AVAILABILITY OF PUBLIC RECORDS:
All public record to an open session item on this agenda, which are not exempt from disclosure pursuant to the California Public Records Act, that are distributed to a majority of the legislative body will be available for public inspection at the City Clerk’s Office, City Hall located at 333 90 th Street, Daly City, CA during normal business hours, at the same time that the public records are distributed or made available to the legislative body.
CITY OF DALY CITY
Regular Meeting - CITY COUNCIL
AGENDA
Monday, February 23, 2026 - 7:00 PM
City Hall Council Chambers – 2nd Floor
City Hall 333 – 90th Street
Daly City, CA 94015
To watch the live telecast:
https://www.youtube.com/@DalyCityGov/streams, https://www.dalycity.org/agendas, or Comcast Ch. 27
PUBLIC PARTICIPATION
There are three ways to submit public comments: (1) submit written comments by meeting day, (2) submit written comments during the meeting, and (3) attend the meeting in person.
1. To submit written comments by meeting day, please email [email protected] and include “Public Comment” in the subject line. All written comments received by 4:00 pm on meeting day will be provided to the City Council prior to the meeting.
Please note: Any emailed comments received after 4:00 p.m. on the meeting date are not guaranteed to be received by the City Council prior to the meeting. Comments are not read aloud into the record.
2. During the meeting, you may visit www.dalycity.org/agendas to submit comments using the Public Comment form to address the City Council on a specific item, or during the public comment period, and such comments are delivered to the City Council and City Staff during the meeting, and may be read into the record at the time they are received.
3. To speak at the meeting in person, please complete a Speaker Card located at the entrance to the Council Chamber and submit it to a Staff Member as early in the meeting as possible.
Persons with disabilities who require auxiliary aids or services in attending or participating in this meeting should call the office of the City Clerk at (650) 991-8078 as soon as possible.
PLEDGE TO THE FLAG:
CALL TO ORDER
The City of Daly City acknowledges that we are on the ancestral lands of the Ramaytush (rah-my-toosh) Ohlone (O-lon-ee) peoples. We recognize their enduring connection to this region and honor their history, culture, and contributions. As the Indigenous protectors of this land, we affirm their sovereign rights as the original inhabitants of this land and pay respects to the Ancestors, Elders, and Relatives of the Ramaytush Ohlone peoples.
ROLL CALL:
Agenda – City Council
Monday, February 23, 2026
APPROVAL OF MINUTES:
1. Regular Meeting of February 9, 2026
APPROVAL OF AGENDA:
2. Regular Meeting of February 23, 2026
ORAL COMMENT:
NOTE: Speakers are limited to two minutes, unless modified by the Mayor.
The Council cannot take action on any matter raised under this item.
CONSENT AGENDA
All items listed on the Consent Agenda are considered to be routine and may be approved by one roll call vote of the City Council. There shall be no separate discussion of the matters on the Consent Agenda unless requested by a member of the City Council. If discussion is required, that item will be removed from the Consent Agenda and will be considered separately at the end of the Agenda.
Resolutions:
3. Set Time and Place for a Public Hearing to Consider the Zone Change ZC 04-24-16507 - Amendments to the Zoning Map Creating a New Commercial Cannabis Non-Retail (-CCNR) Combining District and Rezoning Parcels to be Included Within It (Set Time: 3/23/26)
4. Authorize Pilot Program Allowing City-Permitted Taxicabs to Accept Transportation Network Company (TNC) Referred Trips Through the CURB Platform as a Pilot Program
5. Accept Resolution of $250,000 in Cannabis Equity Grants Program (CEG) Phase 2 Funds from the Governor’s Office of Business and Economic Development (GO-Biz), Appropriate the Funds, and Authorize the City Manager or Designee to Execute and Administer the Grant Agreement
Check Registers:
6. Check Registers for the Month of January 2026
END OF CONSENT AGENDA
PUBLIC HEARINGS:
7. Introduction of an Ordinance Amending Chapter 8.16 of the Daly City Municipal Code Re:
Recovery of Attorney's Fees for Nuisance Abatement
STAFF: Rose Zimmerman
RECOMMENDATION: Open/Close Hearing
Motion for City Attorney to Read by Title Only
Councilmember Introduce Ordinance
Agenda – City Council
Monday, February 23, 2026
COMMUNICATIONS:
8. Legacy Business Nominations — Third Installment (2026)
STAFF: Maybelle Manio
RECOMMENDATION: Adopt Resolution by Roll Call Vote
9. Four Lot Subdivision at 933-969 Crocker Avenue – Minor Subdivision SUB-07-24-16596 and Design Review DR-08-24-16609
STAFF: Sam Fielding
RECOMMENDATION: Adopt Resolution by Roll Call Vote
RESOLUTIONS:
10. Authorize a WIFIA Loan Agreement with the Daly City Joint Powers Financing Authority (DCJPFA), Daly City, and the Environmental Protection Agency and a Financing Agreement with the DCJPFA for the financing of the Vista Grande Drainage Basin Improvement Project and Authorizing the City Manager (or District Manager), or Designee to Execute and Deliver Such Agreements and Related Documents and Approving Related Agreements and Actions.
STAFF: Joshua Cosgrove, Rose Zimmerman
RECOMMENDATION: Adopt Resolution by Roll Call Vote
ORDINANCES:
11. Second Reading, Ordinance No. 1487, Adding Chapter 5.96 to the Daly City Municipal Code to Establish an Entertainment Zone
STAFF: Rose Zimmerman
RECOMMENDATION: Adopt Ordinance by Roll Call Vote
APPOINTMENTS: Board/Commission Membership Committee Appointments
REPORTS:
12. Council Committee
13. City Council
14. Staff
ADJOURNMENT:
Agenda – City Council
Monday, February 23, 2026
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
--------------------------------
Note on Public Comments:
To provide public comments, members of the public have the option to- 1) attend in person, 2) email the City Clerk, or 3) submit comments through the public comment portal on the City’s website. Persons with disabilities who require auxiliary aids or services in attending or participating in this meeting are instructed to call the office of the City Clerk at 991-8078 prior to the meeting.
Visit https://www.youtube.com/@DalyCityGov/streams to view the City Council meeting
CALL TO ORDER:
Mayor Sylvester called t he special meeting to order at 7:00 P.M. and read the City’s Land Acknowledgement:
The City of Daly City acknowledges that we are on the ancestral lands of the Ramaytush (rah -my-toosh) Ohlone (O-lon-ee) peoples. We recognize their enduring connection to this region and honor their history, culture, and contributions. As the Indigenous protectors of this land, we affirm their sovereign rights as the original inhabitants of this land and pay respects to the Ancestors, Elders, and Relatives of the Ramaytush Ohlone peoples.
ROLL CALL: Councilmembers Present
Glenn R. Sylvester, Mayor
Teresa G. Proaño, Vice Mayor
Dr. Roderick Daus-Magbual
Pamela DiGiovanni
Juslyn C. Manalo
Staff Present
Thomas J. Piccolotti, City Manager
Rose Zimmerman, City Attorney
K. Annette Hipona, City Clerk
APPROVAL OF MINUTES:
Regular Meeting of January 26, 2026
It was moved by Councilmember Daus-Magbual, seconded by Councilmember Manalo and carried to approve the minutes of January 26, 2026, as amended.
APPROVAL OF AGENDA:
It was moved by Councilmember DiGiovanni , seconded by Councilmember Daus-Magbual, and carried to approve the agenda.
