Banning City Council
January 27, 2026

RESOLUTION 2026-22

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BANNING, CALIFORNIA,

APPROVING A TEMPORARY PAYMENT PLAN POLICY FOR A PERIOD OF TWELVE MONTHS
WHEREAS, on November 1, 2024, the City of Banning implemented a new utility billing system, but significant technical and operational issues hindered its ability to generate bills, prompting a return to the legacy system in late December 2024. Due to the need to reconfigure interconnected systems, billing for water, wastewater, and electric services was interrupted for approximately six months, with billing resuming in April 2025; and WHEREAS, to address the backlog of utility bills and restore a normal billing cycle, the City increased staffing and accelerated bill production, resulting in customers receiving multiple monthly bills within a single month, which has created financial impacts for some customers; and WHEREAS, the utility billing delays resulted in the deferral of approximately six months of electric, water, and wastewater revenue, negatively impacting cash flow within the utility funds; and
WHEREAS, City Council has identified the need to provide a Temporary Payment Plan Policy that would balance revenue recovery with customer affordability; and WHEREAS, the Temporary Payment Policy will include the following:
- Grace Period
 A three-month Grace Period will be provided. During the Grace Period customers will have the opportunity to either pay down their balance or submit a payment plans application.
 No late fees or shut offs will occur during the Grace Period.  No credit card fees will be applied during the Grace Period.  Standard shutoff process will resume after the Grace Period, which includes the discontinuance of service when a utility account becomes 60 days delinquent. - Types of Payment Plans (defined in Administrative Policy B-34)  Extensions
 Amortizations
 Alternative Payment Plans
- Payment Plan Terms and Deposits
 6-month term with a 5% deposit (of delinquent balance)  12-month term with a 10% deposit (of delinquent balance) - Discontinuance of Service
 During a payment plan term, if an account becomes 60-days delinquent, the City shall discontinue service
- Exceptions: Special Medical and Financial Circumstances (defined in Administrative Policy B-34)
- Late Fees
 Late fees will not be assessed during the term of a payment plan - Credit Card Fees
 Credit card transaction fees will commence the next full day following the expiration of the Grace Period.
747
Resolution 2026-22

WHEREAS, the Temporary Payment Plan policy will be effective for 12 months from the January/February, 2026 cycle bill date and available for all customer types; and WHEREAS, this Resolution establishes a Temporary Payment Plan Policy for a period of twelve (12) months solely for the purpose of providing structured payment plan options to customers, and is not intended to otherwise amend, repeal, or replace the City’s existing utility billing, collection, or customer account policies; and
WHEREAS, upon expiration of the twelve-month Temporary Payment Plan Policy, the City’s existing policies shall continue to apply without further action of the City Council unless otherwise amended by subsequent Council action.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Banning as follows:

SECTION 1. The City Council approves Resolution 2026-22 approving a Temporary Payment Plan Policy for a period of twelve (12) months.

SECTION 2. The City Manager, or designee, may approve or modify payment plan terms, or establish special payment plan arrangements on a case-by-case basis in response to documented special circumstances, so long as such actions do not conflict with the intent of this Temporary Payment Plan Policy and applicable law.

SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions.

PASSED, APPROVED AND ADOPTED this 20th day of January 2024.

Richard Royce, Mayor
City of Banning
ATTEST:

Sandra Calderon, Deputy City Clerk
City of Banning
APPROVED AS TO FORM:

John Pinkney, City Attorney
Slovak, Baron, Empey, Murphy & Pinkney,
LLP
748
Resolution 2026-22

CERTIFICATION:

I, Sandra Calderon, Deputy City Clerk of the City of Banning, California, do hereby certify that the foregoing Resolution 2026-22, was duly adopted by the City Council of the City of Banning, California, at a regular meeting thereof held on the 27th day of January 2026 by the following vote, to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Sandra Calderon, Deputy City Clerk
City of Banning, California
749

CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Art Vela, Interim City Manager
MEETING DATE: January 13, 2026
SUBJECT: Discuss the City of Banning's Current Utility Billing Payment Plan Policies
RECOMMENDATION:

That City Council consider the current utility billing payment plan structure and possible alternatives to payment plans with consideration of the City's recent utility billing challenges.

BACKGROUND:

On November 1, 2024, the City of Banning implemented a new utility billing software system intended to modernize operations and replace the City’s legacy billing platform. Following implementation, the City experienced significant technical and operational challenges that affected its ability to generate utility bills.

By late December 2024, the City determined that reverting to the legacy billing system was necessary to restore billing functionality. Because several interconnected systems had been modified or replaced to support the new software, additional time was required to reconfigure those systems and fully reinstate operations under the legacy platform.

As a result of this transition, utility bills for water, wastewater, and electric services were not issued for an extended period, resulting in a billing interruption of approximately six months. Utility billing resumed in April 2025, at which time the November 2024 utility bill was mailed to customers. To address the backlog and return to a normal billing cycle, the City augmented staffing resources and accelerated billing production. During this catch-up period, customers received multiple monthly bills in a single month. For example, utility usage for September 2025 and October 2025 were billed and mailed separately in December 2025.

Barring unforeseen staffing shortages or additional technical issues, the City anticipates that the November 2025 and December 2025 utility bills will be mailed separately by the end of January 2026, at which point the City expects to be current with the issuance of utility bills.

During the catch-up period, the City temporarily suspended the processing of new Payment Plan applications until billing operations were fully up to date. The purpose of this discussion is to review existing Payment Plan practices and to receive direction from City Council regarding potential temporary modifications to the current structure (see attached), such as payment plan duration, deposits, late fees, and service shutoffs, while taking into account the impacts the utility billing delays have had on customers.

For reference, attached to this staff report is Administrative Policy B-34 Discontinuation of Water 1 750
Service.

JUSTIFICATION:

The extended utility billing delays resulted in customers receiving multiple bills within a short period as the City worked to return to a normal billing cycle. While necessary to restore operations, this catch-up process may have created financial hardship for some customers. Reviewing and considering temporary modifications to the City’s Payment Plan structure will allow the City to balance revenue recovery with customer affordability.

FISCAL IMPACT:

The utility billing delays resulted in the deferral of approximately six months of electric, water, and wastewater revenue, negatively impacting cash flow within the utility funds. While these revenues are expected to be recovered, the timing of recovery will be directly influenced by the length and structure of payment plans. Longer payment terms may provide customer relief but will extend the period over which revenues are collected and prolong cash flow constraints, while shorter terms may accelerate recovery but increase the risk of delinquency.

ALTERNATIVES:

1. Proceed with current Payment Plan structure.

2. Provide direction to staff to modify Payment Plan structure on a temporary basis during the term of the payment plans.

BUDGETED?:

No
CONTRACT/AGREEMENT:

No
ATTACHMENTS:

1. Banning Utility Billing FAQ.docx

2. Payment Plan Structure.pdf

3. Admin Policy B-34 Disconituation of Water Service.pdf 2 751
City of Banning
Administrative Policy
Subject: Discontinuation of Residential Water Service Policy No:

B-34
Reference:

Financial Management, Accounting and Purchasing
Effective:

February 1, 2020 PAGE 1 of 8
APPROVED BY: City Council

1. Application of Policy. This Policy on Discontinuation of Residential Water Service (this “Policy”) shall apply to all City accounts for residential water service, but shall not apply to any accounts for non-residential service. To the extent this Policy conflicts with any other rules, regulations, or policies of the City, this Policy shall control.

2. Contact Information. For questions or assistance regarding your water bill, the City’s Customer Service staff can be reached at (951) 922-3185. Customers may also visit the City’s Customer Service desk in person during regular business hours.

3. Billing Procedures. In general, water service charges are payable to the City monthly. All bills for water service are due and payable upon receipt of mailing and will become delinquent twenty (20) calendar days after the bill date. A late fee will be assessed on any unpaid balance thirty-one (31) days after the bill date.

4. Discontinuation of Water Service for Nonpayment. If a bill is delinquent for at least sixty (60) days, the City may discontinue water service to the service address.

4.1 Written Notice to Customer. The City will provide a mailed notice to the customer of record at least seven (7) business days before discontinuation of water service. The notice will contain:
(a) the name and address of the customer;
(b) the amount of the delinquency;
(c) the date by which payment or payment arrangements must be made to avoid discontinuation of service;
(d) a description of the procedure by which the customer may initiate a complaint or request an investigation or appeal concerning service or charges;
(e) a description of the procedure by which the customer may request an alternative payment arrangement, which may include an extension, amortization, alternative payment schedule, or payment reduction;
(f) the procedure for the customer to obtain information on financial assistance, if applicable; and
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2 (g) the telephone number where the customer may request a payment arrangement or receive additional information from the City.

4.2 Written Notice to Occupants or Tenants.
(a) The City will also send a notice to the occupants living at the service address at least ten (10) days before discontinuation of water service under the following circumstances: (1) the City furnishes individually metered service to a single-family dwelling, multi-unit residential structure, mobile home park, or permanent residential structure in a labor camp as defined in California Health & Safety Code Section 17008, and the owner, manager, or operator is the customer of record; or (2) the customer of record’s mailing address is not the same as the service address. The notice will be addressed to “Occupant,” will contain the information required in Section 4.1 above, and will inform the residential occupants that they have the right to become customers of the City without being required to pay the amount due on the delinquent account. Terms and conditions for occupants to become customers of the City are provided in Section 8 below.

Notwithstanding the foregoing, if the dwelling unit is a detached single-family dwelling unit, then the City will (1) give notice to the occupant of service discontinuation at least seven (7) days prior to the proposed discontinuation; and (2) require the occupant to verify that the delinquent account customer was the landlord, manager, or agent of the dwelling unit. Verification may include a lease or rental agreement, rent receipts, or other government document.
(b) If the City furnishes water through a master meter in a multi-unit residential structure, mobile home park, or permanent residential structures in a labor camp and the owner, manager, or operator is the customer of record, the City will make a good faith effort to inform the occupants, by means of written notice posted on the door of each residential unit at least fifteen (15) days prior to termination, that the account is in arrears and the service will be terminated on a date specified in the notice. If it is not reasonable or practicable to post the notice on the door of each unit, the City will post two (2) copies of the notice in each accessible common area and at each point of access to the structure or structures. The notice will inform the residential occupants that they have the right to become customers of the City without being required to pay the amount due on the delinquent account. The notice will also specify what the occupants are required to do in order to prevent termination of, or to reestablish service; the estimated monthly cost of service; the title, address, and telephone number of a representative of the City who can assist the occupants in continuing service; and the address and telephone number of a qualified legal services project that has been recommended by the local county bar association. Terms and conditions for occupants to become customers of the City are provided in Section 8 below.

In addition to the limitations set forth in Section 4.4, water service will not be discontinued for nonpayment under the following situations: (1) for an indebtedness owed by the existing customer of record to another public agency; (2) if the delinquent account relates to another property owned, managed, or operated by the existing customer of record; or (3) if a public health or building officer certifies that termination would result in a significant threat to the health or safety of the residential occupants or the public.
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3 4.3 Posting of Notice at Service Address. If the City is unable to make contact with the customer or an adult person living at the service address in person or by telephone, and written notice is returned through the mail as undeliverable, the City will make a good faith effort to leave a notice of imminent discontinuation of residential service and a copy of this Policy in a conspicuous place at the service address. The notice will include:
(a) the name and address of the customer;
(b) the amount of the delinquency;
(c) the date by which payment or payment arrangements must be made to avoid discontinuation of service;
(d) the procedure for the customer to obtain information on financial assistance, if applicable; and
(e) the telephone number where the customer may request a payment arrangement or receive additional information from the City.

