employment, the City is
essentially a residential community.
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
Incorporated in 1927, the City operates as a general law city with a Council -Manager form of
government. The elected City Council is responsible for policy making, and a professional City Manager is
appointed by the Council. The City Council is a five -member governmental body that includes the Mayor,
Mayor Pro Tem, and three Council Members. 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 current mayor and city council members are set forth below:
CITY OF TUSTIN
CITY COUNCIL
Name Position
Dr. Allan Bernstein
Letitia Clark
Barry W. Cooper
Austin Lumbard
Charles E. Puckett
Mayor
Mayor Pro Tem
Councilmember
Councilmember
Councilmember
Term Expires
November 2020
November 2020
November 2022
November 2022
November 2020
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, 2019.
-16-
THE ENTERPRISE
Certain of the information set forth under this caption has been obtained from publicly available sources
other than the City, which the City and the Underwriter believe to be reliable, including, without limitation, the
Municipal Water District of Orange County ("MWOOC "), Orange County Water District ("OCWD-) and
The Metropolitan Water District of Southern California (""Metropolitan"). As described herein, historically
approximately 10% of annual water deliveries were obtained from imported water supplied to the Enterprise.
Accordingly, certain of the information set forth under this caption has been included because it provides
additional detail with respect to such sources of supply that may be considered relevant to an informed evaluation
and analysis of the Bonds and the Enterprise. However, such information is not guaranteed by the City or the
Underwriter as to its accuracy or completeness and no representation is made as to the absence of material adverse
changes in such information subsequent to the date hereof. None of MWOOC, OCWD or Metropolitan has
participated in the preparation of this Official Statement None are obligated in any way to the owners or
Beneficial Owners of any of the Bonds and none have pledged any of their moneys, funds or assets toward the
payment of any amount due in connection with the Bonds.
History and Overview of the Enterprise
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.
The Enterprise receives its water from two main sources, local well water from the Lower Santa
Ana River Groundwater basin, which is managed by the Orange County Water District ("OCWD") and
imported water from the Municipal Water District of Orange County ("MWDOC") provided by the East
Orange County Water District ("EOCWD"). MWDOC is Orange County's wholesale supplier and is a
member agency of the Metropolitan Water District of Southern California ("Metropolitan").
The local well water is pumped from the City's 14 groundwater wells under the supervision of the
OCWD. Imported water from Metropolitan is provided through MWDOC and is sourced primarily from
the Colorado River. The Enterprise uses little to no water from the State Water Project.
Management
The Enterprise is operated by .the .Water Service Division (the "Division"), a division of the
City's Public Works Department. The Division employs a full-time equivalent of 18 individuals. The
Enterprise is under the management of the City's Director of Public Works, Douglas Stack. The Water
Service Manager, Michael Grisso, is responsible for direct supervision over the operations of the
Enterprise. Division staff' members perform administrative, engineering, construction and maintenance,
water production, water treatment, water quality, preventative maintenance, and customer service
activities.
Employee Relations
The Enterprise has never experienced a labor action, slow down or work stoppage. The Tustin
Municipal Employee Association (TMEA) represents non -management employees as a collective
bargaining unit. The current contract expires on June 30, 2021.
-17-
Service Area
The Enterprise's water service area consists of approximately 8.4 square miles within the City
(see the Service Area Map, below) and sits at an elevation of about 210 feet above sea level. The
topography of the City combines generally flat areas with gradual rolling hills. The City provides potable
water service and fire protection water service to most of the incorporated area of the City and also to
unincorporated county areas north of the City.
The Enterprise serves approximately 69,000 water consumers through approximately 14,241
water service connections. Approximately 8,690 (61%) of the connections are within a five square mile
area within the City limits and the remaining 5,551 (39%) 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 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 served by the Irvine Ranch Water District.
The service area is essentially fully developed, and the number of water customers has been
relatively stable since 1980. No significant growth within the service area is anticipated.
A map of the Enterprise's water service area is provided below. The water service area is divided
into three pressure zones.
Table 1
SERVICE AREA MAP
Source: City of Tustin Public Works Dept.
Water Supply
The Enterprise relies on a combination of imported water and local groundwater to meet its water
needs. The City's main source of water supply is groundwater from the Lower Santa Ana River
Groundwater Basin. Currently, the City relies on approximately 909 local groundwater and 10% imported
water to meet its needs.
years.
The table below is a history of the Enterprise's sources of water supply for the last five fiscal
Table 2
HISTORIC WATER SUPPLY
(Amounts in Acre-feet)(0
Fiscal Years 2014-15 through 2018-19
Source: City of Tustin Public Works Dept.
(1) One acre-foot ("AF") equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet).
(2) Pumped water that is not treated is subject to a basin pumping percentage ("BPP") restriction imposed by the OCWD.
Currently, the BPP is 77% which allows the Enterprise to pump up to 77% of its annual supply without paying a BEA.
(3) Includes treated groundwater that is BEA exempt.
Note: For additional discussion of BPP and BEA, see "OCWD" below.
-19-
Local
Ground
Imported
%
Fiscal Year
Water (2)(3)
Water
Total
Change
2014-15
8,199
2,829
10,028
n/a
2015-16
7,685
1,548
9,233
(7.93)
2016-17
8,687
1,072
9,760
5.71
2017-18
9,967
910
10,877
11.44
2018-19
8,978
1,201
10,179
(6.42)
Source: City of Tustin Public Works Dept.
(1) One acre-foot ("AF") equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet).
(2) Pumped water that is not treated is subject to a basin pumping percentage ("BPP") restriction imposed by the OCWD.
Currently, the BPP is 77% which allows the Enterprise to pump up to 77% of its annual supply without paying a BEA.
(3) Includes treated groundwater that is BEA exempt.
Note: For additional discussion of BPP and BEA, see "OCWD" below.
-19-
The table below is a five-year projection of the Enterprise's expected sources of water supply for
the next five fiscal years.
Table 3
PROJECTED WATER SUPPLY
(Amounts in Acre-feet)(0
Fiscal Years 2019-20 through 2023-24
Source: City of Tustin Public Works Dept.
(1) One acre-foot (AF) equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet).
(2) Pumped water that is not treated is subject to a basin pumping percentage ("BPP") restriction imposed by the Orange County
Water District. Currently, the BPP is 77% which allows the Enterprise to pump up to 77% of its annual supply without paying a
BEA.
(3) Includes treated groundwater that is BEA exempt.
Note: For additional discussion of BPP and BEA, see "OCWD" below.
Local Groundwater Sources. Historically, local groundwater has been the cheapest and most
reliable source of supply for the Enterprise. Approximately 90% percent of the Enterprise's water supply is
pumped by Enterprise -owned wells from local groundwater aquifers managed by the OCWD.
The Enterprise pumps its local groundwater from the Lower Santa Ana River Groundwater Basin,
also known as the Orange County Groundwater Basin (the "OC Basin"). The OC Basin underlies the
northerly half of Orange County beneath broad lowlands. The OC Basin, managed by OCWD, covers an
area of approximately 350 square miles, bordered by the Coyote and Chino Hills to the north, the Santa
Ana Mountains to the northeast, and the Pacific Ocean to the southwest. The OC Basin boundary extends
to the Orange County -Los Angeles Line to the northwest, where groundwater flows across the county line
into the Central Groundwater Basin of Los Angeles County. The total thickness of sedimentary rocks in
the OC Basin is over 20,000 feet, with only the upper 2,000 to 4,000 feet containing fresh water. The
Pleistocene or younger aquifers comprising this Basin are over 2,000 feet deep and form a complex series
of interconnected sand and gravel deposits. The OC Basin's full volume is approximately 66 million acre
feet ("MAF ").
There are three major aquifer systems that have been subdivided by OCWD, the Shallow Aquifer
System, the Principal Aquifer System, and the Deep Aquifer System. These three aquifer systems are
hydraulically connected as groundwater is able to flow between each other through intervening aquitards
or discontinuities in the aquitards. The Shallow Aquifer system occurs from the surface to approximately
250 feet below ground surface. Most of the groundwater from this aquifer system is pumped by small
water systems for industrial and agricultural use. The Principal Aquifer system occurs at depths between
200 and 1,300 feet below ground surface. Over 90 percent of the City's groundwater production is from
wells that are screened within the Principal Aquifer system. Only a minor amount of the City's
groundwater is pumped from the Deep Aquifer system, which underlies the Principal Aquifer system and
is up to 2,000 feet deep in the.center of the OC Basin.
-20-
Local
Ground
Imported
%
Fiscal Year
Water (2)(3)
Water
Total
Change
2019-20
9,252
1,028
10,280
—
2020-21
9,345
1,038
10,383
1%
2021-22
9,345
1,038
10,383
0
2022-23
9,345
1,038
10,383
0
2023-24
9,345
1,038
10,383
0
Source: City of Tustin Public Works Dept.
(1) One acre-foot (AF) equals 325,851 gallons, approximately equal to 436 billing units (hundred cubic feet).
(2) Pumped water that is not treated is subject to a basin pumping percentage ("BPP") restriction imposed by the Orange County
Water District. Currently, the BPP is 77% which allows the Enterprise to pump up to 77% of its annual supply without paying a
BEA.
(3) Includes treated groundwater that is BEA exempt.
Note: For additional discussion of BPP and BEA, see "OCWD" below.
Local Groundwater Sources. Historically, local groundwater has been the cheapest and most
reliable source of supply for the Enterprise. Approximately 90% percent of the Enterprise's water supply is
pumped by Enterprise -owned wells from local groundwater aquifers managed by the OCWD.
The Enterprise pumps its local groundwater from the Lower Santa Ana River Groundwater Basin,
also known as the Orange County Groundwater Basin (the "OC Basin"). The OC Basin underlies the
northerly half of Orange County beneath broad lowlands. The OC Basin, managed by OCWD, covers an
area of approximately 350 square miles, bordered by the Coyote and Chino Hills to the north, the Santa
Ana Mountains to the northeast, and the Pacific Ocean to the southwest. The OC Basin boundary extends
to the Orange County -Los Angeles Line to the northwest, where groundwater flows across the county line
into the Central Groundwater Basin of Los Angeles County. The total thickness of sedimentary rocks in
the OC Basin is over 20,000 feet, with only the upper 2,000 to 4,000 feet containing fresh water. The
Pleistocene or younger aquifers comprising this Basin are over 2,000 feet deep and form a complex series
of interconnected sand and gravel deposits. The OC Basin's full volume is approximately 66 million acre
feet ("MAF ").