ORAL COMMENT:
Emma Mapa expressed her gratitude to the Council and Police staff for assigning an officer to monitor Dorchester Drive and for issuing citations to speeding vehicles along John Daly Boulevard. Emma requested the installation of cameras and improved lighting in the area, as well as assistance with her PG&E bill.
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
2 Jim Laramie raised concerns about the detrimental effects of large tree roots on the streets and sidewalks along W. Cavour Street. He noted that these roots are causing drainage issues during heavy rains and leading to sidewalk buckling, which ultimately r esults in expensive street repairs. Jim requested help with the removal of trees located in front of 55 and 61 W. Cavour St.
CONSENT AGENDA:
It was moved by Councilmember DiGiovanni, seconded by Councilmember Sylvester and carried to approve the consent agenda, with the exception of items #4 and 13.
Communications:
Accept QTR 4 Investment Report
Accept the Fiscal Year 2025 Annual Comprehensive Financial Report (ACFR)
Interim Director of Finance and Administrative Services Tim Nevin provided the staff report recommending the acceptance of the ACFR . Nevin clarified questions regarding identified deficiencies linked to internal controls discussed in the report by auditors Maze & Associates.
It was moved by Councilmember DiGiovanni, seconded by Vice Mayor Proaño and carried to accept the report.
Resolutions:
Amend Traffic Regulations to: (1) Extend the existing 4-ft red zone on the south side of the driveway at 7535 Mission Street to 6- ft; and (2) remove the existing 3.5- ft red zone between the two parking spaces in front of 7535 Mission Street and 7555 Mission Street (TSR 26/22)
Resolution 26-15, Establishing Traffic Regulations
Approve Resolution Adopting Salary Schedules and Benefits for Miscellaneous/Unrepresented Employees
Resolution 26- 16, Adopting Salary Schedule/Benefits For Miscellaneous/Unrepresented Employees
Approve Resolution Adopting Salary Schedules and Benefits for Executive Management Employees
Resolution 26-17, Adopting Salary Schedule And Benefits For Executive Management Employees
Accept and Appropriate Fiscal Year 2026 Mid-Year Operating and Capital Improvement Program Budget Adjustments
Resolution 26-18, Accepting And Appropriating Fiscal Year 2026 Mid- Year Operating Capital Improvement Program Budget Adjustments
Authorize the City Manager to Approve a Purchase Agreement with Altec for an Altec Model AT41ME Articulating Telescopic Aerial Lift Service Truck
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
3 Resolution 26-19, Authorizing Execution Of A Purchase Agreement With Altec For An A ltec Model AT41ME Articulating Telescopic Aerial Lift Service Truck
Authorize Agreement with the County of San Mateo for Participation in the Compost for Climate Solutions Program
Resolution 26-20, To Enter into a Memorandum of Understanding with the County of San Mateo for Participation in the San Mateo County Compost for Climate Solutions Program to Support Senate Bill 1383 Procurement Compliance
Set Time and Place for a Public Hearing to Consider Proposed Ordinance Amending Chapter 8.16 of the Daly City Municipal Code Re: Property Maintenance and Nuisance Abatement
Resolution 26-21, Setting Time And Place Of Public Hearing For Proposed Ordinance Amending Chapter 8.19 Of The Daly City Municipal Code Re: Property Maintenance And Nuisance Abatement (Hearing Date: February 23, 2026, Time: 7:00 P.M.)
Accept 2025 Mandated Fire And Life Safety Inspection Report
Resolution 26- 22, Acknowledging North County Fire Authority Regarding The Inspection Of Certain Occupancies Required To Perform Annual Inspections In Such Occupancies Pursuant To Sections 13146.2 And 13146.3 Of The California Health And Safety Code
Approve Early Lease Renewal and Authorization to Execute a Lease Amendment for the Child Care Center at 280 92nd Street
Councilmember Manalo acknowledged how essential childcare is for the community by helping families thrive, noting that the Child Care Center on 92 nd Street is utilized by many families in Daly City.
Mayor Sylvester agreed on the necessity for more childcare services and noted that the County has plans in the pipeline regarding this issue.
It was moved by Councilmember Manalo, seconded by Councilmember DiGiovanni and carried to adopt the resolution.
Resolution 26-23, Approving An Early Lease Renewal And Authorizing Execution Of A Lease Amendment For The Childcare Center At 280 92nd Street
END OF CONSENT AGENDA
PUBLIC HEARINGS:
Public Hearing to Consider Adoption of an Entertainment Zone Ordinance Pursuant to State Law (SB 969)
Economic Development Specialist Maybelle Manio provided the staff report to adopt an ordinance mandated by state law to allow the City to activate entertainment zones that allow controlled outdoor alcohol consumption during City events. Adopting this proposed ordinance is necessary for Daly City to comply with SB 969 and safely activate public spaces during major events. The ordinance provides a framework that aligns with best practices statewide and requires a biennial review to assess its impacts.
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
4 Manio addressed questions on the following: the origin of the ordinance, how an entertainment zone is activated and examples of when the ordinance would be utilized, whether an ordinance exists that similarly addresses cannabis consumption, the type of data collected to ensure successful implementation , age verification procedures at special events, types of alcohol that businesses can sell at events, steps for activating an entertainment zone and the process for approving a special event permit, the point of purchase for alcoholic beverages, and preventive measures for underage drinking.
Councilmember Manalo recognized Senator Wiener for authoring SB 969 in conjunction with San Francisco’s major city events and the ordinance being used as an economic development tool. Mayor Sylvester acknowledged the ordinance as an added layer of security to assist the City, while also addressing the challenges faced during public events.
Mayor Sylvester opened the public hearing. There were no public speakers.
It was moved by Councilmember DiGiovanni, seconded by Vice Mayor Proaño and carried to close the hearing.
It was moved by Councilmember Manalo, seconded by Councilmember DiGiovanni and carried for the City Attorney to read the ordinance by title only.
Councilmember Manalo introduced the ordinance.
Ordinance 1487, Adding Chapter 5.96 to the Daly City Municipal Code to Establish an Entertainment Zone Program Pursuant to California Business and Professions Code Sections 23039.5, 23357, 25690, 25691 & 25692 (As Amended by SB 969)
Public Hearing on Issuance of Tax -Exempt Bonds for 493 Eastmoor Apartments and Resolution Approving the Issuance of Bonds
Acting Director of Economic and Community Development Michael Van Lonkhuysen provided the staff report for the TEFRA hearing and the resolution to approve the issuance of bonds for a 72- unit multifamily housing project at the designated site. Van Lonkhuysen also addressed questions regarding the funding amount from Daly City for the project, as well as the funding from HEART.
Mayor Sylvester opened the public hearing. There were no public speakers.
It was moved by Councilmember DiGiovanni , seconded by Councilmember Daus -Magbual and carried to close the hearing.
It was moved by Councilmember Manalo, seconded by Councilmember DiGiovanni and carried by unanimous roll call vote to adopt the resolution.
Resolution 26-24, Approving the Issuance by the California Statewide Communities Development Authority of Exempt Facility Bonds for a Qualified Residential Rental Project for 493 Eastmoor
APPOINTMENTS:
It was moved by Councilmember Manalo, seconded by Councilmember Daus-Magbual and carried to appoint Liezel Chan to the Women’s Commission.