4.4 Circumstances Under Which Service Will Not Be Discontinued. The City will not discontinue residential water service for nonpayment under the following circumstances:
(a) During an investigation by the City of a customer dispute or complaint under Section 5.1 below;
(b) During the pendency of an appeal to the City Council under Section

5.3 below; or
(c) During the period of time in which a customer’s payment is subject to a City-approved extension, amortization, alternative payment schedule, or reduction under Section 6 below, and the customer remains in compliance with the approved payment arrangement.

4.5 Special Medical and Financial Circumstances Under Which Services Will Not Be Discontinued.
(a) The City will not discontinue water service if all of the following conditions are met:
(i) The customer, or a tenant of the customer, submits to the City the certification of a licensed primary care provider that discontinuation of water service will be life threatening to, or pose a serious threat to the health and safety of, a resident of the premises where residential service is provided;
(ii) The customer demonstrates that he or she is financially unable to pay for residential service within the City’s normal 754
4 billing cycle. The customer is deemed financially unable to pay during the normal billing cycle if: (a) any member of the customer’s household is a current recipient of CalWORKs, CalFresh, general assistance, Medi-Cal, Supplemental
Security Income/State Supplementary Payment Program, or California Special Supplemental Nutrition Program for
Women, Infants, and Children, or (b) the customer declares under penalty of perjury that the household’s annual income is less than 200 percent of the federal poverty level; and (iii) The customer is willing to enter into an alternative payment arrangement, including an extension, amortization, alternative payment schedule, or payment reduction with respect to the delinquent charges.
(b) For any customers who meet all of the above conditions, the City shall offer the customer one of the following options, to be selected by the City in its discretion: (1) an extension of the payment period; (2) amortization of the unpaid balance; (3) an alternative payment schedule; or (4) a reduced payment. The City’s Administrative Services Director or designee will select the most appropriate payment arrangement, taking into consideration the information and documentation provided by the customer, as well as the City’s payment needs.
(c) The customer is responsible for demonstrating that the conditions in subsection (a) have been met. Upon receipt of documentation from the customer, the City will review the documentation within seven (7) days and: (1) notify the customer of the alternative payment arrangement selected by the City and request the customer’s signed assent to participate in that alternative arrangement; (2) request additional information from the customer; or (3) notify the customer that he or she does not meet the conditions in subsection (a). (d) The City may discontinue water service if a customer who has been granted an alternative payment arrangement under this section fails to do any of the following for sixty (60) days or more: (a) to pay his or her unpaid charges by the extended payment date; (b) to pay any amortized amount due under the amortization schedule; (c) to pay any amount due under an alternative payment schedule; (d) to pay the reduced payment amount by its due date; or (e) to pay his or her current charges for water service. The City will post a final notice of intent to disconnect service in a prominent and conspicuous location at the service address at least five (5) business days before discontinuation of service. The final notice will not entitle the customer to any investigation or review by the City.
755
5 4.6 Time of Discontinuation of Service. The City will not discontinue water service due to nonpayment on a Saturday, Sunday, legal holiday, or at any time during which the City’s office is not open to the public.

4.7 Restoration of Service. Customers whose water service has been discontinued may contact the City by telephone or in person regarding restoration of service. Restoration shall be subject to payment of: (a) any past-due amounts, including applicable interest or penalties; (b) any reconnection fees, subject to the limitations in Section 7.1, if applicable; (c) and a security deposit, if required by the City.

5. Procedures to Contest or Appeal a Bill.

5.1 Time to Initiate Complaint or Request an Investigation. A customer may initiate a complaint or request an investigation regarding the amount of a bill within five (5) days of receiving a disputed bill. For purposes of this Section 5.1 only, a bill shall be deemed received by a customer five (5) days after mailing and immediately upon emailing.

5.2 Review by City. A timely complaint or request for investigation shall be reviewed by a manager of the City, who shall provide a written determination to the customer. The review will include consideration of whether the customer may receive an extension, amortization, alternative payment schedule, or payment reduction under Section 6. The City may, in its discretion, review untimely complaints or requests for investigation; however, such complaints or requests are not subject to appeal.

5.3 Appeal to City Council. Any customer whose timely complaint or request for an investigation pursuant to this Section 5 has resulted in an adverse determination may appeal the determination to the City Council by filing a written notice of appeal with the City Clerk within ten (10) business days of the City’s mailing of its determination.

Upon receiving the notice of appeal, the City Clerk will set the matter to be heard at an upcoming City Council meeting and mail the customer written notice of the time and place of the hearing at least ten (10) days before the meeting. The decision of the City Council shall be final.

6. Extensions and Other Alternative Payment Arrangements.

6.1 Time to Request an Extension or Other Alternative Payment Arrangement.

If a customer is unable to pay a bill during the normal payment period, the customer may request an extension or other alternative payment arrangement described in this Section

6. If a customer submits his or her request within five (5) days after mailing of a written notice of discontinuation of service by the City, the request will be reviewed by a manager of the City. City decisions regarding extensions and other alternative payment arrangements are final and are not subject to appeal to the City Council.

6.2 Extension. If approved by the City, a customer’s payment of his or her unpaid balance may be temporarily extended for a period not to exceed six (6) months after the balance was originally due. The City’s Administrative Services Director or designee shall determine, in his or her discretion, how long an extension shall be provided 756
6 to the customer. The customer shall pay the full unpaid balance by the date set by the City and must remain current on all water service charges accruing during any subsequent billing periods. The extended payment date will be set forth in writing and provided to the customer.

6.3 Amortization. If approved by the City, a customer’s payment of his or her unpaid balance may be amortized over a period not to exceed twelve (12) months, as determined by the City’s Administrative Services Director or designee, in his or her discretion. If amortization is approved, the unpaid balance will be divided by the number of months in the amortization period, and that amount will be added to the customer’s monthly bills for water service until fully paid. During the amortization period, the customer must remain current on all water service charges accruing during any subsequent billing periods. The amortization schedule and amounts due will be set forth in writing and provided to the customer.

6.4 Alternative Payment Schedule. If approved by the City, a customer may pay his or her unpaid balance pursuant to an alternative payment schedule that will not exceed twelve (12) months, as determined by the City’s Administrative Services Director or designee, in his or her discretion. If approved, the alternative payment schedule may allow periodic lump-sum payments that do not coincide with the City’s established payment date or may provide for payments made more or less frequently than the City’s regular payment date. During the period of the alternative payment schedule, the customer must remain current on all water service charges accruing during any subsequent billing periods. The alternative payment schedule and amounts due will be set forth in writing and provided to the customer.

6.5 Payment Reduction or Deferral. If approved by the City, a customer may receive a temporary deferral or reduction of the unpaid balance owed by the customer; payment reductions may not exceed the amount of unpaid reconnection fees and accrued interest charges for water service. Any such reduction shall be funded using unrestricted funds of the City, and not from charges or fees paid by other customers. The City’s Administrative Services Director shall determine, in his or her discretion, whether to grant a deferred or reduced payment, and the amount of such deferral or reduction, based on:
(a) the availability of City funds to fund the reduction at a given time; (b) the customer’s demonstrated financial need; and (c) the customer’s prior payment history or prior payment reductions. The amount of the reduced payment and the due date for the reduced payment will be set forth in writing and provided to the customer.

6.6 Failure To Comply. If a customer has been granted a payment arrangement under this Section 6 and fails to: (1) pay the unpaid charges by the extension date; (2) pay an amount due under an amortization schedule; (3) pay an amount due under an alternative payment schedule; or (4) pay a reduced payment amount by its due date, then the City may terminate water service. The City will post a final notice of intent to disconnect service in a prominent and conspicuous location at the service address at least five (5) business days before discontinuation of service. The final notice will not entitle the customer to any investigation or review by the City.

7. Specific Programs for Low-Income Customers.
757
7 7.1 Reconnection Fee Limits and Waiver of Interest. For residential customers who demonstrate to the City a household income below 200 percent of the federal poverty line, the City will:
(a) Limit any reconnection fees during normal operating hours to fifty dollars ($50), and during non-operational hours to one hundred fifty dollars ($150). The limits will only apply if the City’s reconnection fees actually exceed these amounts. These limits are subject to an annual adjustment for changes in the Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (CPI-U) beginning January 1, 2021.
(b) Waive interest charges on delinquent bills once every 12 months.

The City will apply the waiver to any interest charges that are unpaid at the time of the customer’s request.

7.2 Qualifications. The City will deem a residential customer to have a household income below 200 percent of the federal poverty line if: (a) any member of the household is a current recipient of CalWORKs, CalFresh, general assistance, Medi-Cal, Supplemental Security Income/State Supplementary Payment Program, or California Special Supplemental Nutrition Program for Women, Infants, and Children, or (b) the customer declares under penalty of perjury that the household’s annual income is less than 200 percent of the federal poverty level.

8. Procedures for Occupants or Tenants to Become Customers of the City.

8.1 Applicability. This Section 8 shall apply only when the property owner, landlord, manager, or operator of a residential service address is listed as the customer of record and has been issued a notice of intent to discontinue water service due to nonpayment.

8.2 Agreement to City Terms and Conditions of Service. The City will make service available to the actual residential occupants if each occupant agrees to the terms and conditions of service and meets the requirements of the City’s rules and regulations.

Notwithstanding, if one or more of the occupants are willing and able to assume responsibility for the subsequent charges to the account to the satisfaction of the City, or if there is a physical means, legally available to the City, of selectively discontinuing service to those occupants who have not met the requirements of the City’s rules and regulations, the City shall make service available to the occupants who have met those requirements.

8.3 Verification of Tenancy. To be eligible to become a customer without paying the amount due on the delinquent account, the occupant shall verify that the delinquent account customer of record is or was the landlord, manager, or agent of the dwelling.

Verification may include, but is not limited to, a lease or rental agreement, rent receipts, a government document indicating that the occupant is renting the property, or information disclosed pursuant to Section 1962 of the Civil Code, at the discretion of the City.
758
8 8.4 Methods of Establishing Credit. If prior service for a period of time is a condition for establishing credit with the City, residence and proof of prompt payment of rent for that period of time is a satisfactory equivalent.

8.5 Deductions from Rental Payment. Pursuant to Government Code Section 60371(d), any occupant who becomes a customer of the City pursuant to this Section 8 and whose periodic payments, such as rental payments, include charges for residential water service, where those charges are not separately stated, may deduct from the periodic payment each payment period all reasonable charges paid to the City for those services during the preceding payment period.

9. Third Party Notification Service for Seniors and Dependent Adults. The City will make available, to residential customers who are 65 years or older, or who are dependent adults (as defined in Welfare and Institutions Code Section 15610(b)(1)), a third-party notification service whereby the City will attempt to notify a person designated by the customer to receive notification when the customer’s account is past-due and subject to termination. The notification will include information on what is required to prevent termination of service. The City will mail the notification to the designated third party at least ten (10) days before termination of service. To participate, the customer must submit a request for third-party notification on a form provided by the City, and must include the written consent of the designated third party. The notification service does not obligate the third party to pay any overdue charges, nor shall it prevent or delay termination of service.