There are three major aquifer systems that have been subdivided by OCWD, the Shallow Aquifer
System, the Principal Aquifer System, and the Deep Aquifer System. These three aquifer systems are
hydraulically connected as groundwater is able to flow between each other through intervening aquitards
or discontinuities in the aquitards. The Shallow Aquifer system occurs from the surface to approximately
250 feet below ground surface. Most of the groundwater from this aquifer system is pumped by small
water systems for industrial and agricultural use. The Principal Aquifer system occurs at depths between
200 and 1,300 feet below ground surface. Over 90 percent of the City's groundwater production is from
wells that are screened within the Principal Aquifer system. Only a minor amount of the City's
groundwater is pumped from the Deep Aquifer system, which underlies the Principal Aquifer system and
is up to 2,000 feet deep in the.center of the OC Basin.
-20-
OCWD. OCWD was formed in 1933 by a special legislative act of the California State Legislature
to protect and manage the County's natural, groundwater supply and defend its water rights to the OC
Basin. Groundwater levels are managed within a safe basin operating range to protect the long-term
sustainability of the OC Basin and to protect against land subsidence. OCWD regulates groundwater
levels in the OC Basin by regulating the annual amount of pumping.
The OC Basin is not adjudicated and as such, pumping from the OC Basin is managed through a
process that uses financial incentives to encourage groundwater producers to pump a sustainable amount
of water. The framework for the financial incentives is based on establishing the basin production
percentage ("BPP"), the percentage of each OCWD member's total water supply that comes from
groundwater pumped from the OC Basin. Groundwater production at or below the BPP is assessed a
Replenishment Assessment ("RA"). While there is no legal limit as to how much an agency pumps from
the OC Basin, there is a financial disincentive to pump above the BPP. Agencies that pump above the BPP
are charged the RA plus the Basin Equity Assessment ("BEA"), which is calculated so that the cost of
groundwater production is greater than MWDOC's full-service rate. The BEA can be increased to
discourage production above the BPP. The BPP is set uniformly for all Producers by OCWD on an annual
basis.
The BPP is set based on groundwater conditions, availability of imported water supplies, and
Basin management objectives. The supplies available for recharge must be estimated for a given year. The
supplies of recharge water that are estimated are: 1) Santa Ana River stormflow, 2) Natural incidental
recharge, 3) Santa Ana River baseflow, 4) OCWD's groundwater replenishment system ("GWRS")
supplies, and 5) other supplies such as imported water and recycled water purchased for the Alamitos
Barrier. The BPP is a major factor in determining the cost of groundwater production from the OC Basin
for that year. When the OC Basin storage approaches the lower end of the operating range, immediate
issues that must be addressed include seawater intrusion, increased risk of land subsidence, and potential
for shallow wells to become inoperable due to lower water levels. The OCWD has complied with the
Sustainable.Groundwater Management Act with respect to the OC Basin.
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 2018-19, the Enterprise did not pay a BEA to OCWD. For the year ending June 30, 2019, the
BPP was 77% and the City's actual production was 10,179. OCWD has set the BPP for the fiscal year
ending June 30, 2020 at 77% and the City estimates that its production will be 10,280. The Enterprise pays
OCWD a Replenishment Assessment fee of $402 per acre foot of groundwater pumped up to the BPP.
The Enterprise's fourteen wells pump groundwater from the OC Basin. 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 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
-21-
States Environmental Protection Agency and the California Department of Health Services maximum
contaminant level regulations. See "—Enterprise Facilities—Treatment Plants" below.
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.
OCWD faces challenges in managing its groundwater basin including increasing customer water
demands and effectively balancing demand on the OC Basin with the amount of total recharge and total
pumping to maintain ground water levels and storage within an established safe operating range. Further
discussion of challenges faced by OCWD as well as a variety of other operating information with respect
to OCWD in certain publicly available disclosure documents prepared by OCWD. OCWD 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
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 the City does not make any representation as to the accuracy or completeness of such
information. OCWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH
THE CITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE OCWD
INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS.
Imported Water. The Enterprise currently relies on imported water to meet approximately 10% of
its water needs. The Enterprise purchases water from the EOCWD (which purchases from Metropolitan
through MWDOC). Imported water reaches the City through three (3) connections to the EOCWD
system. EOCWD can provide water to the City at up to 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 I-5 Freeway near Newport Avenue, and can
supply up to 4,500 gallons per minute, or 6.48 million gallons per day. Although pipeline and connection
capacity rights do not guarantee the availability of water, per se, they do guarantee the ability to convey
water when it is available to the Metropolitan distribution system. All imported water supplies are
assumed available to the City from existing water transmission facilities.
Metropolitan Water District of Southern California. MWDOC and EOCWD are member agencies
of Metropolitan. There are 26 -member public agencies of Metropolitan, consisting of 14 cities, 11
municipal water districts, and MWDOC. Metropolitan's service area comprises approximately 5,200
square miles and includes all or portions of the counties of Los Angeles, Orange, Riverside, San
Bernardino, San Diego, and Ventura.
The Colorado River was Metropolitan's original source of water after Metropolitan's
establishment in 1928. The Colorado River Aqueduct ("CRA"), which is owned and operated by
Metropolitan, transports water from the Colorado River to its terminus at Lake Mathews in Riverside
County. The actual amount of water per year that may be conveyed through the CRA to Metropolitan's
member agencies is subject to the availability of Colorado River water for delivery.
-22-
The CRA includes supplies from the implementation of the Quantification Settlement Agreement
and related agreements to transfer water from agricultural agencies to urban uses. The 2003
Quantification Settlement Agreement enabled California to implement major Colorado River water
conservation and transfer programs, stabilizing water supplies for 75 years and reducing the state's
demand on the river to its 4.4 MAF entitlement. Colorado River transactions are potentially available to
supply additional water up to the CRA capacity of 1.25 MAF on an as -needed basis. Water from the
Colorado River or its tributaries is available to users in California, Arizona, Colorado, Nevada, New
Mexico, Utah, and Wyoming, as well as to Mexico. California is apportioned the use of 4.4 MAF of water
from the Colorado River each year plus one-half of any surplus that may be available for use collectively in
Arizona, California, and Nevada. In addition, California has historically been allowed to use Colorado
River water apportioned to but not used by Arizona or Nevada. Metropolitan has a basic entitlement of
550,000 AFY of Colorado River water, plus surplus water up to an additional 662,000 AFY when certain
conditions exists.
Unfortunately, Metropolitan has not received surplus water for a number of years. The Colorado
River supply faces current and future imbalances between water supply and demand in the Colorado River
Basin due to long term drought conditions. The long-term imbalance in future supply and demand is
projected to be approximately 3.2 MAF by the year 2060.
Approximately 40 million people rely on the Colorado River and its tributaries for water with 5.5
million acres of land using Colorado River water for irrigation. Climate change will also affect future
supply and demand as increasing temperatures may increase evapotranspiration from vegetation along
with an increase in water loss due to evaporation in reservoirs, therefore reducing the available amount of
supply from the Colorado River and exacerbating imbalances between increasing demands from rapid
growth and decreasing supplies.
Metropolitan's other major source of water is the State Water Project (the "SWP"). The SWT is
owned by the State and operated by the Department of Water Resources ("DWR"). The SWP transports
Feather River water stored in and released from Oroville Dam and unregulated flows diverted directly
from the Bay -Delta south via the California Aqueduct to four delivery points near the northern and
eastern boundaries of Metropolitan. The total length of the California Aqueduct is 444 miles.
Metropolitan is one of 29 agencies that have long-term contracts for water service from DWR (each a
"State Water Contract") and it is the largest agency in terms of the number of people it serves
(approximately 18 million), the share of the SWP water for which it is entitled, and the total amount of
annual payments made to DWR. Metropolitan's contract with DWR provides for the delivery of
1,911,500 AF.
The SWP was originally intended to meet demands of 4.2 million AF per year. Initial SWP
facilities were completed in the early 1970s, and it was envisioned that additional facilities would be
constructed as contractor demands increased. Several factors, including increased costs and increased
non-SWP demands for limited water supplies, combined to delay the construction of additional facilities.
The State Water Contract, under a 100% allocation, provides Metropolitan with 1,911,500 AF of water.
In general, allocations and deliveries from the SWP reflect recent dry years, low water storage in
the State's major reservoirs, below -normal runoff and regulatory restrictions on water exports from the
Bay -Delta to protect listed fish species. In recent years, Metropolitan has been able to rebuild its water
storage levels after several years of withdrawals.
-23-
Water Use
The Enterprise's average daily demand is approximately 8.7 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's drought ordinance.
The following table shows the water use for the five Fiscal Years ended June 30, 2019.
Consumption is shown in hundred cubic feet ("hcf'), which is the Enterprise's basic billing unit that
appears on the bi-monthly water bills.
Table 4
WATER USE BY CUSTOMER TYPED)
Fiscal Years 2014-15 through 2018-19
Customer Type 2014-15 2015-16 2016-17 2017-18 2018-19
Residential 2,603,538 1,934,761 2,119,716
Apartment/Multiple Units 1,139,321 1,003,808 987,688
Commercial
310,585
259,459
271,649
Fire Services
837
646
504
Irrigation
155,766
96,082
105,750
Government
229,262
134,446
162,843
Restaurants
51,658
45,069
44,947
Hospitals
10,018
11,166
11,276
Non -Profit
41,601
22,989
26,751
Industrial
59,292
40,407
45,071
Hotel/Motels
21,379
23,387
25,185
All Other
71,324
68,830
70,721
Total Water Use
4,694,581
3,641,050
3,872,101
Source: City of Tustin Public Works Dept..
(') Measured in hundred cubic feet.
Enterprise Facilities
2,398,744 2,199,236 '
1,039,878 1,029,284
274,943 267,541
589 564
146,941 131,579
195,695 177,321
45,086 45,905
10,536 13,102
34,539 32,021
45,062 44,693
28,908 32,594
75,208 76,873
4,296,129 4,050,713
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.
Treatment Plants. The City has two treatment plants, the Main Street Treatment Plant and the
17th 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.