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
5 Vice Mayor Proaño informed the Council of an upcoming appointment.
It was moved by Councilmember Manalo, seconded by Councilmember DiGiovanni and carried to reappoint Angella Logarta to the Library Board of Trustees.
REPORTS:
Council Committee
Ad Hoc Committee - City Commissioners (Sylvester/ Proaño) Illegal Dumping Committee (Proaño /Sylvester)
Department of Emergency Management (Sylvester)
City Council
Vice Mayor Proaño reported attendance at the following events: the groundbreaking at Marchbank Park with Sacred Heart Cathedral , Mayor Sylvester, Councilmembers Manalo and Daus-Magbual, City Manager Piccolotti, Assistant to the City Manager Ramos, Director Cosgrove, and City staff; a celebration at Holy Cross Cemetery honoring the Hello Girls, American bilingual women who were switchboard operators during WWI, helping with the war effort, wherein the women finally received recognition and veteran benefits; the Daly City Host Lions event to collect eyeglasses and hearing aids for those in need, along with Councilmember Manalo; the Daly City Host Lions Club’s Student Speaker Contest, where City Manager Piccolotti served as one of the judges, and where Maria Skaf won the competition and will represent the City at the next level ; and Skyline College’s Sunset Soiree along with over 200 community members, Dr. Daus-Magbual, Councilmember Manalo and City Manager Piccolotti.
Councilmember Manalo reported attendance at the following events: the Marchbank Park groundbreaking with Sacred Heart Cathedral, calling the state- of-the-art field the largest private- public partnership in Daly City; the Crab Feed with the Recreation Department, to support a great cause - the Build A Dream program . Manalo reported that community members from FAREPA are interested in collaborating with the City to provide a free workshop for first-time homebuyers. Manalo also noted AMR’s interest in partnering with Daly City to offer CPR training for the North County community . Manalo commended the City for its ongoing work with the County on climate resiliency and efforts to reduce greenhouse gas emissions. Manalo expressed pride in the decision to utilize City-owned land for affordable childcare services, which will be facilitated by Peninsula Family Services, acknowledging the Peninsula Division of the League of California Cities, which Manalo sits on.
Councilmember Daus-Magbual recognized Jefferson High School for collaborating with hip-hop MC LaRussell on his “I’m From the Bay” music video, congratulating LaRussell for his performance during the Super Bowl and for signing with Roc Nation. Dr. Daus-Magbual expressed pride in the students from Jefferson and Westmoor High School and neighboring schools for coming to City Hall to exercise their First Amendment to rally against ICE, showing political engagement and empathy, and reported on talks around a statewide walkout among college and high school students concerning the issue. Dr. Daus - Magbual announced the annual scholarship program by the Daly City Colma Chamber of Commerce and encouraged students to apply for the scholarships before the February 13th deadline.
Councilmember Manalo expressed pride in LaRussell’s video, encouraging everyone to watch his video featuring Jefferson High School and its students and commending the video for showcasing the youth, culture, and talent in the Bay Area. Manalo also recognized local record label Empire.
CITY OF DALY CITY
MINUTES – REGULAR MEETING – CITY COUNCIL
FEBRUARY 9, 2026
6 Councilmember DiGiovanni reported attendance at the Crab Feed for the Build A Dream scholarship program, recognizing the volunteers, the Recreation staff , including Opal Fuller and Denise Brown, the DCPLA’s Clayton Koo, and members of the community who contributed gift baskets.
DiGiovanni recognized the Boy Scouts and their troop leader who were present in the audience, and spoke about the importance of youth, role models, and civic engagement.
Mayor Sylvester reported attendance at the following events: the Marchbank Park groundbreaking ceremony, recognizing City Manager Piccolotti for his leadership on the project ; and the Crab Feed to support the Build A Dream program, which provides scholarships for those in need, thanking staff who worked on the event. Sylvester acknowledged Adonis Marcelino (aka Adonis Eats) as an important member of the community. The Mayor also acknowledged the Scouts and their troop leader who were present and requested their troop leader to say a few words.
The Scout Leader for Troop 58 spoke about the significance of civic engagement and volunteerism, highlighting the valuable advice that scouts receive from their scout leaders.
ADJOURNMENT:
Mayor Sylvester adjourned the meeting at 8:54 P.M. in memory of Stephen Matthew David, Cathie Shubunka Cadigan, and Shane Tyler Hart.
Approved as submitted, this 23
rd
City Clerk
day of February 2026 .
Glenn R. Sylvester
Mayor
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: Setting Time and Place for a Public Hearing to Consider the Zone Change ZC 04-24- 16507 - Amendments to the Zoning Map Creating a New Commercial Cannabis Non-Retail (-CCNR) Combining District and Rezoning Parcels to be Included Within It
Recommended Action
Staff is requesting that the City Council set the time and place for a public hearing to consider Zone Change ZC 04-24-16507.
Background
The City of Daly City proposes amendments to the Zoning Map creating a new Commercial Cannabis Non-Retail (-CCNR) combining district and rezoning parcels fronting Mission Street between Crocker Avenue and Templeton Avenue, fronting Geneva Avenue between Talbert Street and Bayshore Boulevard, and fronting Geneva Avenue between Castillo Street and Calgary Street into the new combining district.
Summary/Conclusion
Staff recommends that the City Council set March 23, 2026, at 7:00 p.m. as the date and time for a public hearing to consider Zone Change ZC 04-24-16507.
Staff is available to provide any additional information desired by the Mayor or Council members.
Respectfully submitted,
Acting Director
Department of Economic and Community Development
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: Authorization of a Pilot Program Allowing City-Permitted Taxicabs to Accept Transportation Network Company (TNC) Referred Trips Through the CURB Platform as a Pilot Program
Recommended Action
Staff recommends that the City Council adopt a resolution authorizing an 180-day pilot program allowing Daly City-permitted taxicabs to accept Transportation Network Company (TNC) referred trips through the CURB platform.
Discussion
Daly City regulates taxicab operations under Chapters 5.72 and 5.84 of the Municipal Code. Taxicab operators must hold certificates of public convenience and necessity, vehicles must be permitted by the Police Department, and drivers must satisfy background, safety, and insurance requirements.
Taxicabs are required to charge fares established by the City Council.
Curb Mobility, LLC has proposed a pilot program that would allow TNC platforms, such as Uber or Lyft, to refer certain ride requests to licensed Daly City taxicabs through the CURB dispatch system.
Participation would be voluntary for City-permitted taxi companies and drivers. For referred pilot trips only, fares would be determined by the TNC’s upfront pricing model rather than the City- approved taximeter rate. All other taxi trips would continue to be charged in accordance with Council-approved meter rates.
Because the Municipal Code requires taxicabs to charge Council-approved fares, the proposed resolution includes a narrowly tailored, temporary exception to the fare provisions of Chapters 5.72 and 5.84 applicable solely to pilot trips. No amendment to the Municipal Code is proposed. All other permitting, insurance, safety, and enforcement requirements remain unchanged. CURB functions only as a dispatch and technology platform and does not license drivers or operate transportation services. TNCs are regulated at the state level by the California Public Utilities Commission (CPUC), while taxicabs remain locally regulated.
The pilot framework provides an opportunity to evaluate operational impacts before considering any long-term authorization. At the conclusion of the pilot period, staff will return to the City Council with an assessment of overall program performance, including service reliability, driver participation, public feedback, safety considerations, and administrative impacts. The City Manager may approve a one-time administrative extension of up to 180 additional days if necessary to complete this evaluation.