10. Other Remedies. In addition to discontinuation of water service, the City may pursue any other remedies available in law or equity for nonpayment of water service charges, including, but not limited to: securing delinquent amounts by filing liens on real property, filing a claim or legal action, or referring the unpaid amount to collections. In the event a legal action is decided in favor of the City, the City shall be entitled to the payment of all costs and expenses, including attorneys’ fees and accumulated interest.

11. Discontinuation of Water Service for Other Customer Violations. The City reserves the right to discontinue water service for any violations of City ordinances, rules, or regulations other than nonpayment.

12. Fees and Charges Incurred. Except as otherwise expressly stated in this Policy, any fees and charges incurred by a customer under any other rules, regulations, or policies of the City, including, but not limited to, delinquent charges, shall be due and payable as set forth therein.

13. Decisions by City Staff. Any decision which may be taken by the City’s Administrative Services Director under this Policy may be taken by his or her designee. 759

CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Art Vela, Interim City Manager
MEETING DATE: January 27, 2026
SUBJECT: Consideration of Resolution 2026-23, Authorizing the City Manager to Execute the Engagement Letter with Stradling Yocca Carlson & Rauth, LLP to Serve as Bond Counsel and Disclosure Counsel to the City of Banning
RECOMMENDATION:

Adopt Resolution 2026-23
BACKGROUND:

The City of Banning periodically issues debt to finance capital improvements and infrastructure projects.

The issuance of municipal bonds requires the specialized legal services of bond counsel and, when applicable, disclosure counsel to ensure compliance with federal, state, and local laws, including tax, securities, and disclosure requirements.

On March 31, 2025, NHA Advisors, LLC, acting as municipal advisor to the City of Banning, requested proposals from qualified municipal bond counsel firms to provide bond counsel and potentially disclosure counsel services. While the original request for proposals was focused on services related to the Banning Electric Utility and a potential issuance of electric utility bonds, the City also evaluated the firms’ ability to provide bond and disclosure counsel services for all City bond issuances.

Following the review process, staff is recommending Stradling Yocca Carlson & Rauth, LLP (“Stradling”) to serve as bond counsel and disclosure counsel for the City of Banning. Stradling is a full-service business law firm with extensive experience representing public agencies throughout California in public finance transactions, including general obligation bonds, revenue bonds, and enterprise fund financings.

Bond counsel services generally include preparing and reviewing bond documents, providing legal opinions regarding the validity and tax-exempt status of bonds, and advising on compliance with applicable federal and state laws. Disclosure counsel services typically include assisting with the preparation and review of official statements and other disclosure documents to ensure compliance with federal securities laws and continuing disclosure obligations.

JUSTIFICATION:

Legal services are exempt from the City’s purchasing policy and do not require the formal solicitation of proposals. However, in the interest of transparency, due diligence, and ensuring the City engages a highly qualified and experienced firm, a competitive proposal process was conducted through the City’s municipal advisor.

Stradling was selected as a result of the Request for Proposal (RFP) process. While the initial RFP was 760
specific to bond and disclosure counsel services related to the Banning Electric Utility, staff recommends utilizing Stradling for all City bond issuances and other financial related issues to ensure consistency, efficiency, and continuity across financial transactions.

Authorizing the City Manager to execute an engagement letter with Stradling will allow the City to move forward efficiently with future bond financings, financial strategies and ensure the City has experienced legal counsel in place as financing opportunities arise.

FISCAL IMPACT:

The total contract amount for bond counsel and disclosure counsel services is not to exceed $200,000.

Costs associated with these services will be funded by funds in which the work performed by Stradling related to (e.g. Electric, Water, Wastewater, etc.).

ALTERNATIVES:

1. Do not approve the engagement.

2. Direct staff to engage a different firm. This option would require additional time to evaluate alternative firms.

BUDGETED?:

Yes
CONTRACT/AGREEMENT:

Yes
ATTACHMENTS:

1. Resolution 2026-23.docx

2. Exhibit A to Resolution 2026-23: Engagement Letter.docx

3. RFP Bond and Disclosure Counsel.pdf

4. Stradling Response to RFP for Bond and Disclosure.pdf 761
Resolution 2026-23

RESOLUTION 2026-23

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BANNING, CALIFORNIA,

AUTHORIZING THE CITY MANAGER TO EXECUTE THE ENGAGEMENT LETTER WITH

STRADLING YOCCA CARLSON & RAUTH, LLP TO SERVE AS BOND COUNSEL AND

DISCLOSURE COUNSEL TO THE CITY OF BANNING
WHEREAS, the City of Banning periodically issues debt to finance capital improvements and infrastructure projects in support of municipal services and enterprise operations, including the Banning Electric Utility; and
WHEREAS, the issuance of municipal bonds requires specialized legal services, including bond counsel and disclosure counsel, to ensure compliance with applicable federal, state, and local laws, including tax, securities, and disclosure requirements; and WHEREAS, on March 31, 2025, NHA Advisors, LLC, acting as municipal advisor to the City of Banning and the Banning Electric Utility, requested proposals from qualified municipal bond counsel firms to provide bond counsel and potentially disclosure counsel services; and WHEREAS, Stradling Yocca Carlson & Rauth, LLP (“Stradling”), selected to provide the required services to the City, is a full-service business law firm with substantial experience representing California public agencies in municipal finance transactions, including general obligation bonds, revenue bonds, and enterprise fund financings; and WHEREAS, utilizing a single firm to provide bond counsel and disclosure counsel services for all City bond issuances will promote consistency, efficiency, and continuity across financing transactions; and
WHEREAS, the proposed engagement with Stradling provides for a not-to-exceed contract amount of $150,000.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Banning as follows:

SECTION 1. The City Council hereby authorizes the City Manager, or designee, to execute an engagement letter with Stradling Yocca Carlson & Rauth, LLP to serve as bond counsel and disclosure counsel for the City of and authorizes the City Manager to make necessary nonsubstantive changes, and to execute said agreement.

SECTION 2. The City Council authorizes the City Manager, or designee, to make necessary budget adjustments, appropriations, and transfers related to this resolution.

SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions.

PASSED, APPROVED AND ADOPTED this 27
th day of January 2026.
762
Resolution 2026-23

Richard Royce, Mayor
City of Banning
ATTEST:

Sandra Calderon, Deputy City Clerk
City of Banning
APPROVED AS TO FORM:

John Pinkney, City Attorney
Slovak, Baron, Empey, Murphy & Pinkney,
LLP
763
Resolution 2026-23

CERTIFICATION:

I, Sandra Calderon, Deputy City Clerk of the City of Banning, California, do hereby certify that the foregoing Resolution 2026-23, was duly adopted by the City Council of the City of Banning, California, at a regular meeting thereof held on the 27 th day of January 2026 by the following vote,
to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Sandra Calderon, Deputy City Clerk
City of Banning, California
764
Resolution 2026-23

EXHIBIT A
Engagement Letter
765
Brian P. Forbath
949 725 4193
[email protected]
Stradling Yocca Carlson & Rauth LLP
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6422
949 725 4000
stradlinglaw.com
4932-7878-1310/202094-0000
December 4, 2025
Art Vela
Interim City Manager
City of Banning
99 E. Ramsey Street
Banning, CA 92220
Dear Mr. Vela:

We thank you for the opportunity to serve as bond counsel and disclosure counsel to the City of Banning (the “City”) and to assist from time to time on matters that maybe outside the scope or expertise of the City Attorney. Unless otherwise confirmed in writing, the terms of this letter and the enclosed Terms of Retention will govern our representation of the City.

We are attaching our normal Terms of Retention, which is an integral part of our retention agreement. If this letter, including the attached Terms of Retention, accurately reflects your understanding of our relationship, please acknowledge your approval and acceptance of these terms by signing and returning this letter to me. I would be pleased to answer any questions you might have.

Very truly yours,

STRADLING YOCCA CARLSON & RAUTH LLP
Brian P. Forbath
Enclosure
766
Art Vela, Interim City Manager
City of Banning
December 4, 2025

4932-7878-1310/202094-0000
The undersigned hereby agrees that the terms and conditions in this letter and the accompanying attached Terms of Retention shall apply to services rendered by Stradling Yocca Carlson & Rauth LLP.

CITY OF BANNING
By:

Interim City Manager
767
4932-7878-1310/202094-0000

TERMS OF RETENTION
OF

STRADLING YOCCA CARLSON & RAUTH LLP

1. Fees and Costs. Stradling Yocca Carlson & Rauth LLP (the “Firm”) is compensated for its services based primarily on the value of the services and the time spent performing them.

Such compensation may include the time spent on client conferences, travel, research, drafting documents, and other activities. The amount of fees charged on a statement is determined by the hours expended by the different attorneys and other professional personnel involved and the applicable discounted rates applicable to public agencies. Such rates may change from time-to-time.

Notwithstanding the foregoing, in the event that the City of Banning (the “City”) determines to issue bonds, notes or other obligations, we will agree to negotiate a written fixed fee arrangement as is traditional for bond and disclosure counsel matters. Such arrangement may be memorialized as a supplement to this letter. Such fixed fees would be payable contingent upon closing of the transaction and the City would be under no obligation to pay the fees to the Firm if either (i) the bonds, notes or other obligations are not issued or (ii) the Firm and the City are unable to reach an agreement regarding the fixed fee arrangement. Work in connection with the City’s ongoing matters and general advice outside of a specific bond issue will be charged on an hourly rate basis. A schedule of the hourly rates applicable to attorneys expected to work on City matters is attached as Exhibit A.

The firm also charges for various costs such as copying, telephone charges, computerized legal research, word processing and/or other computer time, overtime costs, messenger services, travel, filing fees and other costs. Bills for some costs are passed on directly, such as bills for certified shorthand reporters, technical consultants, and other professional fees. In the event that the City and the Firm agree to a fixed fee for a transaction, expenses for such transaction will be included in the fixed fee set forth in the related supplement to this letter.

2. Termination by Us. We reserve the absolute right to withdraw from representing you, upon 30 days written notification, if, among other things, you fail to honor the terms of our agreement, you fail to cooperate fully or follow our advice on a material matter, or any fact or circumstance occurs that would, in our view, render our continuing representation unlawful or unethical. If we elect to withdraw, you will take all steps necessary to free us of any obligation to perform further services, including the execution of any documents necessary to complete our withdrawal, and we will be entitled to be paid at the time of withdrawal for all services rendered and costs and expenses paid or incurred on your behalf. If necessary in connection with litigation, we would request leave of court to withdraw.

3. Termination by City. We understand that we serve at the pleasure of the City and this Terms of Retention may be terminated by the City at any time, upon 10 days written notification with or without cause.

4. Date of Termination. Our representation of you will be considered terminated at the earlier of (i) your termination of our representation, (ii) our withdrawal from our representation of you or (iii) the completion of our substantive work for you. 768
Art Vela, Interim City Manager
City of Banning
December 4, 2025

4932-7878-1310/202094-0000

5. Related Activities. If any claim or action is brought against us or any personnel or agents of the firm based on your negligence or misconduct, or if we are asked to testify as a result of our representation of you or must defend the confidentiality of your communications in any proceeding, you agree to pay us for any resulting fees, costs, or damages, including our time, even if our representation of you has ended.

6. No Guarantee of Outcome. The Firm will provide its services consistent with the level and quality of expertise expected of a nationally recognized firm specializing in securities law and the transactions contemplated by this agreement. We do not and cannot guarantee any outcome in a matter.