Transmission and Distribution Mains. The water distribution system has three pressure zones that
consist of over 170 miles of transmission and distribution mains, 2,020 fire hydrants, four booster stations
and four emergency interconnections with neighboring water agencies.
StorageReservoirs. Storage is required to balance variations in demand (operational or regulatory
storage), to provide water for fighting fire (fire storage), and to provide water when normal supplies are
-24-
reduced or unavailable due to unusual circumstances (emergency storage). The existing storage system
consists of six reservoirs with a combined storage capacity of approximately 13.83 million gallons (MG).
The Simon Ranch Reservoir and Booster Pump Station Project will replace the existing buried,
gunite lined, earthen reservoir with a new circular, pre -stressed concrete tank. A new pump station has
been designed and integrated within the reservoir site. A portion of existing 8 inch pipeline serving the
existing booster station and 10 inch pipeline leading to the Simon Ranch Reservoir will be abandoned and
a new 16 inch ductile iron transmission pipeline, approximately 1,600 feet in length, will be constructed to
feed both the new pump station and reservoir.
Groundwater Wells. The City pumps its groundwater from 14 wells, including five wells that
undergo nitrate and total dissolved solids removal through the Main Street Plant and the 17th Street
Desalter Treatment Plant.
Historical and Planned Capital Improvements
The capital improvements completed from fiscal year 2014-15 to fiscal year 2018-19 are shown in
the following table.
Table 5
HISTORICAL CAPITAL EXPENDITURES
Fiscal Years 2014-15 through 2018-19
Project Name
Simon Ranch Reservoir
Tustin Ave Well
Hydraulic Modeling
MWD Turnout Improvements
Well Rehab
Edinger Well
El Camino / Newport Line Stop Program
SCADA Improvements
17th Street Treatment Plant Membrane Replacement
Service Line Replacement / Maintenance
Totals
2014-15
2015-16
2016-17
2017-18
$ 168,938
$ 681,669
$ 327,046
$ 452,909
5,886
2,320
(148,547)
1,014
1,755
-
-
-
17,762
106,370
6,710
27,973
159,852
-
181,377
176,646
571,888
3,770,587
1,309,829
178,098
207,787
80,536
580
-
-
-
31,042
82,773
-
-
-
152,126
-
-
69,550
5,992
$1,133,868
$4,641,482
$1,599,088
$1,077,531
Source: City of Tustin Public Works Department.
-25-
2018-19
$363,385
5,134
$368,519
Total
$1,993,947
(139,327)
1,755
158,815
517,875
5,830,402
288,903
113,815
157,260
75,542
$7,144,367
The Enterprise expects to spend another $31,384,000 in capital projects over the next five fiscal
years which is expected to be funded on a pay -as -you go basis. The table below shows the next five years of
planned capital improvements.
Source: City of Tustin Public Works Department.
Water Rates
Water rates are set by the City Council and are not subject to review by any state or local
government agency. In the past, rate changes have been enacted by the City Council based upon the
recommendations of staff and/or a private water engineering consultant after following notice procedures
required by State law.
The City adopted new water rates on January 21, 2020 that will become effective in February 1,
2020. See "2020 Rate Increase" below. Prior to that the most recent revision of the rate structure took
place in June 2010 and the prior rates had remained static since January 1, 2014. See "Prior Rate
Structure" below.
Prior Rate Structure. The prior water rate structure, effective from January 1, 2014 until January
31, 2020, consisted of meter charges (based on meter size), capital replacement charges (based on meter
size), consumption charges, and pass-through charges. Meter charges were designed to generate about
one-third of the annual revenue. This approach was 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 Enterprise.
Volume charges consisted 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.
The pass-through charge was designed to offset the increasing third party costs. Imported water
rates are established by Metropolitan 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 allowed the Enterprise to assess and
recoup the costs of providing water beyond current budget appropriation in case of unexpected supply
-26-
Table 6
PROJECTED CAPITAL EXPENDITURES
Fiscal Years 2019-20 through 2023-24
Project Name
2019-20
202-21
2021-22
2022-23
2023-24
Total
Simon Ranch Reservoir
$15,150,000
—
—
—
—
$15,150,000
Service Line Replacement / Maintenance 120,000
$ 120,000
$ 120,000
$ 120,000
$ 120,000
600,000
Main Line Replacement/Maintenance
2,700,000
1,650,000
1,650,000
1,650,000
1,650,000
9,300,000
Meter Maintenance
100,000
100,000
100,000
100,000
100,000
500,000
Well Replacement/Maintenance
600,000
600,000
600,000
600,000
600,000
3,000,000
Hydrant Maintenance
100,000
100,000
100,000
100,000
100,000
500,000
Beneta Well - Conjunctive Use Well
—
—
2,334,000
—
—
2,334,000
Totals
$18,770,000
$2,570,000
$4,904,000
$2,570,000
$2,570,000
$31,384,000
Source: City of Tustin Public Works Department.
Water Rates
Water rates are set by the City Council and are not subject to review by any state or local
government agency. In the past, rate changes have been enacted by the City Council based upon the
recommendations of staff and/or a private water engineering consultant after following notice procedures
required by State law.
The City adopted new water rates on January 21, 2020 that will become effective in February 1,
2020. See "2020 Rate Increase" below. Prior to that the most recent revision of the rate structure took
place in June 2010 and the prior rates had remained static since January 1, 2014. See "Prior Rate
Structure" below.
Prior Rate Structure. The prior water rate structure, effective from January 1, 2014 until January
31, 2020, consisted of meter charges (based on meter size), capital replacement charges (based on meter
size), consumption charges, and pass-through charges. Meter charges were designed to generate about
one-third of the annual revenue. This approach was 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 Enterprise.
Volume charges consisted 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.
The pass-through charge was designed to offset the increasing third party costs. Imported water
rates are established by Metropolitan 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 allowed the Enterprise to assess and
recoup the costs of providing water beyond current budget appropriation in case of unexpected supply
-26-
cost increase. The pass-through was 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 had a bi-monthly bill under the prior rate structure of $105.90, consisting of a $35.85
fixed charge, a $11.00 capital charge, and a $59.05 consumption charge.
The following tables outline the prior rate structure for domestic and commercial uses in place
from January 1, 2014 until January 31, 2020.
Table 7
PRIOR RATES FOR WATER SERVICE
(Effective January 1, 2014 to January 31, 2020)
Prior Bi -Monthly Fixed Charge
Meter Size
Charge
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
Prior Bi -Monthly Capital Charge
Meter Size
Charge
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
Prior 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
-27-
Prior 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
Large Meter Consumption Charge (Meters 2 inches or larger)
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 Tier 7
0-10 11-20 21-30 31-40 41-50 51-60 61+
Units Units Units Units Units Units Units
High0) 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
LowO> 0.84 1.48 1.94 2.41 3.05 3.53 4.05
(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
Prior Bi -Monthly Fire Meter Charge
Meter Size
4"
5"
6"
8"
10"
12"
Source: City of Tustin.
Charge
$113.41
142.90
172.38
231.36
285.81
342.54
2020 Rate Increase. While the Enterprise has reduced its overall water use by 18% compared to
peak usage during 2013, the costs to provide water have continued to increase since the prior rate increase
in January, 2014. Electricity costs to pump and distribute water, water treatment costs, and materials and
labor costs are all projected to continue to increase in the upcoming years. As a result, the City approved
new water rates that reflect the current cost of delivering water to Enterprise customers.
The new water rate structure, effective beginning February 1, 2020, consists of a metered charge
applicable to all users (regardless of meter size) as well as a fined service charge (based on meter size with
additional charge per dwelling unit). The new water rate structure includes a 5% annual cost escalator for
each year until January 1, 2024.
Under the new rate structure a sample bi-monthly bill for single family residential customer in
2020 with a 5/8" or 3/4" size meter with consumption of 40 HCF will consist of a $111.60 commodity
charge and a $39.76 fixed charge for a total bi-monthly bill of $151.36.
-28-
The following tables outline the new rate structure for all Enterprise users in place for each of the
next five years year beginning on February 1, 2020. The tables also include a comparison to the prior rate
structure effective prior to February 1, 2020.
Table 8
PRIOR AND FUTURE RATES FOR WATER SERVICE
(Effective February 1, 2020 to present)
Prior Rates
Before 2/1/2020
Rates Effective Beginning,
2/1/2020 1/1/2021 1/1/2022 1/1/2023 1/1/2024
Bi -Monthly Potable Water Usage Charges per HCF
All Customers
Units: 0 - 10
$0.84
Units: 11 - 20
1.48
Units: 21 - 30
1.94
Units: 31 - 40
2.41
Units: 41- 50
3.05
Units: 51- 60
3.53
Units: 61+
4.05
Meter Size
$2.79 $2.93 $3.08 $3.24 $3.41
Bi -Monthly Fixed Service Charges
5/8" or 3/4"
46.85
39.76
41.75
43.84
46.03
48.33
1"
103.65
83.82.
88.01
92.41
97.03
101.88
11/2"
197.29
157.25
165.11
173.37
182.04
191.14
2"
311.86
245.38
257.65
270.53
284.06
298.26
3"
574.86
524.43
550.65
578.18
607.09
637.45
4"
956.38
935.67
982.45
11031.58
1,083.15
1,137.31
6"
1,893.76
2,066.56
2,169.89
2,278.38
2,392.30
2,511.92
8"
1,893.76
3,535.26
3,712.02
3,897.62
4,092.51
4,297.13
10"
1,893.76
5,591.44
5,871.01
6464.56
6,472.79
6,796.43
Per Dwelling Unit
37.70
10.38
10.90
11.44
12.02
12.62
Fire Protection Services
Meter Size
4"
113.41
17.90
18.80
19.73
20.72
21.76
5"
142.90
22.38
23.50
24.67
25.91
27.20
6"
172.38
26.85
28.19
29.60
31.08
32.64
8"
231.36
35.80
37.59
39.47
41.44
43.52
10"
285.81
44.75
46.99
49.34
51.80
54.39
12"
342.54
53.70
56.39
59.20
62.16
65.27
Source: City of Tustin.