Fiscal Impact
There is no direct fiscal impact associated with approval of the pilot program. The City is not increasing tax rates or modifying its business license structure. No amendment to the business license ordinance is proposed or required.
City Council Agenda Report
Subject: Authorization of a Pilot Program Allowing City-Permitted Taxicabs to Accept Transportation Network Company (TNC) Referred Trips Through the CURB PlatformMeeting Date: February 23, 2026Page 2 of 2
Summary/Conclusion
Staff recommends that the City Council approve the proposed CURB pilot program. This program would permit City-approved taxicabs to participate in app-based ride referrals in a controlled and time-limited manner, while still maintaining the City's regulatory authority.
Staff is available to provide any additional information requested by the Mayor or Councilmembers.
Respectfully submitted,
Rose Zimmerman Leilani Ramos
City Attorney Assistant to the City Manager
Attachment: Draft Resolution
1 RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DALY CITY AUTHORIZING A 180-DAY PILOT PROGRAM ALLOWING CITY-PERMITTED TAXICABS TO ACCEPT
TRANSPORTATION NETWORK COMPANY (TNC) REFERRED TRIPS THROUGH THE
CURB PLATFORM AND APPROVING A LIMITED TEMPORARY EXCEPTION TO THE TAXICAB FARE PROVISIONS OF CHAPTERS 5.72 AND 5.84 OF THE DALY CITY
MUNICIPAL CODE
WHEREAS the City of Daly City regulates taxicab operations pursuant to Chapters 5.72 and
5.84 of the Daly City Municipal Code to protect the public health, safety, and welfare; and WHEREAS Chapters 5.72 and 5.84 require taxicabs operating within the City to charge fares approved by the City Council; and
WHEREAS, Curb Mobility LLC has proposed a pilot program allowing Transportation Network Companies (TNCs) to refer to certain ride requests to City-permitted taxicabs through the CURB dispatch platform; and
WHEREAS, the proposed pilot would allow participating taxicabs to charge TNC-determined upfront fares for referred trips, which differs from the city-approved taximeter rate; and WHEREAS the City Council finds that a time-limited pilot program with a narrowly tailored temporary fare exception is in the public interest and will allow evaluation of operational impacts prior to consideration of any permanent authorization.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Daly City does hereby resolve as follows:
1. Pilot Authorization. The City Council authorizes an 180-day pilot program allowing City- permitted taxicabs to accept TNC-referred trips through the CURB platform.
2. Limited Temporary Fare Exception. For the duration of the pilot program, participating taxicabs are granted a limited and temporary exception to the fare requirements of Chapters 5.72 and 5.84 of the Daly City Municipal Code solely for CURB-referred trips. For such pilot trips only, participating taxicabs may charge upfront fares determined by the referring TNC platform. All other trips shall continue to be charged in accordance with City Council-approved taximeter rates.
3. This exception shall automatically expire at the conclusion of the pilot period and any authorized extension unless further action is taken by the City Council.
4. Preservation of Existing Regulations. Except as expressly provided herein, all provisions of the Daly City Municipal Code governing taxicab operations remain in full force and effect. All participating drivers and vehicles must maintain valid City-issued permits and comply with all applicable requirements.
5. Administrative Extension. City Manager or designee, is authorized to approve a one-time
2 extension of the pilot program for up to an additional 180 days if necessary to complete evaluation of the program.
6. Future Authorization. Any continuation, modification, or permanent authorization beyond the pilot period and any authorized extension shall require further approval by the City Council.
7. Effective Date. This Resolution shall take effect immediately upon adoption.
I hereby certify the foregoing to be a true copy of a Resolution adopted by the City Council of Daly City, California, at a regular meeting thereof held on the day of , 2026, by the following vote of the members thereof:
AYES, and in favor thereof, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
CITY CLERK OF THE CITY OF DALY CITY
APPROVED:
MAYOR OF THE CITY OF DALY CITY
City Council Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: Resolution Accepting $250,000 in Cannabis Equity Grants Program (CEG) Phase 2 Funds from the Governor’s Office of Business and Economic Development (GO-Biz), Appropriating the Funds, and Authorizing the City Manager or Designee to Execute and Administer the Grant Agreement
Recommendation
Staff recommends that the City Council:
1. Adopt a Resolution accepting $250,000 in Cannabis Equity Grants Program (CEG) Phase 2 funds from the Governor’s Office of Business and Economic Development (GO-Biz);
2. Appropriate the $250,000 in grant revenue and corresponding expenditures to the appropriate special revenue fund; and
3. Authorize the City Manager, or his designated staff, to execute the grant agreement and all related documents, and to administer and manage the grant program in accordance with grant requirements.
Background
The Cannabis Equity Grants Program for Local Jurisdictions is administered by the Governor’s Office of Business and Economic Development (GO-Biz) to advance economic justice and reduce barriers to entry into the regulated cannabis marketplace for individuals most harmed by cannabis criminalization
Funding Request Type 2 supports assistance for local cannabis equity program applicants and licensees to gain entry to and successfully operate in the state’s regulated cannabis marketplace.
Eligible uses of Funding Request Type 2 funds include:
• Providing grants, no-interest loans, or low-interest loans to local equity applicants and licensees for startup and ongoing costs;
• Providing or funding direct technical assistance, capped at 10 percent of the award; and • Administration of the local equity program, capped at 10 percent of the award The City of Daly City maintains a local Cannabis Equity Program consistent with State requirements and submitted a competitive Phase 2 application. The City has now been notified that it has been awarded $250,000.
Discussion
The $250,000 award will be used to:
• Provide direct financial assistance to eligible Daly City cannabis equity applicants and licensees to address startup costs, regulatory compliance, and operational stabilization; • Deliver targeted technical assistance, including business planning, regulatory navigation, financial management, and compliance support; and
Resolution Accepting $250,000 in Cannabis Equity Grants Program (CEG) Phase 2 Funds from the Governor’s Office of Business and Economic Development (GO-Biz), Appropriating the Funds, and Authorizing the City Manager or Designee to Execute and Administer the Grant Agreement
Meeting Date: February 23, 2026
• Support limited administrative costs necessary to manage and monitor the program in accordance with GO-Biz reporting requirements.
Under the grant terms, Funding Request Type 2 awards are disbursed in four installments: three 25 percent installments and a final 25 percent reimbursement upon documentation of expenditures.
The City will be required to submit periodic progress reports and annual reporting detailing fund disbursement, number of equity applicants and licensees served, aggregate demographic data, and program outcomes.
Authorization of the City Manager or designee to administer the grant will allow for timely execution of the grant agreement via GO-Biz’s electronic signature platform and ensure compliance with all programmatic and fiscal reporting requirements.
Fiscal Impact
The City will receive $250,000 in grant revenue from GO-Biz. Upon Council approval, staff will:
• Establish a dedicated project account within the appropriate special revenue fund; • Appropriate $250,000 in revenue; and
• Appropriate corresponding expenditure authority in alignment with the approved GO-Biz Budget Spreadsheet.
Because the award does not exceed $750,000, no matching funds are required. All funds must be expended within the grant term of April 1, 2026 through October 31, 2027.
Of the total $250,000 award, $23,335 is allocated for program administration to support City staff responsible for managing and administering the grant in compliance with GO-Biz requirements.
These funds will offset staff time associated with grant oversight, fiscal tracking, reporting, and coordination of equity program services.