7. Insurance. We hereby advise you that this firm maintains professional errors and omissions insurance coverage applicable to the services to be rendered to you. Evidence of such insurance will be provided upon request.

8. Client. This firm’s client for the purpose of our representation is only the person or entity identified in the letter accompanying these Terms of Retention. Unless expressly agreed, we are not undertaking the representation of any related or affiliated person or entity, nor any parent, brother-sister, subsidiary, or affiliated corporation or entity, nor any of your or their officers, directors, agents, or employees. The City acknowledges that from time to time the Firm may advise the Marina Joint Powers Financing Authority on financing transactions and related matters.

9. Client File and Retention. For each matter the Firm maintains a file in which the Firm places certain documents and items, including original documents, that are reasonably necessary to the Firm’s representation in the matter. The Firm currently keeps each file for seven years after a matter concludes. The file belongs to the client and, subject to any protective order or non-disclosure agreement, the client may request to take possession of it once the matter concludes.

Should all or any portion of the file become the subject of a subpoena, discovery request or other disclosure obligation (“Legal Process”) while in the Firm’s possession, including after the matter concludes, you agree to pay the Firm’s then-prevailing hourly rates and costs that the Firm incurs in connection with the Legal Process.

10. Payment Notwithstanding Dispute. In the event of any dispute that relates to our entitlement to any payment from you, all undisputed amounts shall be paid by you. Any amounts in any client trust account held on your behalf, sufficient to pay the disputed amounts, shall continue to be held in such trust account until the final disposition of the dispute.

11. Arbitration. We appreciate the opportunity to serve as your attorneys and anticipate a productive and harmonious relationship. If you should feel for any reason that there is a problem with the services we have performed or with our charges, we encourage you to bring that to our attention immediately. If we perceive a problem with your representation, we likewise will endeavor to discuss it with you. Most problems should be rectified by communication and discussion.

However, a dispute might arise between us which could not be resolved by negotiation. We believe that such attorney-client disputes are most satisfactorily resolved through final and binding 769
Art Vela, Interim City Manager
City of Banning
December 4, 2025

4932-7878-1310/202094-0000
arbitration rather than by litigation. Both the United States Supreme Court and the California Supreme Court have endorsed arbitration as an accepted and favored method of resolving disputes, because it is economical and expeditious.

In arbitration, there is no right to a trial by jury and the arbitrator's legal and factual determinations are generally not subject to appellate review. Arbitration rules of evidence and procedure are often less formal and less rigid than the rules which apply in Court. Arbitration usually results in a decision much more quickly than proceedings in Court, and the attorneys' fees and other costs incurred by both sides may be substantially less. You are free to discuss the advisability of arbitration with us, or with your own independent counsel or any of your other advisors, and to ask any questions which you may have.

By signing this Terms of Retention, we agree that, in the event of any dispute or claim arising out of or relating to our engagement, our relationship, our charges, or our services (including but not limited to disputes or claims regarding our charges, professional malpractice, errors or omissions, breach of contract, breach of fiduciary duty, fraud, or violation of any statute), SUCH DISPUTE OR

CLAIM SHALL BE RESOLVED BY SUBMISSION TO FINAL AND BINDING ARBITRATION IN RIVERSIDE COUNTY, CALIFORNIA, BEFORE A RETIRED JUDGE OR JUSTICE. BY

AGREEING TO ARBITRATE, YOU WAIVE ANY RIGHT YOU HAVE TO A COURT OR JURY TRIAL. Venue with regard to any ancillary proceedings arising out of such dispute or claim shall also be in Riverside County. If we are unable to mutually agree on a retired judge or justice, then each side will name one retired judge or justice and the two named persons will select a neutral judge or justice who will act as the sole arbitrator. The fees of the arbitrator will be paid initially equally by both the Firm and you. However, the arbitrator shall have the right to order either party to pay all fees and costs as part of his award.

In arbitration, we shall both be entitled to conduct discovery in accordance with the provisions of the California Code of Civil Procedure, but either of us may request that the arbitrator limit the amount or scope of such discovery and, in determining whether to do so, the arbitrator shall balance the need for the discovery against the parties' mutual desire to resolve disputes expeditiously and inexpensively.

Under California law, you have the right, if you desire, to request arbitration of any fee dispute before an arbitrator or panel of arbitrators selected by a local bar association or the State Bar (“Bar Arbitration”) and a trial de novo in court if dissatisfied with the result. If you do request a Bar Arbitration, the law provides that evidence of any claim of malpractice or professional misconduct is admissible only concerning the fees or costs in dispute and that the Bar Arbitrators shall not award any affirmative relief in the form of damages, offset or otherwise on account of such claim. By signing this Terms of Retention, you agree that if a Bar Arbitration is conducted, that Bar Arbitration or any trial de novo in Court thereafter shall determine only the issue of the amount of fees properly chargeable to you, if any, and that such Bar Arbitration or trial de novo in Court thereafter shall have no effect on the provisions set forth above which require arbitration before a retired judge or justice of any claims for affirmative relief based on alleged professional malpractice, errors or omissions, 770
Art Vela, Interim City Manager
City of Banning
December 4, 2025

4932-7878-1310/202094-0000
breach of conduct, breach of fiduciary duty, fraud or violation of any statute. Any such claims shall be solely determined in an arbitration proceeding by a retired judge or justice without regard to the result of any Bar Arbitration or trial de novo thereafter.

12. Other Clients. As a law firm with many diverse clients and practice areas, the Firm seeks to retain the ability to accept unrelated matters for all of our clients. The Firm may thus request your informed written consent in the event the Firm seeks to represent any other client in any future matter that is not substantially related to the applicable public finance matter of the City and does not involve material confidential information the Firm obtained while representing the City.

Such matters could arise during the Firm’s representation of you on public finance matters as contemplated by this letter. You may determine to consent or not consent to such request and should feel free to consult your general counsel or other counsel of your choice before deciding whether to grant any consent should it be requested.

The Firm represents various investment banks and underwriters from time-to-time on transactions for public agencies other than the City. In the event that the City determines to issue bonds, notes or other obligations, the Firm will not represent any investment bank or underwriter on any such transaction of the City.

The Firm represents various public agencies, including cities, water agencies, school districts, and other agencies in Riverside County and throughout California, as bond finance and/or disclosure counsel and on other financing matters. In the event that the City determines to issue bonds, notes or other obligations, the Firm does not expect to represent any such agency in connection with the City’s transaction; however, in the supplemental letter relating to the specific transaction of the City, the Firm would provide a statement to the effect that the Firm is not representing another water or similar agency in connection with such transaction.

13. Electronic Communication and Storage Technology. The Firm uses cell phones, email, wireless networks, cloud-based platforms, and other technology to communicate with others and to transmit or store documents and information. Such technology helps the Firm provide efficient and convenient legal services, but may pose confidentiality and security risks. By signing this letter agreement, you consent to the Firm’s use of all such technology in connection with this engagement.

14. Processing Client Personal Information. In connection with our engagement, you may be required to disclose to the Firm, or the Firm may obtain on your behalf, personal information relating to individuals that the Firm does not otherwise collect for the Firm’s own commercial or business purposes (“Client Personal Information”). For example, materials that you provide to the Firm for purposes of due diligence may contain Client Personal Information relating to third parties. You hereby acknowledge, agree and require that the Firm only collect, retain, use, disclose, or otherwise process Client Personal Information as your “service provider” or “data processor,” as defined in the California Consumer Privacy Act of 2018 or other data privacy laws, as applicable (collectively, “Data Privacy Laws”), or pursuant to any exception that may apply under Data Privacy Laws regarding the attorney-client relationship. The Firm will not sell Client Personal 771
Art Vela, Interim City Manager
City of Banning
December 4, 2025

4932-7878-1310/202094-0000
Information. The Firm will not collect, retain, use, disclose or otherwise process Client Personal Information for any purpose other than for the purpose of performing services to you pursuant to this engagement letter, unless applicable law requires us to do otherwise. The Firm will not collect, retain, use, disclose, or otherwise process Client Personal Information outside of the Firm’s direct relationship with you, unless applicable law requires the Firm to do otherwise. The Firm certifies that the Firm understand these restrictions and will comply with them. These restrictions are not intended to reduce or replace our obligations under applicable rules of professional conduct, including but not limited to the Firm’s obligation of confidentiality.

15. Publicity. You consent to the Firm’s use of your name and logo (if applicable) on our web site and in our marketing materials.

16. Client Communication. You hereby designate Art Vela, Interim City Manager, to act on your behalf for this matter, and you authorize us to communicate with, and receive directions from, that person and any other person that you may designate in the future.

17. City to Sign. The person signing this letter on behalf of the City represents that he or she has the full right and authority to do so, and to fully commit and bind the City to this engagement letter.

18. Firm Not Providing Financial Advice. The Firm is not a registered municipal advisor and does not provide financial advisory services or otherwise provide financial advice to Firm clients.

19. Miscellaneous. This letter sets forth the entire agreement between you and the Firm, and there is no other or additional understanding between you and the Firm on these subjects. This agreement supersedes any prior agreements or representations, written or oral, between you and the Firm on these subjects. Any modification or amendment to this agreement must be in a writing signed by you and the Firm. This agreement shall be governed by California law without reference to its conflict of law principles. If any provision of this agreement is found to be invalid or unenforceable, that provision shall be deemed modified or removed so that it is valid and enforceable to the fullest extent of the law, and the other provisions of this agreement shall be unimpaired.

20. Primary Attorneys. The primary attorneys with responsibility for this representation will be Brian Forbath, Jonathan Guz, Carol Lew and Nicolas Yeager. The parties agree that the Firm is being retained based on the unique skill, experience, and expertise of Brian Forbath, Jonatan Guz, Carol Lew and Nicolas Yeager and no change will be made in the primary attorneys without the prior, written consent of the City. The Firm will not substitute another primary attorney without the prior, reasonable, approval of the City. 772
A-1
4932-7878-1310/202094-0000

EXHIBIT A
2025 DISCOUNTED HOURLY RATES
PARTNERS 2025 RATE
BRIAN FORBATH $690.00
CAROL LEW $690.00
JONATHAN GUZ $630.00
NICOLAS YEAGER $630.00
OTHERS $630.00
ASSOCIATES 2025 RATE
SENIOR ASSOCIATES $450.00
JUNIOR ASSOCIATES $390.00
PARALEGALS 2025 RATE
ALL $195.00
773

Bond and Disclosure Counsel Request for Proposal
From: Eric Scriven
Date: March 12, 2025
RE: Banning Electric Utility – Bond and Disclosure Counsel Request for Proposal Overview
NHA Advisors, LLC, acting as the municipal advisor to the City of Banning and the Banning Electric Utility (the “City” and “BEU,” respectively), is requesting a brief proposal (“Proposal”) from a limited number of qualified municipal bond counsel firms for bond, and potentially disclosure, counsel services for the private placement or public issuance of its 2025 Electric Utility Revenue Bonds (“2025 Bonds”). A presentation regarding BEU’s financial status and its “Financial Recovery Plan” (“FRP”) is attached for your background review.

BEU plans to issue the 2025 Bonds as part of its FRP. The 2025 Bonds may be privately placed or publicly offered in amounts ranging from $6 million to $30 million and may consist of some combination of taxexempt and taxable debt, depending upon use of proceeds, structure and tax counsel opinion. A request for proposal will also be circulated for broker dealer services for this potential transaction. BEU and the City seek to retain a bond counsel firm capable of delivering thoughtful ideas, and the professional and timely services necessary to support development and execution of the most advantageous financing structure to execute upon BEU’s FRP. Among the core objectives of the FRP are rapidly restoring liquidity to BEU (and other funds), ensuring future stable and strong debt service coverage and setting a foundation for solid rate management encompassing all of BEU’s needs once the cost of service study concludes in late Summer / Fall 2025.