Billing Collection and Procedures. The City mails a utility bill to each of its water customers on a bi-
monthly basis. Customers must pay their water bill upon receipt. If the water bill is not paid within 20
calendar days of the invoice date, a written notice of payment delinquency and impending discontinuation
will be mailed to the customer. The overdue notice will be mailed at least seven business days prior to the
-29-
possible discontinuation of service. If the total payment is not received, the account is then considered to
be in a pending shut-off status.
SB 998. The City is in compliance with SB 998, the Water Shutoff Protection Act, regarding
policies relating to the discontinuation of water service, which became effective on February 1, 2020. The
City does not believe that SB 998 will have a material effect on the City's ability to make the required debt
service payments on the Bonds.
Water Users
There are 14,241 current customer active and inactive service connections in the City's water
distribution system with all existing connections metered. Approximately 80% of the City's 2018-19 fiscal
year water demand was residential; commercial, industrial, institutional and dedicated landscape,
accounts for the remaining 20% of the total 201849 fiscal year demand.
The following table shows the number of water connections over the last five fiscal years within
the Enterprise based on type of customer.
Table 9
HISTORIC WATER CONNECTIONS BY CUSTOMER TYPE
Fiscal Years 2014-15 through 2018-19
Customer Type 2014-15 2015-16 2016-17 2017-18 2018-19
Single -Family
11,801
11,819
11,824
11,829
11,852
Multi -Family
847
848
845
845
844
Commercial
1,137
1,082
4130
1,134
1,125
Industrial
50
50
50
50
49
Public Agencies
148
197
149
159
142
Irrigation
213
215
214
227
229
Total
14,196
14,211
14, 212
14, 244
14, 241
Source: City of Tustin Finance Dept.
-30-
Largest Enterprise Customers. In fiscal year 2018-19, the twenty five largest water users accounted
for 14.05% of total annual water sales revenues. The largest user, the Tustin Unified School District,
accounted for 4.06% of the total usage. The following are the top twenty five water users and their fiscal
year 2018-19 usage and sales.
Table 10
TWENTY-FIVE LARGEST WATER CUSTOMERS
Fiscal Year Ended June 30, 2019
Source: City of Tustin.
(1) The Enterprise generated $18,229,013 in total revenues in FY2018-19. See Tables 12 and 14.
Financial Statements
The following table presents the Enterprise's Statement of Net Position prepared by the City for
the five most recent fiscal years.
-31-
Percent of
Water
Total Water
Water Customer
Charges
Revenues(')
Tustin Unified School District
$ 739,443
4.06%
City of Tustin
204,847
1.12
Raintree Tustin LLC
183,511
1.01
Schroeder Property Management
104,359
.57
Ricoh Electronics, Inc.
84,359
.46
Tustin Parc
84,223
.46
Tustin Acers Community Association
82,808
.45
Tustin Village Community Association
79,258
.43
CalTrans - District 12
76,146
.42
Westchester Park LP
74,558
.41
Tustin Plaza Center, LP
72,300
.40
Key Inn
72,294
.40
Briarwood Investment Co. Ltd.
70,534
.39
Vio Tustin Investment LP
63,761
.35
CMC Association Management
63,077
.35
Curtis Greider
61,943
.34
New Villa Valencia MHP
56,416
.31
Regency West
53,964
.30
Saddleback Mobilodge
53,225
.29
15701 TV Way Partnership
50,310
.28
Sycamore Gardens HOA
49,366
.27
Roshan M.D.
48,513
.27
Alders Apartment Company
46,159
.25
Stonebrook Lmtd.
43,182
.24
Waterston Gardens Investments LP
42,824
.23
Total Top 25
2,561,380
14.05
Source: City of Tustin.
(1) The Enterprise generated $18,229,013 in total revenues in FY2018-19. See Tables 12 and 14.
Financial Statements
The following table presents the Enterprise's Statement of Net Position prepared by the City for
the five most recent fiscal years.
-31-
ASSETS
Current Assets:
Cash and investments
Accounts receivable, net
Interest receivable
Prepaid items
Land held for resale
Restricted cash and investments
Total Current Assets
Noncurrent Assets:
Capital assets not being depreciated
Capital assets being depreciated
Total Noncurrent Assets
Total Assets
Table 11
STATEMENT OF NET POSITION
Fiscal Year Ending June 30,
2014-15 2015-16 2016-17 2017-18 2018-19
Audited Audited Audited Audited Audited
$14,767,193 $16,207,860 $18,000,732 $19,739,231 $20,637,563
2,791,123
2,920,396
2,968,645
2,843,553
2,769,763
30,668
46,052
45,709
70,140
66,538
110
26,035
42,257
46,866
11,830
-
-
-
-
3,765,347
20,673,118
17,878,663
13,528,036
13,129,092
9,503,532
38,262,212
37,079,006
34,585,379
35,828,882
36,754,573
4,728,481
9,237,662
10,833,293
3,978,963
6,586,353
40,984,094
39,610,461
37,929,002
43,885,311
41,966,859
45,712,575
48,848,123
48,762,295
47,864,274
48,553,212
83,974,787
85,927,129
83,347,674
83,693,156
85,307,785
DEFERRED FLOWS OF RESOURCES
Deferred charge on refunding
418,969
364,908
3,383,219
3,301,388
3,116,377
Deferred amount from pension plans, net
(510,193)
45,486
826,798
909,340
865,158
Total Deferred Flows of Resources
(91,224)
410,394
4,210,017
4,210,728
4,031,535
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities
2,203,804
3,486,580
2,480,043
2,506,371
3,877,739
Deposits payable
482,855
562,770
584,782
483,915
503,888
Compensated absences payable
176,606
180,853
201,367
209,395
228,486
Termination benefits payable
14,787
14,787
-
-
-
Interest payable
487,792
481,980
383,974
375,774
368,530
Bonds payable
790,000
815,000
845,000
880,000
910,000
Total Current Liabilities
4,155,844
5,541,970
4,495,166
4,455,455
5,888,643
Noncurrent Liabilities:
Compensated absences payable
19,622
20,094
22,374
23,266
25,388
Termination benefits payable
14,787
-
-
-
-
Bonds payable
41,743,944
40,833,043
41,679,297
40,660,991
39,612,686
Net pension liability
1,832,914
2,271,208
2,978,725
3,504,665
3,622,504
Total Noncurrent Liabilities
43,611,267
43,124,345
44,680,396
44,188,922
43,260,578
Total Liabilities
47,767,111
48,666,315
49,175,562
48,644,377
49,149,221
NET POSITION
Net investment in capital assets
24,270,718
25,443,651
23,252,432
22,753,763
20,650,435
Unrestricted
11,845,734
12,227,557
15,129,697
16,505,744
19,489,664
Total Net Position
36,116,452
37,671,208
38,382,129
39,259,507
40,140,099
Sources: City of Tustin 2015-19 Comprehensive Annual Financial Reports and City of Tustin Finance Department.
-32-
The following table presents the Enterprise's Statement of Revenues, Expenses and Changes in
Net Position prepared by the City for the four most recent fiscal years and budgeted projections for the
2019-20 fiscal year. Audited totals are provided for the 2015-16 through 2018-19 fiscal years and
budgeted projections for fiscal year 2019-20. See "Historical and Projected Operating Results" for a five-
year historical comparison of revenues and expenses of the Water Fund and a projection of the revenues
and expenses, including projected debt service coverage.
Table 12
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
Sources: City of Tustin FY2016-19 Comprehensive Annual Financial Reports.
-33-
Fiscal Year Ending June 30,
2015-16
2016-17
2017-18
2018-19
2019-20
Audited
Audited
Audited
Audited
Projected
OPERATING REVENUES
Charges for services
$ 16,511,795
$ 17,100,836
$ 18,229,013
$ 17,329,090
$18,193,000
OPERATING EXENSES
Personnel services
2,849,928
3,203,733
3,781,121
3,708,959
3,996,500
Purchased water
5,488,071
5,975,184
7,019,757
7,257,570
7,331,000
Maintenance and operation
3,675,377
3,853,781
3,514,949
3,317,944
4,366,130
Depreciation and amortization
1,759,296
1,833,732
1,980,617
1,918,452
1,900,000
Total Operating Expenses
13,772,672
14,866,430
16,296,444
16,202,925
17,593,630
OPERATING INCOME
2,739,123
2,234,406
1,932,569
1,126,165
599,370
NONOPERATING REVENUE
Interest income
480,050
108,669
150,371
1,084,525
150,000
Other nonoperating revenues
149,374
155,845
178,880
230,610
28,000
Loss on sale of assets
(7)213)
—
—
—
—
Interest expense
(1,806,578)
(1,787,999)
(1,384,442)
(1,560,708)
(1,814,600)
Total Nonoperating Revenues
(1,184,367)
(1,523,485)
(1,055,191)
(245,573)
(1,636,600)
CHANGES IN NET POSITION
1,554,756
710,921
877,378
880,592
(1,037,230)
NET POSITION, Beginning of Year
36,116,452
37,671,208
38,382,129
39,259,507
40,140,099
NET POSITION, End of Year
37,671,208
38,382,129
39,259,507
40,140,099
39,102,869
Sources: City of Tustin FY2016-19 Comprehensive Annual Financial Reports.
-33-
Historical and Projected Operating Results and Debt Service Coverage
The following two tables provide a history and projection of the Gross Revenues and Maintenance
and Operation Costs for ten fiscal years as prepared by the Enterprise.
The following table presents the Historical Summary of Gross Revenues, Maintenance and
Operation Costs and debt service coverage for the five most recent fiscal years. Data for fiscal years 2014-
15 through 2018-19 are based on figures from the City's Audited Financial Statements.
Table 13
HISTORICAL SUMMARY OF GROSS REVENUES,MAINTENANCE AND
OPERATION COSTS
AND DEBT SERVICE COVERAGEW
For Fiscal Years Ending June 30,
Source: City of Tustin 2015-2018 CAFRs and City of Tustin Finance Department.
(1) Excludes depreciation and amortization.
(2) The 2011 Bonds were refunded by the 2016 Bonds on September 28, 2016.