There is no additional impact to the General Fund beyond the staff time covered through the allowable administrative allocation within the grant award.
Conclusion
The Cannabis Equity Grants Program Phase 2 award of $250,000 represents an important opportunity for Daly City to continue advancing its Cannabis Equity Program and to provide meaningful assistance to individuals disproportionately impacted by cannabis criminalization.
Acceptance of these funds will allow the City to expand financial assistance and technical support for local equity applicants and licensees while ensuring compliance with State requirements.
The inclusion of $23,335 for program administration ensures that the City can effectively manage the grant without creating additional strain on the General Fund. Approval of this item will
Resolution Accepting $250,000 in Cannabis Equity Grants Program (CEG) Phase 2 Funds from the Governor’s Office of Business and Economic Development (GO-Biz), Appropriating the Funds, and Authorizing the City Manager or Designee to Execute and Administer the Grant Agreement
Meeting Date: February 23, 2026
authorize the City Manager or designee to execute the grant agreement and administer the program in alignment with GO-Biz requirements and City Council policy direction.
Respectfully submitted,
Maybelle Manio
Economic Development Specialist
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: Public Hearing to Consider Adoption of an Ordinance Amending Chapter 8.16 of the Daly City Municipal Code Re: Property Maintenance and Nuisance Abatement
sss
Recommended Action
Staff recommends that the City Council introduce an Ordinance amending Chapter 8.16 of the Daly City Municipal Code regarding Property Maintenance and Nuisance Abatement to recover Attorney’s Fees.
Discussion
Under Government Code section 38773.5, the City is authorized to recover attorney’s fees in any action, administrative proceeding, or court proceeding to abate a public nuisance, provided the City has adopted an ordinance authorizing the recovery of attorney’s fee. Under the Municipal Code, the City is authorized to obtain inspection and abatement warrants from the court. These judicial proceedings can incur significant costs to the City to enforce the City’s property maintenance and nuisance abatement laws. Currently, the City is able to recover costs only for the actual costs of abating the nuisance and for the penalties imposed by the City. Staff recommends that the Code be amended to allow for the recovery of reasonable attorney fees incurred as a result of judicial proceedings to enforce nuisance abatement procedures, as authorized by Government Code section 38773.5.
Summary/Conclusion
Staff recommends that the City Council introduce an Ordinance amending Chapter 8.16 of the Daly City Municipal Code regarding Property Maintenance and Nuisance Abatement to recover Attorney’s Fees.
Staff is available to provide any additional information desired by the Mayor or Councilmembers.
Respectfully submitted,
Rose Zimmerman
City Attorney
Attachment: Draft Ordinance
1 ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DALY CITY AMENDING CHAPTER 8.16 OF THE MUNICIPAL CODE RE: PROPERTY MAINTENANCE AND
NUISANCE ABATEMENT
The City Council of the City of Daly City, DOES ORDAIN as follows:
SECTION 1. Section 8.16.460 of the Daly City Municipal Code is hereby added to read as follows:
8.16.460 Attorney Fees and Treble Costs.
A. Attorney fees. Under Government Code section 38773.5, in any action, administrative proceeding, or special proceeding to abate a nuisance, the prevailing party will be entitled to recover attorney's fees, provided that attorney's fees will be limited to those individual actions or proceedings in which the city elects, at the initiation of that individual action or proceeding, to seek recovery of its own attorneys’ fees. In no action, administrative proceeding, or special proceeding, may an award of attorneys’ fees to a prevailing party exceed the amount of reasonable attorneys’ fees incurred by the city in the action or proceeding.
B. Order for treble costs. Under Government Code section 38773.7, in addition to any other costs of abatement permitted under this chapter, upon entry of a second or subsequent civil or criminal judgment within a two-year period finding that a property owner or other responsible person is responsible for a condition that may be abated in accordance with this chapter, except for conditions abated pursuant to California Health and Safety Code section 17980, the city may seek and the court may order the property or other responsible person to pay treble the costs of the abatement.
SECTION 2. Environmental Determination. The City Council of the City of Daly City finds and determines that the implementation of measures described in this Chapter is in furtherance police powers of the City of Daly City, and that these purposes are exempt from the provisions of the California Environmental Quality Act (CEQA); Chapter 3 (commencing with Section 21100) of Division 13 of the Public Resources Code, as provided in categorical exemption Classes 1, 4, 5, 7, 8, 9, and or 21 of the CEQA Guidelines (Title 14, California Code of Regulations, Sections 15301-15329).
SECTION 3. Effective Date and Publication: This Ordinance shall be published according to law. This ordinance shall become effective thirty (30) days from and after its adoption.
SECTION 4. Severability: If any section, subsection or sentence of this Ordinance is found by a court of competent jurisdiction to be invalid or unlawful, the City Council finds and declares that the remainder of this ordinance would be and is enforceable and would have been adopted notwithstanding the finding of invalidity as to any section, subsection or sentence.
2 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DALY CITY AMENDING CHAPTER 8.16 OF THE MUNICIPAL CODE RE: PROPERTY MAINTENANCE AND
NUISANCE ABATEMENT
Introduced this day of , 2026.
Passed and adopted as an Ordinance of the City of Daly City at a regular meeting of the City Council of the City of Daly City held on the day of , 2026, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
CITY CLERK OF THE CITY OF DALY CITY
APPROVED:
MAYOR OF THE CITY OF DALY CITY
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT Recommendation
Staff recommends the City Council approve all Legacy Business Nominations.
Background
In April 2023, the City Council Adopted of an Amendment to Daly City Municipal Code Chapter
2.58 – Small Business Commission Ordinance to establish a Legacy Business Program.
The purpose of the program is to recognize and celebrate the longstanding community-serving, and culturally relevant businesses in the City. In addition, the City intends that the Registry be a tool for the provision of promotional assistance to Legacy Businesses to encourage their continued viability and success.
The Daly City Council passed and adopted a Legacy Business Registry ordinance on May 8, 2023 – Ordinance 1464, amending Chapter 2.58 of the Municipal Code regarding the Small Business Commission. Each business was nominated by a Small Business Commissioner and passed review at the Economic and Community Development Department where they met each eligibility criteria.
This item represents the third installment of Legacy Business designations since the program’s establishment. The Legacy Business Program continues to serve as a recognition tool and promotional platform to encourage the continued viability and success of longstanding small businesses in Daly City.
Each nominated business was submitted by a Small Business Commissioner, reviewed by the Economic Development Specialist for eligibility, and considered by the Small Business Commission at a duly noticed public meeting.
Discussion
Small Business Commissioners reviewed the nomination at their regular business meeting on February 12, 2026 and discussed the cultural relevance and contributions to history and identity to the neighborhoods and communities of a) Teeth, Gums and Beyond – The Dental Practice of Dr.
Mylene D. Gandingco b) Broadmoor Cleaners Laundry & Alteration c) Classic Bowling Center d) Hilltop Beauty School, Inc. e) Colma Auto Body Shop, Inc.
Listed below are the eligibility criteria for the Legacy Business program as set forth in the ordinance:
a) Teeth, Gums and Beyond – The Dental Practice of Dr. Mylene D. Gandingco
1. The business has operated in City of Daly City for ten (10) or more years, with no break in Daly City operations exceeding two years. The business may have operated in more than one location and may have gone through an ownership change.