Potential Financing Scenarios
Scenario 1: New Money only 2025 Bonds issued through a private placement to raise $6 million in proceeds. While tax status is still being determined, the current assumption (see September 2024 City Council presentation) is $2.2M in proceeds will be tax exempt while $3.8 million will be taxable. For this scenario, we assume a twenty-year maximum term. Under this scenario, the City would not require disclosure counsel services.

Scenario 2 (preferred): New Money and Refunding 2025 Bonds issued through a negotiated public sale to raise $6 million in new money proceeds (split between taxable and tax exempt as identified in Scenario 1 above, although ideas to reduce the taxable component of the issuance will be entertained) and approximately $19.5 million in refunding proceeds on a tax-exempt basis to refund the outstanding 2015 Bonds. This scenario requires the 2015 Bonds insurer (AGM) to agree to provide an insurance policy on the 2025 Bonds. We do not anticipate securing an underlying credit rating on the 2025 Bonds. Final 774
BANNING ELECTRIC UTILITY – BOND AND DISCLOSURE COUNSEL REQUEST FOR PROPOSAL MARCH 12, 2025

PAGE 2
maturity for this scenario is still being determined, but at this point we assume a twenty-year maximum term.

Timing
The City Council directed an expeditious execution of a transaction that meets BEU’s FRP goals. As such, timeliness of closing the transaction will be an important factor during deliberations to choosing bond counsel and broker-dealer. A proposed financing schedule is attached. We recognize this is an aggressive timeline and your firm’s ability to meet this timeline will be a factor in the City’s selection process.

Selection Approach
The selection process will be based on your concise response and how well you convey your strategic approach to providing bond counsel services to meet the goals of BEU’s FRP. We are generally familiar with the qualifications of you and your firm and this RFQ does not require generic, standard marketing material as part of your response. The response should be limited to four (4) pages with 1-inch margins, 11-point font, single spacing. The total page count includes all pages within your RFQ, as well as any additional elements you choose to include (e.g., cover page, cover letter, table of contents). This page limit excludes an optional appendix for standard disclosures, if desired. Your response should be succinct and focus primarily on the following:
 Provide focused CVs of the lead attorney and his/her backup who would serve the City on this assignment geared towards how they typically approach and “deliver results” upon such challenging transactions.
 Provide a recent, relevant case study that clearly illustrates how you and your firm delivered extreme value-added services for bond and disclosure counsel services to successfully address a similar distressed utility situation. Please provide the public agency reference contact information.
 Depending upon what potential broker-dealers tell the City, it may be extremely important towards achieving FRP goals to close the 2025 Bond transaction prior to June 1, 2025 (the date of the next $1.9m debt service payment). Please review the schedule and provide feedback as to how it may be improved to ensure that this key milestone may be achieved.  In Scenario 2, the 2015 Bonds are defeased, so there is a “clean slate” to put into place appropriate conditions and covenants for 2025 and all future BEU Bonds. Please provide a summary of some considerations you would suggest to assist BEU in ensuring future flexibility while maintaining sufficient bondholder security.
 Beyond BEU’s current credit challenges, please advise if you foresee any critical legal or disclosure obstacles towards a timely execution of the 2025 Bonds to meet the FRP goals. Please include a preliminary strategy to remove or mitigate these perceived obstacles.  Finally, please provide your fee proposal and rationale. Please provide your fees for either Scenario 1 (private placement, bond counsel only) or Scenario 2 (negotiated public offering requiring bond and disclosure counsel services). If there is a separate charge for tax attorney services, please include that.
775
BANNING ELECTRIC UTILITY – BOND AND DISCLOSURE COUNSEL REQUEST FOR PROPOSAL MARCH 12, 2025

PAGE 3
Selection Criteria
Selection criteria for the 2025 Bonds will be based upon fees and the City’s determination of which proposer will execute its role as bond counsel that will best ensure that the objectives of the FRP are met.

This determination will be in the sole opinion of City staff with input from NHA Advisors.

RFQ Questions
Questions regarding this RFP or financing should be addressed to Eric Scriven ([email protected], 415.785.2025 ext. 2003).

Submission Deadline
Your Proposal must be submitted via email to Eric Scriven by 2:00 p.m. Pacific on Thursday, March 20, 2025. The City and NHA Advisors will promptly review the proposals. The City may schedule a follow up with 2 or more of the respondents at its sole discretion. The City expects to make a determination at its earliest convenience after the conclusion of its review. Thank you for your consideration of this request for proposal.

Attachments:

August, 2024 City Council Presentation
February, 2025 City Council Presentation
Proposed Financing Schedule
776
City of Banning
2025 Electric Revenue Bonds
(Series A and B)
Financing Schedule
(As of March 12, 2025)
Issuer:

Municipal Advisor:

Bond Counsel:

Disclosure Counsel:

Underwriter:

Trustee:

Date Activity Participants
Wednesday, March 12 Distribute Bond and Disclosure Counsel RFP MA/CITY Thursday, March 13 Distribute Broker-Dealer RFP MA/CITY Thursday, March 20 Bond and Disclosure Counsel Proposals Due MA/CITY Thursday, March 20 Bond and Disclosure Counsel Proposals Due MA/CITY Friday, March 21 Broker-Dealer Proposals Due MA/CITY
Monday, March 24 City Selects Winning Broker-Dealer MA/CITY Monday, March 24 City Selects Winning Bond and Disclosure Counsel MA/CITY Week of March 24 Kickoff Meeting/Call to Discuss Proposed Financing ALL Friday, April 4 Circulate Draft Staff Report MA
Monday, April 7 Circulate First Drafts of Financing Documents (Base Legal Documents and Resolution)
BC
Monday, April 7 Circulate First Draft of Preliminary Official Statement ("POS")
DC
Tuesday, April 8 Submit Credit Package to Bond Insurer MA Wednesday, April 9 Comments Due on First Drafts of Financing Documents ALL City of Banning (CITY)
NHA Advisors (MA)

TBD (BC)

TBD (DC)

TBD (TR)

TBD (UW)
Su M Tu W Th F Sa Su M Tu W Th F Sa Su M Tu W Th F Sa Su M Tu W Th F Sa 1 1 2 3 4 5 1 2 3 1 2 3 4 5 6 7
2 3 4 5 6 7 8 6 7 8 9 10 11 12 4 5 6 7 8 9 10 8 9 10 11 12 13 14 9 10 11 12 13 14 15 13 14 15 16 17 18 19 11 12 13 14 15 16 17 15 16 17 18 19 20 21 16 17 18 19 20 21 22 20 21 22 23 24 25 26 18 19 20 21 22 23 24 22 23 24 25 26 27 28 23/30 24/31 25 26 27 28 29 27 28 29 30 25 26 27 28 29 30 31 29 30 March 2025 April 2025 May 2025 June 2025

City of Banning 2025 Electric Revenue Bonds
Financing Schedule March 12, 2025
Date Activity Participants
Wednesday, April 9 Comments Due on First Draft of POS ALL Wednesday, April 9 Comments Due on Draft Staff Report ALL Friday, April 11 Circulate Agenda Drafts of Financing Documents and POS BC/DC Friday, April 11 Agenda Deadline for April 22, 2025 City Council Meeting (Staff Report and Financing Documents)
ALL
Friday, April 18 Good Friday (Bond Markets Closed) ALL
Monday, April 21 Bond Insurance Bid Due CITY/MA
Tuesday, April 22 City Council Approval of Financing CITY Tuesday, April 22 Circulate Draft POS with Insurance Language DC April 22-23 Due Diligence Call ALL
Wednesday, April 23 Final Comments Due on POS ALL
Wednesday, April 23 Release POS to Underwriter DC
Monday, April 28 Pre‐pricing Call CITY/
UW/MA
Tuesday, April 29 Price Bonds CITY/
UW/MA
Thursday, May 1 Circulate Draft Final Official Statement (“FOS”) DC Thursday, May 1 Circulate Draft Closing Documents BC
Friday, May 2 Comments Due on Draft FOS ALL
Friday, May 2 Comments Due on Closing Documents ALL
Monday, May 5 Release FOS to Underwriter DC
May 5-9 Execute Closing Documents ALL
Monday, May 12 Pre-Closing ALL
Tuesday, May 13 Closing ALL