��
2015
2016
2017
2018
2019
Gross Revenues
Fixed Charges
$ 6,551,507
$ 6,585,228
$ 7,150,936
$ 6,372,946
$ 6,344,719
Consumption charges
10,606,479
8,216,619
8,421,284
10,316,044
9,449,732
Investment income
249,863
480,050
108,669
150,371
1,084,525
Capital charge
1,531,801
1,535,177
1,528,616
1,540,023
1,534,639
Other
489,091
324,149
155,845
178,880
230,610
Total Gross Revenues
19,428,741
17,141,223
17,365,350
18,558,264
18,644,225
Maintenance and Operation Costs
Personnel services
2,488,663
2,849,928
3,203,733
3,781,121
3,708,959
Purchased water
6,530,965
5,488,071
5,975,184
7,019,757
7,257,570
Maintenance and operation
3,492,020
3,675,377
3,853,781
3,514,949
3,317,944
Total Maintenance and Operation Costs
12,511,648
12,013,376
13,032,698
14,315,827
14,284,473
Net Revenues Available for Debt Service
6,917,093
5,127,847
4,332,652
4,242,437
4,359,752
Debt Service
2011 Bonds(2)
1,047,625
1,047,625
-
-
-
2012 Bonds
997,175
995,425
998,075
992,275
955,475
2013 Installment Payments
699,020
698,120
697,220
701,320
700,320
2016 Bonds (2)
-
-
349,378
687,300
687,300
Total Debt Service
2,743,820
2,741,170
2,044,673
2,380,895
2,383,095
Debt Service Coverage
2.52x
1.87x
2.12x
1.78x
1.83x
Revenues Available after Debt Service
4,173,273
2,386,677
2,287,979
1,861,542
1,976,657
Source: City of Tustin 2015-2018 CAFRs and City of Tustin Finance Department.
(1) Excludes depreciation and amortization.
(2) The 2011 Bonds were refunded by the 2016 Bonds on September 28, 2016.
��
The following table presents the Projected Summary of Gross Revenues, Maintenance and
Operation Costs and debt service .coverage for the fiscal years 2019-20 through 2023-24. Projections for
fiscal year 2019-20 are based on projected revenues for the Enterprise from the City's 2019-20 Budget,
adopted June 18, 2019 with certain modifications based on updated information.
While the City, believes that these assumptions are reasonable, the Enterprise cannot guarantee
that its actual results will not differ. The projections in the following table do not include- any capital
projects planned by the Enterprise.
Table 14
PROJECTED SUMMARY OF GROSS REVENUES,MAINTENANCE AND
OPERATION COSTS AND DEBT SERVICE COVERAGE0)
For Fiscal Years Ending June 30,
Maintenance and Operation Costs M
Personnel services
2020
2021
2022
2023
2024
Gross Revenues
7,331,000
7,847,000
8,239,350
8,651,318
9,083,883
Fixed Charges
6,3673,000
8,441,598
8,814,649
9,206,353
9,617,642
9Consumption charges
10,639,189
11,432,086
11,991,663
12,579,219
13,196,153
Investment income
150,000
150,000
150,000
150,000
150,000
Capital charge
1,540,000
—
—
—
—
Other
28,000
28,000
28,000
28,000
28,000
Total Gross Revenues
18,730,189
20,051,684
20,984,312
21,963,572
22,991,795
Maintenance and Operation Costs M
Personnel services
3,996,500
4,086,200
4,206,897
4,335,291
4,467,712
Purchased water
7,331,000
7,847,000
8,239,350
8,651,318
9,083,883
Maintenance and operation
4,366,130
4,233,030
4,444,682
4,666,916
4,900,261
Total Maintenance and Operation
15,693,630
16,166,230
16,890,929
17,653,525
18,451,856
Costs
2,009,960
2,316,238
2,320,732
2,320,341
2,458,198
Net Revenues Available for Debt Service 3,036,559 3,885,454 4,093,383 4,310,047 4,539,939
Debt Service
2012 Bonds
998,500
995,600
995,200
998,400
—
2013 Installment Payments (3)
324,160
—
—
—
—
2016 Bonds
687,300
687,300
687,300
687,300
1,592,300
2020 Bonds (4)
—
633,338
638,232
634,641
865,898
Total Debt Service
2,009,960
2,316,238
2,320,732
2,320,341
2,458,198
Debt Service Coverage
1.51x
1.68x
1.76x
1.86x
1.84x
Revenues Available after Debt Service 1,026,599 1,569,216 1,772,651 1,989,706 2,081,741
Source: City of Tustin 2019-20 Budget and City of Tustin Finance Department.
(1) Includes rate increases effective on February 1, 2020.
(2) Excludes depreciation and amortization. Assumes an annual increase of
(3) The 2013 Installment Payments will be refunded by the Bonds.
(4) Preliminary, subject to change.
The Director of Finance and Director of Public Works have been authorized by resolution of the
City Council to adjust water rates to insure that Enterprise revenues are sufficient to cover the total
expenses of providing water, including depreciation, administration, debt service coverage levels, and
required capital outlay. For additional information, see "WATER RATES" above.
-35-
Water Conservation and Supply Shortage Contingency Measures
Water Conservation Act of 2009 (SBx7--7). The Water Conservation Act of 2009 set forth in State
Senate Bill x7-7 ("SBx7-7" ), was signed by the Governor in 2009 and became effective in February 2010.
Among other things, SBx7-7 seeks to achieve a State-wide 20% reduction in urban per capita water use by
December 31, 2020. SBx7-7 requires each urban retail water supplier (such as the City) to develop urban
water use targets to help meet the 20% reduction goal by 2020, with an interim 10% reduction goal by
2015. An urban water retail supplier that fails to meet its water use target by December 31, 2020 will be
ineligible for a water grant or loan administered by the State until the supplier complies with the
provisions of SBx7-7, unless the State Department of Water Resources determines that the supplier is
eligible for a water grant or loan after the supplier's submission of a schedule, financing plan, and budget
for achieving the required per capita reductions.
Under SBx7-7, a retail water agency may comply with the reduction requirements as an individual
or as part of a regional alliance. The advantage of becoming part of a regional alliance is that the agency
then has multiple means of meeting the compliance requirements. The City is member of Orange County
20x2020 Regional Alliance formed by MWDOC (the "Regional Alliance"). The Regional Alliance is
comprised of 29 retail agencies throughout the County. The Regional Alliance has a 2015 weighted target
of 175.9 gallons per capital per day ("GPCD") and a 2020 weighted target of 156.4 GPCD. The actual
2015 water use in the region was reported to be 129 GPCD, well below the 2015 interim target and the
2020 target. The Regional Alliance has fully met the 20% mandated water reduction goal.
California 2011-17 Drought; State Emergency Measures and Continuing Efforts. California has a
highly variable climate, and often experiences very wet years followed by extremely dry ones. During the
last thirty-five years, the State experienced drought periods between 1986 and 1992, between 2007 and
2009, and between 2011 and 2017.
The drought from December 2011 to March 2017 was considered one of the worst in the State's
recorded history, with 2012 through 2015 having the driest four-year statewide precipitation on record.
Between 2014 and 2015, the Governor issued two emergency proclamations (on January 14, 2014 and
April 25, 2014) and four executive orders (Executive Orders B-26-14, B-28-14, B-29-15 and B-36-15).
During this period, SWRCB adopted and implemented regulations for water use reductions and
restrictions. Among such actions, the SWRCB adopted emergency regulations in 2015 to achieve a 25%
reduction in the overall potable urban production statewide in accordance with directives set forth in
Executive Order B- 29-15. It was reported that, overall, the State saved an average of more than 24%
during the twelve months that the mandate was in place. In addition, the Sustainable Groundwater
Management Act of 2014 was enacted. The State developed a five-year California Water Action Plan,
with the stated goals of more reliable water supplies, the restoration of important species and habitat, and
a more resilient, sustainably managed water resources system (water supply, water quality, flood
protection, and environment).
On May 16, 2016, the Governor issued Executive Order B-37-16, which among other things,
directed: (i) the State Department of Water Resources to work with the SWRCB to develop new water use
targets as part of a permanent framework for urban water agencies, (ii) the permanent requirement of
urban water suppliers to issue monthly reports of their water usage, conservation amounts and
enforcement efforts, (iii) the prohibition of wasteful potable water practices (such as hosing of sidewalks,
watering lawns in a manner that causes runoff); (iv) California Energy Commission's certification of
innovative water conservation and water loss detection and control technologies that also increase energy
-36-
efficiency; and (v) consultation by the State Department of Water Resources with urban water suppliers,
local governments, environmental groups and other partners to update requirements for water shortage
contingency plans.
The winter of 2016-17 brought significant precipitation and was one of the wettest on record for
Northern California. On April 7, 2017, Governor Brown issued Executive Order B-10- 17, rescinding the
two emergency proclamations from January and April 2014 and the four drought related Executive Orders
issued in 2014 and 2015. However, Executive Order B-37-16 was largely left in place.
Executive Order B-10-17 terminated the drought state of emergency for all counties in the State,
except for the counties of Fresno, Kings, Tulare and Tuolumne with directives for those particular
counties. The City is located in Orange County.
During the 2018-19 winter season, several strong winter storms brought above-average levels of
snowpack and precipitation to the State. In March 2019, the U.S. Drought Monitor (a map which is
updated weekly through a joint effort of the National Drought Mitigation Center at the University of
Nebraska -Lincoln, the National Oceanic and Atmospheric Administration, and the U.S. Department of
Agriculture) reported that California was drought free for. the first time since 2011.
The City cannot predict if and when California will experience another drought, and the actions
that the State will have to take in response. The State is continuing to implement the directives of
Executive Order B-37-16, dubbed "Making Water Conservation a California Way of Life." The
implementation of the Sustainable Groundwater Management Act of 2014 and the additional directives
under Executive Order B-10-17 for the counties of Fresno, Kings, Tulare and Tuolumne also continues.
Employee Pension Plans
The Enterprise pays an allocable portion of the City's administrative expenses, including
employee compensation and benefits from revenues of the Enterprise. Under the Indenture, Net
Revenues (which are pledged to the payment of the Bonds) is defined as Gross Revenues less
Maintenance and Operation Costs. Maintenance and Operation Costs include, among other things,
administrative costs of the City attributable to the operation and maintenance of the Enterprise, such as
salaries and wages of employees, overhead, taxes (if any), the cost of permits and licenses to operate the
Enterprise and insurance premiums. The table below shows'the City's contribution to the Ca1PERS plans
(discussed below), and the amounts allocated to each of the Enterprise for the years shown:
Table 15
CITY OF TUSTIN
CONTRIBUTION TO CALPERS PLANS AND ALLOCATION TO ENTERPRISE
Fiscal Year City Contribution
Ended June 30, To Ca1PERS
2015
$1,379,562
2016
1,503,081
2017
1,850,072
2018
1,881,701
2019
2,249,216
Source: City of Tustin Finance Department.