Teeth, Gums and Beyond – The Dental Practice of Dr. Mylene D. Gandingco opened on May 13, 2014
LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT
Meeting Date: February 23, 2026
2. The business has contributed to the history or identity of the neighborhood or community within which it is located.
Teeth, Gums and Beyond has provided high-quality, compassionate dental care to Daly City residents for many years, building a trusted reputation through consistency, clinical excellence, and strong community relationships. Dr. Gandingco and her team serve multigenerational families with preventive, restorative, and emergency dental services that support the health and confidence of working families.
The practice operates with integrity and transparency, clearly communicating care options and costs while accommodating seniors, children, and patients with language access or mobility needs. The business supports local employment, collaborates with nearby schools and community groups on oral health education, and donates time and supplies to residents who may otherwise delay necessary care.
Recognition in the Legacy Business Registry would honor a small business that has contributed meaningfully to the well-being of Daly City residents through reliable service and patient-centered values.
3. The business is committed to maintaining the physical features or traditions that define the business, including craft, culinary, or art forms.
Daly City is known for its diverse immigrant population, strong multigenerational families, and neighborhood-centered identity. Teeth, Gums and Beyond reflects these values by providing culturally responsive care to patients from a wide range of backgrounds. The practice fosters continuity of care across generations, creating lasting relationships that strengthen community trust.
The office participates in school-based dental hygiene initiatives, supports youth activities, and provides multilingual resources to ensure families feel welcomed and supported. Its presence within the Westlake corridor contributes to neighborhood vitality and reinforces the importance of locally accessible essential health services. The practice embodies Daly City’s identity as a caring, family- oriented community.
4. The business has no pending complaints with the City associated with its operations.
5. The business has a total of 100 or fewer employees across all locations.
6. The business reported less than $1M in annual gross receipts in its first full year of operating in the City.
b) Broadmoor Cleaners Laundry & Alteration
1. The business has operated in City of Daly City for ten (10) or more years, with no break in Daly City operations exceeding two years. The business may have operated in more than one location and may have gone through an ownership change.
Broadmoor Cleaners Laundry & Alteration opened on January 25, 2016.
LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT
Meeting Date: February 23, 2026
2. The business has contributed to the history or identity of the neighborhood or community within which it is located.
Since assuming ownership in 2016, Shay D. has transformed Broadmoor Cleaners into a true community anchor. She operates with exceptional dedication and a service-first philosophy, opening early and often remaining open late to accommodate working families.
Shay is known by many regular customers as “Aunti Shay,” reflecting the strong personal relationships she has cultivated. She is dependable, efficient, and treats customers with warmth and respect. In an era increasingly dominated by impersonal services, Broadmoor Cleaners preserves the personal connection that defines neighborhood-based commerce.
3. The business is committed to maintaining the physical features or traditions that define the business, including craft, culinary, or art forms.
Broadmoor Cleaners contributes to Daly City’s identity by maintaining the human element in local business. The shop provides essential services, including alterations, wash and fold, and professional garment care, while fostering trust and familiarity within the community.
By continuing to operate under the Broadmoor name along the Junipero Serra corridor, the business honors the history of the Broadmoor and Westlake districts. It represents the resilience and work ethic of Daly City’s immigrant and small business communities and demonstrates how quality service and kindness sustain long-standing neighborhood institutions.
4. The business has no pending complaints with the City associated with its operations.
5. The business has a total of 100 or fewer employees across all locations.
6. The business reported less than $1M in annual gross receipts in its first full year of operating in the City.
c) Classic Bowling Center
1. The business has operated in City of Daly City for ten (10) or more years, with no break in Daly City operations exceeding two years. The business may have operated in more than one location and may have gone through an ownership change.
Classic Bowling Center opened on April 4, 1985
2. The business has contributed to the history or identity of the neighborhood or community within which it is located.
Classic Bowl has been a cornerstone of family recreation in Daly City since 1985. With 60 lanes, it is one of the largest bowling venues in San Francisco and San Mateo counties. The facility provides affordable, family-friendly entertainment and has remained resilient amid changes in the regional recreational landscape.
LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT
Meeting Date: February 23, 2026
Classic Bowl continues to deliver access to a traditional sport in a welcoming environment that serves residents of all ages.
3. The business is committed to maintaining the physical features or traditions that define the business, including craft, culinary, or art forms.
Since its establishment, Classic Bowl has functioned not only as a bowling alley but also as a community gathering space. It attracts a diverse customer base reflective of Daly City’s demographic composition and serves as a hub for social and cultural connection.
The venue has hosted philanthropic fundraisers, youth activities, and cultural programs. It has longstanding ties to local figures and community events. Classic Bowl represents Daly City’s recreational heritage and continues to provide a safe, inclusive environment for families.
4. The business has no pending complaints with the City associated with its operations.
5. The business has a total of 100 or fewer employees across all locations.
6. The business reported less than $1M in annual gross receipts in its first full year of operating in the City.
d) Hilltop Beauty School, Inc
1. The business has operated in City of Daly City for ten (10) or more years, with no break in Daly City operations exceeding two years. The business may have operated in more than one location and may have gone through an ownership change.
Hilltop Beauty School, Inc opened on September 8, 1964.
2. The business has contributed to the history or identity of the neighborhood or community within which it is located.
Hilltop Beauty School has provided vocational education and workforce training in cosmetology for over 45 years. The school has supported thousands of students in developing professional skills, contributing directly to career mobility and economic participation within Daly City and the greater Bay Area.
In addition to training future professionals, the school offers affordable beauty services to residents, increasing accessibility to personal care services while providing hands-on student experience.
3. The business is committed to maintaining the physical features or traditions that define the business, including craft, culinary, or art forms.
Hilltop Beauty School has been a fixture along the Mission Street corridor since 1979. Its commitment to workforce development and entrepreneurship reflects Daly City’s culture of small business growth and immigrant-driven enterprise. The school’s longevity demonstrates sustained relevance and community trust.
4. The business has no pending complaints with the City associated with its
LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT
Meeting Date: February 23, 2026
operations.
5. The business has a total of 100 or fewer employees across all locations.
6. The business reported less than $1M in annual gross receipts in its first full year of operating in the City.
e) Colma Auto Body Shop, Inc.
1. The business has operated in City of Daly City for ten (10) or more years, with no break in Daly City operations exceeding two years. The business may have operated in more than one location and may have gone through an ownership change.
Colma Auto Body Shop, Inc. opened on May 1975
2. The business has contributed to the history or identity of the neighborhood or community within which it is located.
Colma Auto Body Shop has provided high-quality collision repair and auto body services to Daly City residents for over 45 years. The business has restored vehicles for multiple generations of families, ensuring safety and reliability on local roads.
Its longstanding presence demonstrates consistent workmanship, customer service, and operational resilience.
3. The business is committed to maintaining the physical features or traditions that define the business, including craft, culinary, or art forms.
Located on Mission Street, Colma Auto Body Shop has witnessed decades of neighborhood evolution while maintaining its commitment to quality and service. The business represents the durability of Daly City’s locally owned service sector and contributes to the stability of the Mission Street commercial corridor.
4. The business has no pending complaints with the City associated with its operations.
5. The business has a total of 100 or fewer employees across all locations.
6. The business reported less than $1M in annual gross receipts in its first full year of operating in the City.
Fiscal Impact
Approval of the 2026 Legacy Business nominations has no direct General Fund impact beyond minimal administrative and event-related costs already accounted for within the Economic & Business Development Division’s adopted budget.