BANNING ELECTRIC UTILITY

EMERGENCY RATE INCREASE SCENARIOS

PRESENTATION TO CITY COUNCIL
August 27, 2024
779
2 Background & Objective
Electric Utility’s most recent utility-wide rate increase occurred in 2013 •Most recent rate adjustment occurred in 2022 when some customer categories’ rates increased while others decreased, but there was no net increase in the overall rates During the last 10 years, the Electric Utility has seen increasing pressure from operating expense inflation, power purchase costs, and capital expenditures •Pressures have resulted in a negative ~$9 million fund balance and have required the Electric Utility to borrow from other funds to make required debt service payments on outstanding debt Electric Utility’s negative cash balance and declining debt service coverage caused S&P to lower the rating from “A- to “BB” – (i.e., “junk” bonds rating) Electric Utility is evaluating a one-time emergency rate remedy the negative Electric Utility cash balance and improve debt service coverage •Planned 2025 cost of service study will provide additional background and context and a multi-year rate recommendations
780
3 -$15
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(Est.)
Millions
Unrestricted Cash & Investments
$0
$2
$4
$6
$8
$10
$12
$14
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(Est.)
Millions
Acquisition & Construction of Capital Assets
Financial Pressures on the Electric Utility
 Historically (2015-2021), the Electric utility has
been able to generate sufficient operating
revenues to cover operating expenses
 However, the last three years (2022, 2023, and
2024) there were not sufficient operating
revenues to cover operating expenses
 From 2019 to 2023, power purchase costs increased
31%
 At the same time, the Electric utility accelerated
its capital improvement program in FYEs 2021,
2022, and 2023
 Average during that 3-year period was $10 million
per year
 Average during the prior 6-year period was $3.5M
per year
 Net Result: Electric utility cash balances have
decreased quickly and significantly; the Electric
utility is not generating sufficient revenues to
cover operations, so cash balance is expected to
keep decreasing
$3.5M Annual Avg $10M Annual Avg
Source: City’s Audited
Financials & OpenGov (2024)
$11M Cash
Reserve Policy
Negative ~$9.6M balance
781
4 Financial Pressures on Other City Funds
 Cash in other City funds allow the Electric Utility to continue operations  Current situation with a negative cash balance is only possible because of inter-fund loans to pay Electric Utility operating costs
 General Fund’s capacity to support the Electric Utility is limited and General Fund Balances have been decreasing
 For FYE 2023 General Fund cash was $4.5M
 $1.1M pooled cash & investments
 $3.5M due from other funds
 Marked decrease from FYE 2018 when General Fund pooled cash was >$13 million  General Fund cannot / should not continue to support the Electric Utility  Unlike the Electric Utility, Banning Utility Authority’s Water and Wastewater Funds are subject to California Proposition 218
 Utility funds cannot send cash to the Electric Utility without exposing the City to risk of legal challenge
782
5 Credit Rating Agency Actions and Concerns
 Rating Analysts focus on
several things including cash
balances and debt service
coverage
 Negative outlook means they
intend to further downgrade
the credit rating if corrective
actions are not taken
 While S&P credit rating will
not impact the interest rates
on the outstanding 2015
Bonds, a “junk” bond credit
rating limits future access to
capital markets and increases
the cost of issuing debt in the
future
S&P Credit Rating Actions on 2015 Bonds
September 2015 (Issuance) “A-”/Stable
June 2022 (Rating Review) “A-”/Stable
March 2024 (Rating Review) “BBB”/Negative
May 2024 (Rating Review) “BB”/Negative (“Junk” bonds)
Concerns Cited by S&P in May 2024 Report:
• Failure to implement proper financial controls
• Lack of effective risk management and oversight
• Use of interfund borrowings to meet obligations
• Drastic decreases in liquidity and coverage
Lack of action to raise electric rates could result in
further rating reduction
783
6 Electric Rates within Context of Other California Utilities  2023 Energy Institute at Haas study compared cost per kWh paid by non-CARE resident households in California, assuming 500 kWh/month  Average cost statewide was $0.192 per kWh; median was $0.178 per kWh  Study calculated Banning’s rate at $0.1844 per kWh, to be below average Banning
Source: Energy Institute at Haas; underlying dataset Link As of June 2024, the
average SCE
residential user pays
$193/month
(Per SCE: 520 kWh/month usage,
typical usage profile, summer
service)
BEU residential
customers pay
~$111/month for
the same amount of
energy
784
7 Debt Service Coverage
 Electric Utility made a covenant with bond investors in 2015 that it would raise electric rates as needed to generate net revenues at least 120% of annual debt service  Net Revenues = gross revenues - operating expenses (and does not include depreciation or noncash expenses)  Failure to maintain that 120% minimum debt service coverage (DSC) ratio is considered an event of default by bond investors and will result in further reductions in the rating  Except for FY 2018, Electric Utility has historically complied with DSC requirements, but preliminary calculations for FY 2024 indicate that a DSC covenant default is likely  Promise to bond investors is that in the event of a rate covenant default, the Electric Utility will take action to remedy that default
 Failure to remedy gives the bond trustee and bond owners certain rights, including the right to make the 2015 Bonds due and payable immediately (though in practice that is uncommon for a DSC covenant default)
FYE 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024*
Calculated DSC
(Reported to Bond Investors) 187% 161% 160% 63% 181% 122% 168% 170% 140% <50% Minimum Required DSC 120% 120% 120% 120% 120% 120% 120% 120% 120% 120% Complies? Yes Yes Yes No Yes Yes Yes Yes Yes No
*FYE 2024 calculation is preliminary, final calculation will be provided to bond investors once the 2024 Audit is completed 785
8 Option 1: No Emergency Rate Increase & Complete a COSS in 2025  City is in the process of engaging a rate
consultant for a full-scale electric utility cost
of service study in FYE 2025
 City is also in process of updating the Electric
Master Plan
 Doing nothing now will not “stop the
bleeding” and will result in greater stress to
other City Funds (including the General Fund)
 Other City funds would need to continue to
subsidize the Electric Utility in FY 2025
 Electric Utility cash balance go further into the
negatives (estimated -$9.95M by FYE 2025)
 Bond covenant default is likely, which would
likely trigger a further credit rating downgrade
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
Area of
Concern Likely Outcomes
Cash Balance More negative by FY
End
Credit Rating Likely downgrade
Bond
Covenants
Covenant Default
Service Levels Possible reduction
depending on other
funds’ ability to
subsidize EU operations
Option 1: Likely Impact on Key
Areas of Concern
786
9 Option 2: Raise Rates to Cover Operations and Essential Expenditures Only  13% FY 2025 rate increase is projected to cover
operations, only essential CIP, and pay existing debt
service for the next two years
 Assumes rate increase is effective 10/1/24
 Key assumption is that expenses are equal to or less than the FY 2025 operating budget
 Electric Utility’s cash balance remains negative at FYE 2025
 Keeps the Electric Utility Fund cash balance from
decreasing further
 But no reimbursement to other funds
 Credit concern remains in this area
 Coverage projected to comply with 120% minimum
covenant in FYEs 2025 and 2026
 Partial mitigation of credit concern in this area
 While this option “stops the bleeding” it is only a
temporary solution until the Electric Utility adopts
long-term rate increases
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
Area of
Concern Likely Outcomes
Cash Balance Slight improvement,
but still negative
Credit Rating Neutral in near term
Bond
Covenants
Avoid covenant
default (DSC
Compliance)
Service Levels Assumes service
levels in line with FY
2025 budget
Option 2: Likely Impact on Key
Areas of Concern
787
10 Option 3: Raise Rates & Revenues to Bring Fund Levels Up Over 1-2 Years  Electric Utility can raise rates to increase revenues and bring cash balances into the positive over the next two years  Amount of rate increase will depend on the target balance and the length of time
 Credit Rating agency gave City a 2-year window to improve cash  Benefits
 Electric Utility can repay other City funds
 Demonstrate action to rating agencies and bond investors  City remains compliant with debt service coverage requirements  Downsides
 Negative cash balance condition continues to persist until balances recover slowly over next 2 years
 “Shock” rate increases may lead to higher delinquent accounts NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
Area of
Concern Likely Outcomes
Cash Balance Improvement to
positive by Year 2
Credit Rating Neutral in near term,
positive in the long
term
Bond
Covenants
Avoid covenant
default (DSC
compliance)
Service Levels Assumes service
levels in line with FY
2025 budget
Option 3: Likely Impact on Key
Areas of Concern
Over 1 Year Over 2 Years
Annual Rate Increase Needed 64% in FY 2025 22% per year Assumes first rate increase effective 10/1/2024
788
11 Option 4: Raise Rates to Support a Bond which Replenishes Cash Balances  Similar to Option 2, a 13% FY 2025 rate increase is
projected to cover operations, essential CIP, and pay
existing debt service for the next two years
 Assumes rate increase is effective 10/1/24
 Key difference from Option 2: ~$10 million from a
bond financing would allow immediate repayment to
other City funds and would bring Electric Utility cash
balances into the black
 Trade off would be long-term debt service repayments
 Repayments would be structured to have no debt service payments to next two years, but long-term electric rate planning will need to account for future debt service
 Bond financing would likely be unrated due to the
Electric Utility’s current credit rating
 Would also likely would need to be taxable given IRS
limitations on using tax exempt debt to reimburse an
issuer
 Taxable debt has higher interest rates than tax exempt debt
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
Area of
Concern Likely Outcomes
Cash Balance Rapid improvement
to positive cash
Credit Rating Neutral in near term,
positive in the long
term
Bond
Covenants
Avoid covenant
default (DSC
compliance)
Service Levels Assumes service
levels in line with FY
2025 budget
Option 4: Likely Impact on Key
Areas of Concern
789
12 Summary and Next Steps
Option 1 Option 2 Option 3 Option 4
Description
No Action
Fund balance remains
negative; likely debt
coverage covenant
default in FY 2025
Maintain Services
Fund balance remains
negative; avoids debt
coverage covenant
default in FY 2025
Maintain Services +
Replenish Cash with
Rate Revenues
Fund balance remains
negative for 12-24
months; avoids debt
coverage covenant
default in FY 2025
Maintain Services +
Replenish Cash with
~$10M Bond
Fund balance becomes
positive in 3-4 months;
avoids debt coverage
covenant default in FY
2025
Rate Increases
Needed
None 13% in FY 2025 64% in FY 2025
OR
22%/year for 2 years
13% in FY 2025
(higher rate increases in
future years vs Option 2)
Key Next Steps
• Engage Rate
Consultant for 2025
Cost of Service Study
• City Council considers
rate increase at
September meeting
• Engage Rate
Consultant for 2025
Cost of Service Study
• City Council considers
rate increase at
September meeting
• Engage Rate
Consultant for 2025
Cost of Service Study
• City Council considers
rate increase at
September meeting
• Engage Rate
Consultant for 2025
Cost of Service Study
• City’s financing team
brings request for
authorization to issue
bonds at a future City
Council meeting
Note: NHA does not
recommend Option 1
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
790
DISCUSSION / QUESTIONS?
791
APPENDIX: SUMMARY OF ANALYSIS
792
15 Draft Estimated
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Assumed Rate Increases 4.7% 0.0% 0.0% 0.0% 0.0%
Assumed Rate Increase Date 10/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Total Gross Revenues 34,167,255 35,346,961 37,292,549 37,592,549 35,520,209 35,520,209 35,520,209 Total Operating Expenses 30,760,816 34,333,079 35,235,777 35,740,279 37,474,936 39,314,601 41,246,250 Net Revenues 3,406,439 1,013,882 2,056,772 1,852,270 (1,954,727) (3,794,392) (5,726,041) Debt
2015 Electric Revenue Bonds 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Placeholder
Total Debt Service 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Debt Service Coverage (1.20x Requirement) 1.40 0.42 0.85 0.76 (0.81) (1.56) (2.36) City's Reported Coverage (EMMA Filings) 1.25
Cash Balance Calculations
Net Revenues After Debt Service 981,645 (1,409,162) (366,272) (572,274) (4,377,020) (6,220,686) (8,149,054) Capital Expenditures 8,073,472 5,145,653 1,140,072 1,130,000 1,130,000 1,130,000 1,130,000 Other Cash Adjustments (2,101,693) 5,020,639 (350,000) (350,000) - - - Net Revenues After Capital Expenditures and Transfers Out (4,990,134) (11,575,454) (1,156,344) (1,352,274) (5,507,020) (7,350,686) (9,279,054) Beginning Cash Balance 6,966,959 1,976,825 (9,598,629) (10,754,972) (12,107,246) (17,614,266) (24,964,953) Net change in Cash & Cash Equivalents (4,990,134) (11,575,454) (1,156,344) (1,352,274) (5,507,020) (7,350,686) (9,279,054) Ending Cash Balance 1,976,825 (9,598,629) (10,754,972) (12,107,246) (17,614,266) (24,964,953) (34,244,006) Projected
Summary Results for Option 1 (“Do Nothing”)
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
NHA does not recommend this option
793
16 Draft Estimated
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Assumed Rate Increases 13.0% 0.0% 11.0% 6.0% 6.0%
Assumed Rate Increase Date 10/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Total Gross Revenues 34,167,255 35,346,961 38,959,905 39,259,905 40,450,974 42,426,820 44,521,217 Total Operating Expenses 30,760,816 34,333,079 35,235,777 35,740,279 37,474,936 39,314,601 41,246,250 Net Revenues 3,406,439 1,013,882 3,724,128 3,519,626 2,976,039 3,112,219 3,274,967 Debt
2015 Electric Revenue Bonds 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Placeholder
Total Debt Service 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Debt Service Coverage (1.20x Requirement) 1.40 0.42 1.54 1.45 1.23 1.28 1.35 City's Reported Coverage (EMMA Filings) 1.25
Cash Balance Calculations
Net Revenues After Debt Service 981,645 (1,409,162) 1,301,084 1,095,082 553,745 685,925 851,954 Capital Expenditures 8,073,472 5,145,653 1,140,072 1,130,000 1,130,000 1,130,000 1,130,000 Other Cash Adjustments (2,101,693) 5,020,639 (350,000) (350,000) - - - Net Revenues After Capital Expenditures and Transfers Out (4,990,134) (11,575,454) 511,012 315,082 (576,255) (444,075) (278,046) Beginning Cash Balance 6,966,959 1,976,825 (9,598,629) (9,087,616) (8,772,534) (9,348,789) (9,792,864) Net change in Cash & Cash Equivalents (4,990,134) (11,575,454) 511,012 315,082 (576,255) (444,075) (278,046) Ending Cash Balance 1,976,825 (9,598,629) (9,087,616) (8,772,534) (9,348,789) (9,792,864) (10,070,910) Projected
Summary Results for Option 2 (“Maintain Operations ONLY”) Cash balance never gets positive under this scenario but hovers around current negative levels; this option has serious, negative implications for ability of other City funds to be repaid for amounts they have loaned the Electric Utility NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
794
17 Draft Estimated
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Assumed Rate Increases 63.7% 0.0% 0.0% 0.0% 0.0%
Assumed Rate Increase Date 10/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Total Gross Revenues 34,167,255 35,346,961 49,169,526 49,469,526 47,397,186 47,397,186 47,397,186 Total Operating Expenses 30,760,816 34,333,079 35,235,777 35,740,279 37,474,936 39,314,601 41,246,250 Net Revenues 3,406,439 1,013,882 13,933,749 13,729,247 9,922,250 8,082,585 6,150,936 Debt
2015 Electric Revenue Bonds 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Placeholder
Total Debt Service 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Debt Service Coverage (1.20x Requirement) 1.40 0.42 5.75 5.66 4.10 3.33 2.54 City's Reported Coverage (EMMA Filings) 1.25
Cash Balance Calculations
Net Revenues After Debt Service 981,645 (1,409,162) 11,510,705 11,304,703 7,499,957 5,656,291 3,727,923 Capital Expenditures 8,073,472 5,145,653 1,140,072 1,130,000 1,130,000 1,130,000 1,130,000 Other Cash Adjustments (2,101,693) 5,020,639 (350,000) (350,000) - - - Net Revenues After Capital Expenditures and Transfers Out (4,990,134) (11,575,454) 10,720,633 10,524,703 6,369,957 4,526,291 2,597,923 Beginning Cash Balance 6,966,959 1,976,825 (9,598,629) 1,122,005 11,646,708 18,016,664 22,542,955 Net change in Cash & Cash Equivalents (4,990,134) (11,575,454) 10,720,633 10,524,703 6,369,957 4,526,291 2,597,923 Ending Cash Balance 1,976,825 (9,598,629) 1,122,005 11,646,708 18,016,664 22,542,955 25,140,878 Projected
Summary Results for Option 3A (“Recovery from Rates in 2025”) NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
795
18 Draft Estimated
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Assumed Rate Increases 21.2% 21.2% 0.0% 0.0% 0.0%
Assumed Rate Increase Date 10/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Total Gross Revenues 34,167,255 35,346,961 40,603,984 47,510,365 45,438,025 45,438,025 45,438,025 Total Operating Expenses 30,760,816 34,333,079 35,235,777 35,740,279 37,474,936 39,314,601 41,246,250 Net Revenues 3,406,439 1,013,882 5,368,207 11,770,086 7,963,090 6,123,424 4,191,775 Debt
2015 Electric Revenue Bonds 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Placeholder
Total Debt Service 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 Debt Service Coverage (1.20x Requirement) 1.40 0.42 2.22 4.85 3.29 2.52 1.73 City's Reported Coverage (EMMA Filings) 1.25
Cash Balance Calculations
Net Revenues After Debt Service 981,645 (1,409,162) 2,945,163 9,345,542 5,540,796 3,697,130 1,768,762 Capital Expenditures 8,073,472 5,145,653 1,140,072 1,130,000 1,130,000 1,130,000 1,130,000 Other Cash Adjustments (2,101,693) 5,020,639 (350,000) (350,000) - - - Net Revenues After Capital Expenditures and Transfers Out (4,990,134) (11,575,454) 2,155,091 8,565,542 4,410,796 2,567,130 638,762 Beginning Cash Balance 6,966,959 1,976,825 (9,598,629) (7,443,538) 1,122,005 5,532,800 8,099,930 Net change in Cash & Cash Equivalents (4,990,134) (11,575,454) 2,155,091 8,565,542 4,410,796 2,567,130 638,762 Ending Cash Balance 1,976,825 (9,598,629) (7,443,538) 1,122,005 5,532,800 8,099,930 8,738,693 Projected
Summary Results for Option 3B (“Recovery from Rates in 2026”) NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
796
19 Draft Estimated
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Assumed Rate Increases 13.0% 5.0% 10.0% 5.0% 5.0%
Assumed Rate Increase Date 10/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Total Gross Revenues 34,167,255 35,346,961 38,959,905 40,739,209 41,781,535 43,494,601 45,293,321 Total Operating Expenses 30,760,816 34,333,079 35,235,777 35,740,279 37,474,936 39,314,601 41,246,250 Net Revenues 3,406,439 1,013,882 3,724,128 4,998,930 4,306,599 4,180,000 4,047,070 Debt
2015 Electric Revenue Bonds 2,424,794 2,423,044 2,423,044 2,424,544 2,422,294 2,426,294 2,423,013 2024 Electric Revenue Bonds (Taxable) 0 0 925,750 925,750 925,750 Total Debt Service 2,424,794 2,423,044 2,423,044 2,424,544 3,348,044 3,352,044 3,348,763 Debt Service Coverage (1.20x Requirement) 1.40 0.42 1.54 2.06 1.29 1.25 1.21 City's Reported Coverage (EMMA Filings) 1.25
Cash Balance Calculations
Net Revenues After Debt Service 981,645 (1,409,162) 1,301,084 2,574,386 958,556 827,956 698,308 Capital Expenditures 8,073,472 5,145,653 1,140,072 1,130,000 1,130,000 1,130,000 1,130,000 Other Cash Adjustments (2,101,693) 5,020,639 (350,000) (350,000) - - - Proceeds from Bonds - 10,209,621 - - - -
Net Revenues After Capital Expenditures and Transfers Out (4,990,134) (11,575,454) 10,720,633 1,794,386 (171,444) (302,044) (431,692) Beginning Cash Balance 6,966,959 1,976,825 (9,598,629) 1,122,005 2,916,391 2,744,946 2,442,902 Net change in Cash & Cash Equivalents (4,990,134) (11,575,454) 10,720,633 1,794,386 (171,444) (302,044) (431,692) Ending Cash Balance 1,976,825 (9,598,629) 1,122,005 2,916,391 2,744,946 2,442,902 2,011,210 Projected
Summary Results for Option 4 (“Recovery from Bonds in 2025”) Cash balance recovers quickly under this scenario, tradeoff is the long-term debt repayments on a ~$10M Bond (principal + interest)
NHA is not a rate consultant; these required rate increases are estimates, subject to a cost of service study
797