-37-
Amount Allocated
To Enterprise
Allocation %
$176,552
13%
201,558
13%
256,685
14%
274,610
15%
321,503
14%
General Information about the City's CaIPERS Plans. All qualified permanent and probationary
employees are eligible to participate in either (1) the City's Miscellaneous Plan, an agent multiple -
employer defined benefit pension plan administered by the California Public Employees' Retirement
System ("CaIPERS"), which acts as a common investment and administrative agent for its participating
member employers, or (2) the City's Safety Plan, a cost-sharing multiple employer defined benefit
pension plan administered by CaIPERS. They may be collectively referred to as the "Plans" or
individually as a "Plan". Benefit provisions under the Plans are established by State statute and City
resolutions. CaIPERS 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 CaIPERS
website.
CaIPERS 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, equal to one year of full-time employment. Members with five years of total
service are eligible to retire at age 50 to 62 with statutorily reduced benefits. All members are eligible for
non -duty disability benefits after five (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, 2019 (valuation date), the following employees were covered by
the benefit terms for each Plan.
Table 16
CITY OF TUSTIN
COVERED EMPLOYEES
Source: City of Tustin Finance Department.
(1) Combined Police and Fiore Plans
Contributions. Section 20814(c) of the California Public Employees' Retirement Law ("PERL")
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. The total plan
contributions are determined through CaIPERS' annual actuarial valuation process. 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 employer is
required to contribute the difference between the actuarially determined rate and the contribution rate of
employees. Employer contribution rates may change if plan contracts are amended. Payments made by the
employer to satisfy contribution requirements that are identified by the pension plan terms as plan
member contribution requirements are classified as plan member contributions.
Net Pension Liability. The City's net pension liability for both Plans is measured as the total
pension liability, less the plan's fiduciary net position. As of June 30, 2019 the City reported a net pension
-38-
Misc
Safety
Plans
Plan
Inactive employee or beneficiaries currently receiving benefits
261
157
Inactive employees entitled to but not yet receiving benefits
301
71
Active employees
199
89
Total
761
317
Source: City of Tustin Finance Department.
(1) Combined Police and Fiore Plans
Contributions. Section 20814(c) of the California Public Employees' Retirement Law ("PERL")
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. The total plan
contributions are determined through CaIPERS' annual actuarial valuation process. 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 employer is
required to contribute the difference between the actuarially determined rate and the contribution rate of
employees. Employer contribution rates may change if plan contracts are amended. Payments made by the
employer to satisfy contribution requirements that are identified by the pension plan terms as plan
member contribution requirements are classified as plan member contributions.
Net Pension Liability. The City's net pension liability for both Plans is measured as the total
pension liability, less the plan's fiduciary net position. As of June 30, 2019 the City reported a net pension
-38-
liability for its Miscellaneous plans of $27,865,426 and a net pension liability for its Safety Plans of
$36,911,786.
For more information, including actuarial assumptions, a discussion of the discount rate used, and
schedules of funding progress for the City's various pension plans, see APPENDIX B—
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2019—Notes to Basic Financial Statements—NOTE 9.
Recent Actions Taken by CalPERS. At its April 17, 2013, meeting, Ca1PERS' Board of
Administration (the "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 that spread investment returns over a 15 -year period with experience gains and losses
paid for over a rolling 30 -year period. As a result, Ca1PERS now employs an amortization and smoothing
policy that will pay for all gains and losses over a 20 -year period with a five-year ramp -up, and five-year
ramp -down, period. The new amortization and smoothing policy was used for the first time in the June 30,
2013 actuarial valuations in setting employer contribution rates for fiscal year 2015-16.
On February 18, 2014, the Board of Administration approved new demographic actuarial
assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit
groups, is a new 20 -year mortality projection reflecting longer life expectancies and that longevity will
continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits
will increase as a result. The Board of Administration also assumed earlier retirements for Police 3%@50,
Fire 3%@55, and Miscellaneous 2.7%@55 and 3%@60, which will increase costs for those groups. As a
result of these changes, rates increased beginning in fiscal year 2016-17 (based on the June 30, 2014
valuation) with full impact in fiscal year 2020-21.
On November 18, 2015, the Board of Administration adopted a funding risk mitigation policy
intended to incrementally lower its discount rate - its assumed rate of investment return - in years of good
investment returns, help pay down the pension fund's unfunded liability, and provide greater
predictability and less volatility in contribution rates for employers. The policy establishes a mechanism to
reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points
in years when investment returns outperform the existing discount rate, currently 7.5%, by at least four
percentage points. CAPERS staff modeling anticipates the policy will result in a lowering of the discount
rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the pension
system by lowering the volatility of investment returns. More information about the funding risk
mitigation policy can be accessed through CAPERS' web site at the following website address:
https://www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-risk-mitigation-policy.
The reference to this Internet website is provided for reference and convenience only. The information contained
within the website may not be current, has not been reviewed by the City or the Underwriter and is not
incorporated in this Official ficial Statement by reference.
On December 21, 2016, the Board of Administration voted to lower its discount rate from the
current 7.5% to 7.0% over the next three years according to the following schedule.
Fiscal Year Discount Rate
2017-18 7.375%
2018-19 7.250
2019-20 7.000
-39-
For public agencies like the City, the new discount rate took effect on July 1, 2019. As the
discount rate is decreased employers that contract with Ca1PERS to administer their pension plans will
see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January
1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. The
three-year reduction of the discount rate will result in average employer rate increases of about 1% to 3% of
normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2% to 5% increase for
most safety plans. Additionally, many Ca1PERS employers will see a 30 to 40% increase in their current
unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20
years to bring the pension fund to a fully funded status over the long-term.
PERS Amortization Period Reform. On February 1.3, 2018 the CalPERS Board voted to shorten the
period over which actuarial gains and losses are amortized from 30 years to 20 years for new pension
liabilities. The new 20 -year amortization period begins with new gains or losses accrued starting with the
June 30, 2019 actuarial valuations. The first payments on the new 20 -year amortization schedule will take
place in 2021.
A shorter amortization period will increase annual Unfunded Accrued Liability ("UAL")
contributions for cities that participate in CAPERS so long as CAPERS remains underfunded. The
shortened amortization period will also lead to reductions of periods of negative amortization of the UAL,
interest cost savings, and faster recoveries of funded status after market downturns.
Cities that participate in CAPERS will also see additional volatility in their future UAL
contributions due to market performance as gains or losses will be amortized faster under the new
amortization period.
The City cannot currently estimate the impact the shorter amortization period will have on its
required contributions for its Miscellaneous and Safety Plans.
Other Post -Employment Benefits
Plan Description. The City has established an agent multiple -employer Defined Benefit
Postemployment Healthcare Plan ("OPEB") that provides post-retirement medical benefits to retirees
through the California Public Employees Medical and Hospital Care Act ("PEMCHA"). The plan
provides healthcare benefits to eligible retirees and their dependents. Benefit provisions are established
and may be amended through agreements and memorandums of understanding between the City, its
management employees, and unions representing City employees.
In fiscal year 2017-18, the City established an OPEB trust administered by the Public Agency
Retirement Services (the "PARS OPEB Trust"). The assets in the PARS OPEB Trust are held in trust
for the exclusive purpose of providing post -employment health care benefits to the eligible beneficiaries.
The City makes discretionary contributions to the PARS OPEB Trust and pays benefits directly to the
insurance provider and retirees.
Membership of the OPEB Plan as of June 30, 2019 consisted of 113 inactive employees or
beneficiaries currently receiving benefits and 284 active employees.
Funding Policy. There is no statutory requirement for the City to contribute the more than the
PEMHCA minimum for eligible retirees and surviving spouses. The City has currently chosen to
contribution 100% of the actuarially determined contribution. For measurement period ending June 30,
-40-
2019, the City contributed $500,000 to the PARS OPEB Trust, made payments of $480,087 to insurance
providers and retirees, and the estimated implied subsidy was $297,598, resulting in total contributions of
$1,277,685. The liability for governmental activities is primarily liquidated from the general fund.
The Enterprise pays an allocable portion of the City's OPEB expenses from revenues of the
Enterprise.
Annual OPEB Cost and Net OPEB Obligation. The following table shows the amount contributed
to the plan, and changes in the City's net OPEB obligation:
Table 17
CITY OF TUSTIN
OPEB LIABLITY
As of June 30, 2019
(Dollars in Thousands)
Service cost
$ 735,504
Interest on OPEB Liability
890,622
Changes in Assumptions
(398)848)
Employer Contribution
(1,277,685)
Net Investment Income
(77,171)
Administrative Expense
-
Change in Fund Balance
(127,578)
Balance at June 30, 2018
13,892,607
Balance at June 30, 2019
13,765,029
Source: City of Tustin 2018-19 CAFR.
For additional information about the City's OPEB Plan, see APPENDIX B—
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2019, Note 10.
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.
-41-
For more information about the City's investment policy, see APPENDIX D—CITY
INVESTMENT POLICY.
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND FEES
Under the California Constitution, the power of initiative is reserved to the voters for the purpose
of enacting statutes and constitutional amendments. In the past, the voters have exercised this power from
time to time, including through the adoption of Propositions 13 and 218.
From time to time other State and local initiative measures could be adopted, affecting the ability
of the City to increase revenues and to increase appropriations.
Article XIIIA
On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the
California Constitution ("Article XIIIA"). Article XHIA 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 XHIA 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
-42-
providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a
requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess
would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain
expenditures are excluded from the appropriations limit including payments of indebtedness existing or
legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and
payments required to comply with court or federal mandates which without discretion require an
expenditure for additional services or which unavoidably make the providing of existing services more
costly.
Proposition 218
General. On November 5, 1996, California voters approved Proposition 218, the so-called "Right
to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which
affect the ability of local governments to levy and collect both existing and future taxes, assessments, and
property -related fees and charges. Proposition 218, which generally became effective on November 6, .