Anticipated costs include:
LEGACY BUSINESS NOMINATIONS – THIRD INSTALLMENT
Meeting Date: February 23, 2026
• Production of recognition plaques for each designated Legacy Business • Modest event-related expenses for the annual Legacy Business recognition ceremony, including venue setup and materials
• Updates to the City’s online Legacy Business Registry and promotional materials These costs are absorbed within the Division’s existing operating budget and primarily consist of staff time and minor materials expenses. No new appropriations are required.
The Legacy Business designation does not include direct financial subsidies or incentives. The program is a recognition and promotional initiative designed to support small business retention, corridor stability, and economic vitality through visibility and community engagement.
Conclusion
The City will provide recognition plaques to each business awarded with the Legacy Business designation. An online registry with the awarded Legacy Businesses will continue to be developed.
A celebration event recognizing the Legacy Businesses includes salaried staff time to assist in the production and event space at City Hall. The Legacy Business Celebration typically takes place during Small Business Week, set for May 3 – 9, 2026.
City staff and Small Business Commissioners will continue to work cooperatively to nominate small businesses that have contributed to the identity of Daly City’s neighborhoods and cultural relevance in our community and recommended for City Council approval.
Staff is available to provide any additional information sought by the Mayor and Councilmembers.
Respectfully submitted,
Maybelle Manio
Economic & Community Development
Specialist
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: Four Lot Subdivision and at 933-969 Crocker Avenue – Minor Subdivision SUB-07-24-16596 and Design Review DR-08-24-16609
Recommended Action
The Planning Commission recommends that the City Council approve the parcel map for a lot split from one to four parcels and Design Review for the construction of one single-family residence with one accessory dwelling unit on each parcel.
Planning Commission Discussion
On February 3, 2026, the Planning Commission voted 5-0 to recommend that the City Council approve the Minor Subdivision Parcel Map for a lot split of a vacant lot from one to four parcel and Design Review for the construction of one single-family residence with one accessory dwelling unit on each parcel. The following issues were raised at the meeting:
Staff informed the Commissioners that a letter of support for the project was received on 2/3/26 from The California Housing Defense FUND (CalHDF).
Commissioner Faapuaa asked about the foundation proposed for the residential buildings and the architect’s experience designing projects on hillsides. Architect Lee mentioned that he has worked hillside projects and explained that due to the steep slope the buildings will use a pier/pile system with retaining walls to support the buildings. Lee explained that the architecture team has consulted with geotechnical and structural engineers for the best structural design for the project as well as has licensed plumbers, structural engineers, electricians and building contractors on the team working on the project.
Commissioners asked about the removal of the large trees at the rear of the property below the project site. The architect explained that they consulted closely with the Fire Department which requested the large trees on the lot be removed due to fire hazard.
Public Comment: A resident, Berman Louie, who lives in house on Templeton Avenue, to the north of the project site, expressed concerns regarding privacy after the trees are removed and the bio- retention area. Staff clarified that the bio-retention area is for stormwater runoff filtration and will only have ground cover plantings, no trees. The architect and the property owner responded that the Fire Department requested the large Eucalyptus trees and dense vegetation be removed to reduce fire hazard on the property. The owner explained that the removal of the trees will also reduce tree maintenance from falling branches and leaves onto to adjacent property. Regarding privacy, the architect stated the difficulty to address privacy in the building design, given the steep slope and urban city environment. The owner suggested blinds, shades and curtains are useful for privacy.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 2 of 12
Background
The project site is a 13,051 (0.3 acre) vacant property zoned single-family residential (R1) within the residential medium density (R-MD) land use designation. The lot contains a north facing downhill slope of 25%. The property is located on the north side of Crocker Avenue, between Templeton Avenue and Point Pacific Drive (Attachment A – Location Map). The applicant, Ramon Lei, is requesting approval to subdivide the 0.29-acre vacant lot into four parcels and construct one single- family residence with one accessory dwelling unit (ADU) on each parcel, for a total of eight residential units. The proposed subdivision map would result in each building being situated on four individual parcels.
This application is like the proposed four lot subdivision application (SUB-10-10-2809 and design review (DR-10-10-2809) for four single-family homes that the Planning Commission and City Council approved in 2012. The project was ultimately not pursued due to financial constraints (Attachment B – Project Description).
Proposed Project
The applicant, Wing Lee, is requesting to subdivide one lot into four parcels and receive design review approval to construct one single-family residence with accessory dwelling unit on each parcel.
Design review includes review of the site plan, architectural building design and materials, and landscape plan.
The proposal is to subdivide an existing vacant 13,051 sf (0.3 acres) lot into four lots fronting Crocker Avenue. The proposed four parcel lot areas would be 3,065 square feet for lot 1 (eastern lot), 2878 square feet for lot 2, 2,773 square feet for lot 3 and 4,334 square feet for lot 4 (western lot). Lot 4 will be larger than the other three lots due to an existing public utility easement along the western edge of the lot.
Once subdivided, the applicant would construct one single-family dwelling with ADU on each lot.
Each single-family dwelling will be approximately 2,300 square feet in net area with each ADU about 800 square feet net at the basement two level. Each single-family home will have four parking spaces (two garage spaces and two off-street spaces). Parking is not required for the basement ADUs.
Each single-family building would consist of four stories with backyard access by an exterior stairway located on the east side of each building. The Basement 2 level would include a one- bedroom ADU with deck. Basement 1 would include a kitchen open to dining room, bathroom and deck. The ground floor would consist of a living room, bathroom, closet, deck, primary entry and two car garage. The second floor would include three bedrooms, three-bathroom, laundry closet, a deck and three skylights (located in each bathroom and the interior stairwell). There is an interior stairway to provide access to the three floors of the single-family residence. The access to the Basement 2 ADU is provided by an exterior east side staircase from the front elevation ground level to the rear ADU entry, as well as access to the backyard for both the single-family residence and ADU dwelling (Attachment C – Tentative Map and Plans, Sheets A1.1 to A1.14).
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 3 of 12
Minor Subdivision and Site Design
The applicant is required to secure a minor subdivision planning entitlement to subdivide the single lot into four parcels fronting Crocker Avenue for the construction of four single family residences with ADUs. Each residence will consist of four stories: basement two, basement one, ground floor and second floor. The building heights at the front are 22’-3” from the ground floor to top of parapet.
Due to the steep grade of the lot, the overall building height is approximately 55’-5” at the rear elevation (Attachment C – Tentative Map and Plans, Sheet A2.1). Height is defined as vertical distance from the average of the finished ground level at the center of all walls of the building to the highest point of the flat roof.
The subject site is presently vacant, with a 25 percent slope decline running from southeast to northwest and is accessible from Crocker Avenue, an existing improved public right-of-way. Per the zoning code, the proposed lots meet the 25’ minimum lot width and 2,500 square feet minimum lot area standards. The four residences comply with the required 20 feet front setback and 10 feet rear setback and height requirements.
The project site design for the four proposed hillside residential buildings utilizes deep foundations (piers/piles), retaining walls, and terracing for stability. Visually, the building uses a multi-level design, expansive glass (walls/windows), and cantilevered decks/terraces to follow the slope. This design maximizes the panoramic views, natural light, and outdoor living spaces that are integrated with the steep terrain (Attachment C – Tentative Map and Plans, Sheet A0.1).