BANNING ELECTRIC UTILITY

FINANCIAL RECOVERY

PLAN DISCUSSION
Presentation to City Council on February 25, 2025
Prepared In Coordination with:
798
Background
In Fall 2024 Banning Electric Utility’s (BEU) had a negative $6.5 million cash balance and declining ability to make its annual bond payments. This situation caused S&P to lower BEU’s credit rating from “A- to “BB-” over the last couple of years
•Negative BEU cash flow was the result of spending over $10 million per year on capital projects, as well as increasing operating costs without increasing rates or issuing debt to pay for them •Negative BEU cash flow necessitated borrowing from other City funds (i.e. General Fund) BEU recently approved a Financial Recovery Plan consisting of two 13.9% rate increases, issuance of approximately $6 million of electric revenue bonds to restore BEU positive cash balance by June 30, 2026, and completion of BEU master-plan and cost of service studies by Fall 2025 799
Two Pathways Available
Option 1
Confirm approved BEU Financial Recovery Plan
and proceed with borrowing funds to restore
BEU cash balances
Key Benefits
• Lower near-term impact on ratepayers
• Rapidly eases the strain on other City funds
from the interfund borrowing
Key Costs
• Annual debt service costs (approximately
$700K annually over a 20-year term)
• Upfront debt issuance costs (~2% of
principal)
Option 2
Direct City Staff to eliminate financing component
of Recovery Plan and instead evaluate using only
rate increases needed to restore BEU cash balances
Key Benefits
• No long-term debt repayment
• No upfront debt issuance costs
Key Costs
• Higher (potentially significantly higher) BEU
rate increases needed to restore cash balances
• Continued strain on other City Funds as long as
fund balance remains negative (opportunity
cost)
800
Additional Detail on a Financing
Structure
• BEU “BB-” rating likely necessitates direct private placement of debt • Sold to a single investor (typically a regional or national bank) • Higher, risk-adjusted fixed interest rate; 20-year maximum term • Early prepayment allowed (typically after 3 years)
• IRS Regulations allow tax-exempt bond issuance to fund capital projects • However, funding replenishment of cash balances must be sold on a taxable basis which require slightly higher interest rates (6-7% range estimated) • While not originally contemplated as part of the BEU Financial Recovery Plan, there may also be the option of refinancing and restructuring BEU’s existing 2015 Bonds using lower, credit enhanced “AA” rating to accomplish all or a portion of the Plan’s objectives
801
Next Steps for Option 1
1 • Upon City Council direction, City staff will work with NHA to investigate/evaluate the most efficient and effective borrowing of funds approach to accomplishing the goals of the approved BEU Financial Recovery Plan
2 • Direct Placement Process takes approximately 2-3 months; Utilizing a more comprehensive approach that may include a full restructuring of the 2015 Bonds could take 3-4 months
3 • Either approach will require City staff oversight and one or more future approvals from City Council
4 • City can close a financing within 1 month of final City Council approval 802
Questions?
803
1 STRADLING YOCCA CARLSON & RAUTH LLP – PROPOSAL TO PROVIDE BOND COUNSEL

AND DISCLOSURE COUNSEL SERVICES FOR BANNING ELECTRIC UTILITY Stradling Yocca Carlson & Rauth LLP (the “Firm”) is pleased to present this response (the “Proposal”) to the Banning Electric Utility -Bond Counsel and Disclosure Counsel Request for Proposal (the “RFP”) to provide Bond Counsel and Disclosure Counsel services to the City of Banning (the “City”) in connection with the proposed financing for the City’s electric utility fund, referred to herein as the Banning Electric Utility (“BEU”).

EXECUTIVE SUMMARY
We believe that the Firm is the most qualified firm to represent BEU as Bond and Disclosure Counsel as it executes its “Financial Recovery Plan” through the financings described in the RFP for the following reasons:

Experience with Challenged Credits. When public agencies have difficult challenges, they hire the Firm and, in particular, Brian Forbath. The Firm has a demonstrated track record of developing innovative and tailored financing solutions for challenged and distressed credits. As described in further detail herein, Brian Forbath, the primary point of contact for the BEU engagement, has counseled the City of Beaumont (“Beaumont”), the Three Rivers Community Services District and the Pixley Public Utility District through difficulties accessing financing, developing solutions and strategies to achieve each entity’s goals during challenging times.

Familiarity with BEU. The Firm, led by Mr. Forbath, served as Underwriter’s Counsel on the BEU’s last public offering, its City of Banning Financing Authority Refunding Revenue Bonds (Electric System Project) Series 2015 (the “2015 Bonds”). The Firm’s prior engagement as Underwriter’s Counsel gives the Firm a familiarity with the relevant BEU legal documents and an understanding of the financial structure and operations of BEU that most other firms do not have. Mr. Forbath also served as Underwriter’s Counsel on the City 2015 water utility financing, and has a strong working relationship with the City Attorney of the City from Mr. Forbath’s work as Bond and Disclosure Counsel to Beaumont.