1996, changed, among other things, the procedure for the imposition of any new or increased property -
related "fee" or "charge," which is defined as "any levy other than an ad valorem tax, a special tax or an
assessment, imposed by a [local government] upon a parcel or upon a person as an incident of property
ownership, including user fees or charges for a property related service" (and referred to in this section as
a "property -related fee or charge").
Specifically, under Article XHID, 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 MID 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.
-43-
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
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 v. Vedd (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
MD, 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
-44-
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 XIED to limit the ability
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 withsuch 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
-45-
directly to the payor that is not provided to those not charged, and which does not exceed the reasonable
costs to the local government of providing the service or product; (3) a charge imposed for the reasonable
regulatory costs to a local government for issuing licenses and permits, performing investigations,
inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and
adjudication thereof; (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 XHID, 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
-46-
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.
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.
-47-
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
conservation measures could decrease usage of the services of the Enterprise.
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 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.
-48-
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.
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.
Public Safety Power Shutoffs
Southern California Edison ("SCE"), the provider of electric power service in the City, has
notified its customers that when extreme and potentially dangerous weather conditions exists, SCE may
need to proactively turn off power in high fire risk areas to reduce the threat of wildfires. (referred to as a
"Public Safety Power Shutoff").
According to SCE, a Public Safety Power Shutoff event will last as long as the extreme and
potentially dangerous fire weather conditions exist, along with additional time to inspect/repair our
equipment in the affected area to ensure safe and reliable power restoration. [The City maintains several
portable emergency power generators and has installed backup power generators at key lift stations and
wells.] However, in the event of a prolonged Public Safety Power Shutoff within the City, the operations
of the Enterprise could be affected.
Risks Related to Cyber Security
The City faces various cyber security threats, including, but not limited to, hacking, viruses,
malware, ransomware and other attacks on its computers and its networks. No assurance can be given that
the City's efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack
will not materially impact the operations or finances of the Enterprise or the ability of the City to make
timely payments on the Bonds. The Enterprise is also reliant on other entities and service providers
including without limitation OCWD, and MWDOC. No assurance can be given that the City and these
-49-
other entities will not be adversely affected by cyber threats and attacks in a manner that may affect
owners of 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
In the opinion of Quint & Thimmig LLP, Bond Counsel, under existing law, interest on the Bonds
is exempt from State of California personal income taxes. Bond Counsel expresses no opinion as to any
other tax consequences regarding the Bonds. INTEREST ON THE BONDS IS NOT EXCLUDED
FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES.
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 Jones Hall, A Professional Law Corporation, San Francisco,
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.
-50-
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.
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, 2019, and to provide notices of the occurrence of certain
enumerated events. The Annual Report and the notices of enumerated 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
enumerated 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).
[UPDATE]
In connection with the City's Community Facilities District No. 06-1 (Tustin Legacy/Columbus
Villages) Special Tax Bonds, Series 2010 (the "2010 CFD Bonds"), the City did not meet all content
requirements for all Annual Report filings within the last five fiscal years. However, the 2010 CFD Bonds
have since been redeemed and the disclosure reporting obligations terminated. Additionally, for the 2012-
13 fiscal year, the City did not timely file annual reports for the City's Community Facilities District No.
06-1 (Tustin Legacy/Columbus Villages) Special Tax Bonds, Series 2007A (the "2007A CFD Bonds").
A subsequent filing was made 247 days after the Annual Report filing deadline. As of this date the City is
compliant with all Annual Report filing requirements.
For Fiscal Years 2010-11 and 2012-13, the City did not timely file its audited financial statements
in connection with the City's Community Facilities District No. 04-1 (Tustin Legacy/John Laing Homes)
Special Tax Bonds, Series 2004, the 2007A CFD Bonds, the City's Community Facilities District No. 07-
1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007, the 2010 CFD Bonds and the City's
-51-
Community Facilities District No. 04-1 (Tustin Legacy/John Laing Homes) 2013 Special Tax Refunding
Bonds. Subsequent filings were made between 18 and 442 days after the filing deadline. As of this date,
the City is compliant with all audited financial statement filing requirements.
As of this date the City is compliant with all filing requirements with regards to rating notices.
AUDITED FINANCIAL STATEMENTS
The City's Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2019 (the
"City CAFR") is attached as APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019. The City CAFR includes the City's
audited financial statements for the fiscal year ended June 30, 2019. The City's financial statements were
audited by White Nelson Diehl Evans LLP, Irvine, California (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 prepayment of the 2013 Installment Payments and the refunding of the
2013 Bonds thereafter. See "THE 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.
UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (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/less a net original issue
premium/discount 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
-52-
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, 2019, are contained in APPENDIX
B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2019.
The execution of this Official Statement and its delivery have been authorized by the City Council
of the City.
CITY OF TUSTIN
By
-53-
City Manager
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX A
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, 2019
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) Taxable Water Refunding Revenue Bonds, Series 2020 (the "Bonds").
The Bonds are being issued pursuant to an indenture of trust, dated as of February 1, 2020 (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 above and, in the Bond. 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:
"Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections
3 and 4 of this Disclosure Certificate.
"Annual Report Date" means the March 31 after the end of the City's fiscal year.
"Dissemination Agent" shall mean, initially, Applied Best Practices, LLC, or any successor Dissemination
Agent designed in writing by the City and which has been filed with the then current Dissemination Agent a written
acceptance of such designation.
"Fiscal Year" means any twelve-month period beginning on July 1 in any year and extending to the next
succeeding June 30, both dates inclusive, or any other twelve-month period selected and designated by the City as
its official fiscal year period under a Certificate of the City filed with the Trustee.
"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 that may be designated by the Securities and Exchange Commission as such for
purposes of the Rule in the future.
"Official Statement" means the final official statement executed by the City in connection with the issuance
of the Series Bonds.
"Participating Underwriter" means Stifel, Nicolaus & Company, Incorporated, the original underwriter of
the Series Bonds.
"Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as it may be amended from time to time.
"Significant Events" means any of the events listed in Section 5(a) of this Disclosure Certificate.
Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered
by the City for the benefit of the holders and beneficial owners of the Series Bonds and in order to assist the
Participating Underwriter in complying with S.E.C. Rule 15c2 -12(b)(5).
* Preliminary, subject to change.
Appendix C
Page 1
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date,
commencing March 31, 2020, with the report for fiscal year 2018-19 provide to the MSRB, in an electronic format as
prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure
Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual
Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date
the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination
Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report
may be submitted as a single document or as separate documents comprising a package and may include by 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 Annual
Report Date, if not available by that date. If the City's fiscal year changes, it shall give notice of such change in the
same manner as for a Significant Event under Section 5(b). The City shall provide a written certification with each
Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual
Report required to be furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the
Annual Report Date, the City in a timely manner shall provide (or cause the Dissemination Agent to provide) to the
MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then -applicable rules and electronic
format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the
Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was
provided.
Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference
the following:
(a) The City's audited financial statements prepared in accordance with generally accepted accounting
principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting
Standards Board. If the City's audited financial statements are not available by the Annual Report Date, 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.
Appendix C
Page 2
(b) Unless otherwise provided in the audited financial statements filed on or prior to the annual filing
deadline for Annual Reports provided for in Section 3 above, financial information and operating data with respect to
the City for preceding fiscal year, substantially similar to that provided in the Official Statement, 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 2016 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) In addition to any of the information expressly required to be provided under this Disclosure
Certificate, the City shall provide such further material 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.
(d) 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 the
MSRB's Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each
such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Significant
Events with respect to the Series Bonds:
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults, if material;
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;
(v) Substitution of credit or liquidity providers, or their failure to perform;
(vi) 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;
(vii) Modifications to rights of security holders, if material;
(viii) Bond calls, if material, and tender offers;
(ix) Defeasances;
Appendix C
Page 3
(x) Release, substitution, or sale of property securing repayment of the securities, if material;
(xi) Rating changes;
(xii) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person;
(xiii) The consummation of a merger, consolidation, or acquisition involving the City or an
obligated person, or the sale of all or substantially all of the assets of the City or an 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, if
material;
(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if
material;
(xv) The incurrence of a financial obligation of the City or other obligated person, if material, or
agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial
obligation of the City or other obligated person, any of which affect security holders, if material; or
(xvi) A default, event of acceleration, termination event, modification of terms, or other similar
events under the terms of a financial obligation of the City or other obligated person, any of which reflect
financial difficulties.
(b) Whenever the City obtains knowledge of the occurrence of a Significant Event, the City shall, or shall
cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, 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
Significant Event. Notwithstanding the foregoing, notice of Significant Events described in subsection (a)(viii) above
need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders
of affected Series Bonds under the Bond Indenture.
(c) The City acknowledges that the events described in subparagraphs (a)(ii), (a)(vii), (a)(viii) (if the event
is a bond call), (a)(x), (a)(xiii), (a)(xiv) and (a) (xv) of this Section 5 contain the qualifier "if material." The City
shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent
that the City determines the event's occurrence is material for purposes of U.S. federal securities law. The City
intends that the words used in paragraphs (xv) and (xvi) and the definition of "financial obligation" to have the
meanings ascribed thereto in SEC Release No. 34-83885 (August 20, 2018).
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(xii) above is considered
to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in
a proceeding under the United States 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 City, or if such jurisdiction has been assumed by leaving the existing governing 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 City.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB 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 legal defeasance, prior redemption or payment in full of all of the Series Bonds. If such
Appendix C
Page 4
termination occurs prior to the final maturity of the Series Bonds, the City shall give notice of such termination in
the same manner as for a Significant Event under Section 5(b).
Section 8. 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 Dissemination
Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by
providing 30 days' written notice to the City.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided
that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), 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 Series Bonds, or type of business
conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally
recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the
Series Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in
circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Series Bonds in the manner
provided in the Bond Indenture for amendments to the Bond Indenture with the consent of holders, or (ii) does not,
in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial
owners of the Series Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended
pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the
amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and
the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing
financial statements, the annual financial information for the year in which the change is made shall present a
comparison between the financial statements or information prepared on the basis of the new accounting principles
and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative
discussion of the differences in the accounting principles and the impact of the change in the accounting principles
on the presentation of the financial information, in order to provide information to investors to enable them to
evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be
quantitative.
The Dissemination Agent shall not be obligated to enter into any amendment increasing or affecting its
duties or obligations hereunder.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a
Significant Event under Section 5(b).
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 Significant 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 Significant Event in addition to
that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this
Appendix C
. Page 5
Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence
of a Significant Event.
Section 11. D f . If the City fails to comply with any provision of this Disclosure Certificate, the
Participating Underwriter or any holder or beneficial owner of the Series Bonds 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. A default under this Disclosure Certificate shall not be
deemed an Event of Default under the Bond Indenture, and 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. Duties, Immunities and Liabilities of Dissemination Agent.
(a) Section 27 of the Bond Indenture is hereby made applicable to this Disclosure Certificate as if this
Disclosure Certificate were (solely for this purpose) contained in the Bond Indenture. The Dissemination Agent
shall be entitled to the protections and limitations from liability afforded to the Trustee thereunder. The
Dissemination Agent -shall have only such duties as are specifically set forth in this Disclosure Certificate, and the
City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless
against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its
powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The
Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder
and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party. The
obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Series Bonds.
(b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in
accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal
fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the
Series Bonds and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Certificate 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 instrument.
Date: [Closing Date]
ACKNOWLEDGED:
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By
Authorized Officer
CITY OF TUSTIN
By
Appendix C
Page 6
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) Taxable Water Refunding Revenue Bonds,
Series 2020
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:
cc: Trustee
APPLIED BEST PRACTICES, LLC, as
Dissemination Agent
By —
Title
Appendix C
Page 7
THIS PAGE INTENTIONALLY LEFT BLANK
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 information in this section of the Official Statement is presented as general background data. The
Bonds are payable solely from the revenues of the Enterprise and other sources as described in the Official
Statement. The taxing power of the City, the State of California, or any political subdivision thereof is not pledged
to the payment of the Bonds.
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.
Introduction
The City of Tustin. The City of Tustin (the "City") is located in the central part of 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, at the intersection of the 5 and 55 freeways. The City covers over eleven
square miles and adjoins the cities of Orange, Santa Ana, and Irvine. While the City is surrounded by
much of the County's main industrial employment, the City is essentially a residential community.
Incorporated in 1927, the City operates as a general law city with a Council -Manager form of government.
The elected City Council is responsible for policy making, and a professional City Manager is appointed
by the Council. The City Council is a five -member governmental body that includes the Mayor, Mayor
Pro Tem, and three Council Members.
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.
Orange County. Orange County was incorporated in 1889 and is located in the southern part of the
State of California. Orange County is one of the major metropolitan areas in the state and nation. Orange
County occupies a land area of 798 square miles with a coastline of 42 miles serving a population of over 3.
million. It represents the third most populous county in the State and ranks sixth in the nation.
Orange County is a charter county as a result of the March 5, 2002, voter approval of Measure V,
which provides for an electoral process to fill mid-term vacancies on the Board of Supervisors. Before
Measure V, as a general law county, mid-term vacancies would otherwise be filled by gubernatorial
appointment. In November 2008, voters approved Measure J, which added Article III, Section 301 to the
Charter of Orange County requiring voter approval for increases in future retirement system benefits of
any employee, legislative officer, or elected official of Orange County in the Orange County Employees
Retirement System (OCERS) or any successor retirement system, with the exception of statutorily -
established cost of living adjustments, salary increases, and annual leave or compensatory time cash -outs.
In all other respects, Orange County is like a general law county. Orange County is governed by a five -
member Board of Supervisors each of which serves four-year terms, and annually elect a Chairman and
Appendix E
Page 1
Vice -Chairman. The supervisors represent districts that are each approximately equal in population.
Orange County provides a full range of services countywide, for the unincorporated areas, and contracted
through cities.
Population
The table below summarizes population of the City of Tustin, Orange County and the State of
California for the last five years.
CITY of TUSTIN, ORANGE COUNTY and CALIFORNIA.
Population
City of Orange State of
Year Tustin County California
2015 80,032 3,155,578 38,952,462
2016 81,509 3,174,945 39,214,803
2017 81,980 3,199,509 39,504,609
2018 81,755 3,213,275 39,740,508
2019 81$69 3,222,498 39,927,315
Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-19, with 2010
Census Benchmark,
Appendix E
Page 2
Employment
The following table summarizes historical employment and unemployment for Orange County,
the State of California and the United States:
ORANGE COUNTY, CALIFORNIA, and UNITED STATES
Civilian Labor Force, Employment, and Unemployment
(Annual Averages)
Year Area
2014 Orange County
California
United States
Labor Force
Employment
Unemployment
1,578,200
1,491,800
86,400
18,811,400
17,397,100
1,414,300
155,922,000
146,305,000
9,617,000
Unemployment
RateW
5.53
7.5
6.2
2015 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
8,296,000
5.3
2016 Orange County
1,602,400
1,538,000
64,300
4.0
California
19,102,700
18,065,000
1,037,700
5.4
United States
159,187,000
151,436,000
7,751,000
4.9
2017 Orange County
1,619,200
1,562,600
56,600
3.5
California
19,312,000
18,393,100
918,900
4.8
United States
160,320,000
153,337,000
6,982,000
4.4
2018 (2) Orange County 1,625,400 1,577,900 47,500 2.9
California 19,398,200 18,58200 815,400 4.2
United States 162,075,000 155,761,000 6,314,000 3.9
Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-
2018, 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.
Appendix E
Page 3
Major Employers
The following table lists the top 10 largest industries within the County as of June 30, 2018.
ORANGE COUNTY
Top 10 Industries
as ofJune 30, 2018
Source: Orange County 2017.18 CAFR,
Construction Activity
The following tables reflect the five-year history of building permit valuation for the City of
Tustin and Orange County, respectively:
CITY of TUSTIN
Building Permits and Valuation
(Dollars in Thousands)
2014
% of Total
2016
2017
County
Employer
Employees
Employment
Walt Disney Co.
30,000
1.87%
University of California, Irvine
23,605
1.47
Orange County
18,257
1.14
St. Joseph Health System
13,786
0.86
Kaiser Permanente
7,800
0.49
Boeing Co.
6,103
0.38
Albertson
6,057
0.38
Wal-Mart
6,000
0.37
Hoag Memorial Hospital
5,680
0.35
Target Corporation
5,400
0.34
Total Top 10
122,688
7.65%
Source: Orange County 2017.18 CAFR,
Construction Activity
The following tables reflect the five-year history of building permit valuation for the City of
Tustin and Orange County, respectively:
CITY of TUSTIN
Building Permits and Valuation
(Dollars in Thousands)
Appendix E
Page 4
2014
2015
2016
2017
20180)
Permit Valuation:
New Single-family
$ 919
$ 87,618
$ 49,819
$ 6,561
$ 6,746
New Multi -family
-
-
708
-
2,063
Res. Alterations/Additions
1,780
2,846
5,691
3012
3,001
Total Residential
2,700
90,464
56,218
9,574
11,811
Total Nonresidential
21,188
21,801
36,791
37,637
16,673
Total All Building
$23,889
$112,266
$93,010
$47,211
$28,485
New Dwelling Units:
Single Family
3
241
139
19
32
Multiple Family
-
-
4
-
10
Total
3
241
143
19
42
Appendix E
Page 4
Source: Construction Industry Research Board: `Building Permit Summary."
Note: Totals may not add due to independent rounding.
(1) Latest available full -year data.
Appendix E
Page 5
ORANGE COUNTY
Building Permits and Valuation
(Dollars in Thousands)
2014
2015
2016
2017
20180)
Permit Valuation:
New Single-family
$1,234,498
$1,288,428
$1,464,920
$1,809,779
$1,442,020
New Multi -family
985,454
1,052,113
1,195,586
880,561
726,503
Res. Alterations/Additions
413,518
486,341
491,132
498,259
582,094
Total Residential
2,633,471
2,826,883
3,151,639
3488,600
2,750,618
Total Nonresidential
2,000,167
2,203,105
2,495,687
2,090,028
3,532,284
Total All Building
$4,633,639
$5,029,988
$5,647,326
$5,278,629
$6,282,903
New Dwelling Units:
Single Family
3,646
3,667
4,226
5,097
3,975
Multiple Family
6,990
7,230
7,908
5,197
4,130
Total
10,636
10,897
12,134
10,294
8,105
Source: Construction Industry Research Board: `Building Permit Summary."
Note: Totals may not add due to independent rounding.
(1) Latest available full -year data.
Appendix E
Page 5
Median Household Income
The following table summarizes the median household effective buying income for the City of
Tustin, Orange County, the State of California and the nation for the five most recent years.
CITY OF TUSTIN, ORANGE COUNTY, CALIFORNIA and UNITED STATES
Effective Buying Income
2018 City of Tustin 2,614,657
Orange County 108,768,390
California 1,183,264,399
United States 9,017,967,563
2019 City of Tustin 2,642,489
Orange County 110,301,021
California 1,243,564,816
United States 9,487,165,436
Source: Nielsen Claritas, Inc.
Appendix E
Page 6
70,343
73,894
62,637
52,841
71,493
75,672
65,870
55,303
Total Effective
Median Household
Buying Income
Effective Buying
Year Area
(000's Omitted)
Income
2015 City of Tustin
$ 2,237,298
$ 62,642
Grange County
90,963,458
64,420
California
981,231,666
53,589
United States
7,757,960,399
46,738
2016 City of Tustin
2,381,968
64,056
Orange County
95,757,421
66,303
California
1,036,142,723
55,681
United States
8,132,748,136
48,043
2017 City of Tustin
2,438,345
66,809
Orange County
100,982,959
69,088
California
1,113,648,181
59,646
United States
8,640,770,229
50,735
2018 City of Tustin 2,614,657
Orange County 108,768,390
California 1,183,264,399
United States 9,017,967,563
2019 City of Tustin 2,642,489
Orange County 110,301,021
California 1,243,564,816
United States 9,487,165,436
Source: Nielsen Claritas, Inc.
Appendix E
Page 6
70,343
73,894
62,637
52,841
71,493
75,672
65,870
55,303
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) Taxable Water Refunding
Revenue Bonds, Series 2020
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
$ * Taxable Water Refunding Revenue Bonds, Series 2020 (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 February 1, 2020 (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 February 4, 2020 (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.
4. Interest on the Bonds is includible in gross income for federal income tax purposes.
5. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.
* Preliminary, subject to change.
Appendix F
Page 1
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 XHIC
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 DTC Regarding 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