California Electric Utility Experience. The Firm has significant experience representing publicly owned electric utilities throughout California as Bond and Disclosure Counsel. Electric utilities represented by the Firm include the City of Vernon, the City of Riverside, the Indio Electric Financing Authority, Northern California Power Agency, the Department of Water and Power of the City of Los Angeles (Power System), the South San Joaquin Irrigation District, the Imperial Irrigation District, the City of Santa Clara, the City of Redding, Public Utilities Commission of the City and County of San Francisco and the Turlock Irrigation District. Firm attorneys also have experience working with the Southern California Public Power Agency, of which the City is a member agency, while working at a prior firm.

ASSIGNED PERSONNEL
Brian Forbath, a partner and President of the Firm, would be the designated contact and lead attorney for the Firm on BEU matters. Mr. Forbath would be assisted by Jonathan Guz, a partner of the Firm. Carol Lew, head of the Firm’s Public Finance Tax Department, would be the lead attorney handling any tax-related matters for BEU. Mr. Forbath and Mr. Guz would be assisted by other partners and associates as appropriate to provide the highest level of service to BEU. Each of the attorneys proposed to represent BEU has extensive experience serving as Bond and Disclosure Counsel to publicly owned utilities throughout California. Mr. Forbath would serve as lead counsel and would provide a majority of the legal services. Mr. Forbath would expect to be involved in all of the key negotiations, conference calls and 804
2 meetings, along with Mr. Guz, as appropriate, to provide the best service to the District. Curriculum vitae for the individuals expected to serve BEU are set forth below.

Brian Forbath. Mr. Forbath is a partner and the President the Firm. He works exclusively in the public finance area and has extensive experience in electric utility financings and working with challenged credits. Mr. Forbath has over 25 years of experience serving as Bond Counsel, Disclosure Counsel or counsel to the underwriter on public finance transactions. Mr. Forbath serves as Bond and Disclosure Counsel to the City of Riverside in connection with its electric utility financings. Mr. Forbath has also represent the electric utility of the City of Vernon (“Vernon”) as Bond and Disclosure Counsel. Mr. Forbath has also served as Underwriter’s Counsel on a number of electric utility financing, including serving in such capacity on BEU’s last publicly offered financing. In addition to electric utility financing, Mr. Forbath provided Bond Counsel services to Three Rivers Community Services District and the Pixley Public Utility District, as such agencies faced impediments to accessing financing. After working with the respective financing teams exploring all avenues for the issuance of debt, Mr. Forbath was able to negotiate loans with the United States Department of Agriculture for each entity, allowing the agencies access to much needed financing while such agencies were otherwise prevented from participating in the public debt markets.

Jonathan Guz. Mr. Guz, a partner in the Firm, focuses his practice on the area of public finance, in particular on transportation and public utilities financings, including electric utilities. Mr. Guz serves on the Firm teams providing Bond and Disclosure Counsel services to IEFA, Northern California Power Agency, the Department of Water and Power of the City of Los Angeles (Power System), the South San Joaquin Irrigation District, the City of Santa Clara, Vernon and the Turlock Irrigation District (“TID”).

Mr. Guz represented the City of Vernon in connection with the re-acquisition of the City’s Malburg Generating Station, providing services in connection with both the negotiation of the acquisition itself and well as the related financing. Recently, Mr. Guz, along with other attorneys at the Firm, represented TID in connection with a prepaid gas and renewable energy financing transaction.

Carol L. Lew. Ms. Lew is nationally recognized with respect to tax issues relating to municipal finance. Ms. Lew is the head of the Firm’s Public Finance Tax Department and a partner in the Firm.

Ms. Lew has been practicing as a public finance tax attorney for over 30 years. Ms. Lew serves has tax counsel on all of the electric utility financings where the Firm serves as Bond Counsel. Ms. Lew works diligently for issuers, analyzing issues from various perspectives to achieve the best tax results for the Firm’s clients. Unlike some other tax attorneys, Ms. Lew has a ”can do” approach to tax analysis, often identifying potential structures and options that allow issuers to achieve their objectives on a tax-exempt basis.

RELEVANT CASE STUDY
The Firm has developed a number of innovative solutions for clients facing challenging circumstances. The Firm, and in particular Mr. Forbath, represented Beaumont during the period following the raid of the city by the Federal Bureau of Investigation. With the assistance of the Firm’s advice, Beaumont was able to successfully navigate settlement with the Western Riverside Council of Governments that otherwise would have forced Beaumont into bankruptcy. Mr. Forbath also advised Beaumont through a Securities and Exchange Commission (“SEC”) and a successful settlement in connection with alleged securities laws violations. The reference for this engagement is Kristine Day, Assistant General Manager, Santa Margarita Water District, (949) 459-6602; [email protected]. Kristine served as the Assistant City Manager at Beaumont during the period described above.

Another example of developing creative solutions for our clients is the creation of the Indio Electric Financing Authority (“IEFA”). Mr. Forbath and Mr. Guz were initially working with City of Indio (“Indio”) to find ways for the Imperial Irrigation District (“IID”) to finance electric resiliency projects, consisting of several substations, in Indio. After hitting several dead ends in negotiations with IID relating 805
3 to imposition of an additional charge on utility users in Indio, the Firm and IID’s lawyers developed a collaborative approach through the creation of joint powers authority (which is IEFA) that would levy a charge to finance the projects, allowing Indio with a means to finance and deliver much needed electric utility projects within the city while allaying the concerns of IID. The IEFA structure is now being replicated by the Coachella Valley Energy Commission, who is establishing a joint powers authority to serve the same function as the IEFA throughout the Coachella Valley. The reference for this engagement is Bryan Montgomery, City Manager, City of Indio, (760) 391-4015; [email protected].

FEEDBACK ON SCHEDULE
As noted in the RFP, the current schedule is very ambitious, especially if the BEU bonds are to be publicly offered with a disclosure document. Due to the fact that BEU’s last publicly sold transaction occurred 10 years ago, and in light of the financial challenges faced by BEU, we would expect that the preparation of the BEU disclosure and the related diligence would take a significant effort from both our Firm and the City. Our Firm will commit the necessary resources to prepare the disclosure on a timeframe to meet the City’s objectives; however, the ability to develop disclosure that is compliant with federal securities law will be largely dependent on the ability of City staff to assist in preparing the disclosure and obtaining the necessary information that our Firm will need to allow the City to sell the bonds in the public debt market. Because of BEU’s financial challenges, it is paramount to craft disclosure that provides the complete picture of BEU’s financial circumstances. In addition, because BEU is an enterprise of the City, we will need to perform diligence relating to the City’s financial position and the bankruptcy risk of the City, as the assets of BEU would be included in any bankruptcy proceedings initiated by the City. To ensure compliance with the federal securities law, any material issues relating to the City’s financial position will need to be included in the offering document. The availability of the audited financial statements for the most recent Fiscal Year will be critical to meeting the proposed schedule. In addition, as discussed in further detail below, because a public sale is contingent on AGM agreeing to insure the 2025 Bonds, there will need to be sufficient time to negotiate conditions that AGM may require for purposes providing insurance.

In addition, the recent wildfires in Southern California have created a heighten interest in the municipal debt markets regarding wildfire risks, inverse condemnation and bankruptcy. Based on BEU’s 2024 wildfire mitigation plan, there are four primary areas of wildfire potential within the City. As this particular issue was not as prominent the last time BEU was in the market, care and thoughtfulness will need to be taken is preparing disclosure on this subject, especially with BEU’s financial challenges as a backdrop to the wildfire risk.

LEGAL DOCUMENT IMPROVEMENTS
In the event that the financing includes the defeasance of the 2015 Bonds, there are few areas of BEU’s current legal documents that we believe can be modernized. First, we propose adding the concept of “Excluded Principal.” Generally, a defined term of “Excluded Principal” would be added that would allow principal on any short-term obligations (typically maturing up to 60 months) that will be paid with a source other than revenues to be excluded from the definition of Debt Service for purposes the rate covenant and the additional bonds test.

Second, we would suggest changing the rate covenant from a historical rate covenant (where compliance is judged at the end of the fiscal year) to a budget based rate covenant (where compliance is judged by the adopted budget). Under a budget based rate covenant, the City would covenant to set rates and charges at the start of each fiscal year that it reasonably believes will provide the specified debt service coverage. If coverage is less than such specified level at the end of the fiscal year, such failure to achieve coverage would not constitute an event of default so long as the City sets rates and charges for the next 806
4 fiscal year that it reasonably believes will achieve debt service coverage. Unlike a historical rate covenant, where there is no way to remedy the default once it has occurred, a budget based rate covenant allows for a practical remedy.

Third, the creation of a rate stabilization fund may also be considered. Unlike a reserve fund, where there is a minimum amount required to be deposited therein, there is no such requirement for a rate stabilization fund and such fund can be drawn upon to assist BEU in meeting its debt coverage threshold in years where there is an unexpected decline in revenues.

LEGAL CHALLENGES AND OBSTACLES
In addition to the challenges with preparing the disclosure discussed above, a publicly sold deal will require AGM’s participation. Our Firm has a strong working relationship with AGM. They respect our judgment and turn to our Firm for advice from time to time. To encourage AGM to provide insurance, the City may propose funding a cash reserve. The City could also adopt the necessary policies to increase the likelihood of getting an investment grade rating and to address concerns expressed by S&P management. To further mitigate concerns that AGM may have, a covenant could be prepared obligating the City to adopt such policies in Fiscal Year 2026 and to seek a rating on the bonds within 180 days of the end of Fiscal Year 2026.

FEES
In connection with our representation of BEU as Bond Counsel in connection with direct placement, we propose the fee of $70,000. Due to BEU’s current financial situation, we would anticipate that there would be a significant amount of time negotiating the provisions of the legal documents with the direct purchaser. In connection with our representation of BEU as Bond Counsel and Disclosure Counsel in connection with a public sale, we propose a fee of $120,000. The fee reflects the amount of work previously discussed relating to the preparation of the disclosure document and the negotiations with AGM.

The quoted fees assume a closing prior to June 30, 2025. If the transaction goes beyond June 30, 2025, we reserve the right to renegotiate additional fees based on then current costs.

In the event the Firm is requested to perform special services outside the scope of normal bond counsel services or services following the issuance of Bonds, we would propose to be compensated at the Firm’s hourly rates. The hourly rates for the attorneys proposed to work on this engagement as well as other partner, associate and paralegal rates are as follows: Senior Partners (Brian Forbath, Carol Lew):
$690, Junior Partners (Jonathan Guz): $575; Associates: $380-450; Paralegals: $205.

CONCLUSION
We truly appreciate the opportunity to submit this proposal to provide Bond and Disclosure Counsel services to BEU. We hope that the foregoing Proposal has conveyed the depth of our experience and the sincerity of our desire to serve BEU. We would be pleased to provide any additional information or answer any further questions that BEU might have in connection with the selection of a Bond Counsel or Disclosure Counsel firm. Please feel free to contact Brian P. Forbath at (949) 725-4193 or [email protected] with any questions or to discuss our proposal.

Respectfully submitted,

STRADLING YOCCA CARLSON & RAUTH LLP
Brian P. Forbath
President/Partner
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