The applicant completed a geotechnical technical study on January 22, 2024, prepared by Smith- Emery San Francisco for staff review. Smith-Emery concluded that based on field exploration, laboratory testing and engineering analyses and review of related report and data available, the subsurface soils and geologic conditions are suitable for the proposed construction. The project plans and specifications shall comply with the appropriate engineering design recommendations presented by the study. The geotechnical study was reviewed and approved by third party consultants and city staff.
Design Review
The proposed buildings’ architectural design underwent staff review for compliance with Daly City’s Municipal Code Chapter 17.45 – Design Review standards and Citywide Objective Design Standards.
Through the initial project application review, staff worked with the applicant’s architect to develop an architectural concept for the buildings that would be consistent with the design requirements set forth by the Citywide Objective Design Standards and Chapter 17.45 design review standards. The architect’s proposed building design is a modern, contemporary design that integrates with the hillside site topography, using terraces, decks, and large windows to take advantage of extensive views and provide additional living spaces. The design also incorporates key architectural vertical and horizontal elements, a variety of exterior materials and colors while being compatible in bulk and mass with the existing two-story homes adjacent to the east and west of the project site.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 4 of 12
The applicant has chosen exterior materials and finishes for their sustainability. The new residences feature thermally broken anodized aluminum windows and doors, composite wood panels, and tempered glass railings. Specifically, the exterior materials of the four residences include composite resin panel siding with a combination of black, white and light beige finish, aluminum fin and rails painted with matching finish to adjacent panels and siding, yellow ceramic tile entryways, painted address numbers with illumination from above, dark anodized aluminum doors and windows and 42- inch tempered glass railings with metal cap for the front covered decks (Attachment C – Tentative Map and Plans, Sheet A0.1).
Staff worked with the applicant to refine the building architectural concept with the project architect and conform to the Citywide Objective Design Review standards by incorporating front porches, to provide a setback from the ground and second floor and introduce horizontal overhang and insets as a visual separation between floors. In addition, the design includes a variety of exterior materials, color variation, vertical and horizontal elements and open decks, to reduce the bulk and mass appearance of the home viewed from the street. The side elevations incorporate siding, different colors, vertical and horizontal elements and banding to add visual interest at these elevations (Attachment C – Tentative Map and Plans, Sheet A2.3 and A2.4).
Staff has determined that the proposed architectural residential design complies with the current Daly City Planning Code Chapter 17.45 design review and Citywide Objective Design Standards for single-family residential housing developments including: site design, building design, massing and articulation, windows; building materials, details and color; and hillside design standards.
Landscaping
The landscape plan for the front yard incorporates a permeable grass paver driveway, decomposed gravel, granite pedestrian paver stones and one 15-gallon, Japanese Maple tree in the front of each home. The paved walkway material to the front entrance of each home will be decomposed gravel with granite stone pavers. The overall front design of the development integrates with the surrounding area, enhancing the residential character of the neighborhood. The backyard will consist of a grass lawn and drought tolerant plants adjacent to the fence separating the bio-retention treatment area along the rear property line. The plants located within the bio-retention area will be selected based on the San Mateo County Water Pollution Prevention Program (SMCWPP) appendix A of the Regulated Project Guide (Attachment C – Tentative Map and Plans, Sheet L1.2). Staff supports the proposed landscape plan and the applicant’s use of sustainable material and design features that integrate with the surrounding neighborhood and San Bruno Mountain hillside.
Stormwater Management
The project includes the required stormwater treatment plan for the four residential parcels. There are three proposed drainage management areas and one treatment area. Treatment management area #1 is in the rear backyard of each parcel, separated by a fence. There will be a 382 square foot bio- retention area along the rear property line of the backyard of all four parcels. This bio-retention area will be accessed for maintenance, inspections and monitoring by a right of way easement located on the westside of parcel four. The stormwater management plan will be subject to separate review and approval by city consultant and staff and is a condition of approval (Attachment C – Tentative Map and Plans, Sheet TM-5.0).
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 5 of 12
Parking
The zoning regulations require that four parking spaces be provided for each single-family residential unit. The proposed project will include four parking spaces (two garage and two surface spaces) for each single-family unit. Additionally, the applicant has proposed driveways of sufficient length to accommodate two additional space per single-family unit, for a total of 16 on-site parking spaces.
Parking for the basement level accessory dwelling units for each parcel are not required. The surface parking driveways for each residence will be 16 feet in length, and the driveway will consist of permeable grass pavers, reducing stormwater runoff into the street.
Zoning Ordinance and General Plan Consistency
The site is zoned single-family residential (R1) and designated residential medium density (R-MD) by the General Plan. This zoning and land use designation allows the construction of residential buildings, subject to tentative subdivision map and design review approval. This land use designation applies to those areas that allow two dwelling units per 2,500-3,000 square foot parcel. These areas are primarily dispersed throughout the older portions of Daly City and correspond to areas developed with duplexes and some multi-family areas where there are small multi-unit buildings located on large lots. Accessory Dwelling Units are permitted on lots with proposed single-family dwellings.
Aside from the Housing Element, the General Plan allows infill housing in existing neighborhoods on underutilized sites, where residential development represents the highest and best use, and where public infrastructure exists to support the intensity of the proposed development. The subject site is situated adjacent to single-family homes. Residential development is the highest and best use for the subject property given its size and shape, and adjacent uses.
Staff has reviewed the proposed subdivision of the single lot into four parcels and construction of four single-family residences with accessory dwelling units and determined that the proposed project is consistent with the zoning ordinance and general plan.
Subdivision Requirements
Pursuant to Section 66474 of the Subdivision Map Act, a legislative body of a city or county may approve a parcel map if it makes the following findings:
1. The proposed subdivision and/or design or improvement must be consistent with applicable general and specific plans.
• Using the density parameters prescribed by the Residential Medium Density General Plan designation, up to two dwelling units could be constructed each 2,500-3000 square foot parcel given the subject parcel size. The project proposal is to subdivide the lot into four parcels and construct one single-family home and one basement level ADU on each parcel for a total of eight dwelling units. ADUs are allowed in all residential zones. The proposed project is consistent with Daly City’s General Plan.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 6 of 12
2. The site must be physically suitable for the type and density of the proposed subdivision.
• Within the subject area, there are predominantly single-family residential dwellings.
The parcels are in a fully urbanized area with all public services capable of being extended to the new lots.
3. The design of the proposed subdivision or improvements must not cause substantial environmental damage or injure fish or wildlife or their habitat.
• Staff has the determined that the proposed subdivision will not cause significant environmental damage or injure fish, wildlife, or their habitat. The proposed project would be constructed in a fully urbanized area. A Categorical Exemption per CEQA will be prepared.
4. The design of the proposed subdivision must not cause serious public health problems.
• The construction of single-family residences on this site must meet Building Code requirements, which set minimum safety standards for new construction. Other City and State regulations will ensure that public health is not at risk.
5. The design of the proposed subdivision or improvements must not conflict with any easements, acquired by the public at large, for access through or use of property within the proposed subdivision.
• The access to the proposed new lots and utilities for the lots would be available directly from the Crocker Avenue right-of-way. No structures of any kind will be built over easements. Where necessary, permits for utility connections for the newly created lots would be obtained in Daly City.
Utility Providers
The parcel is in a fully urbanized area with all public services capable of being extended to the new lots. Utilities to serve the project are in place within the Crocker Avenue public right-of-way and have the capacity to accommodate additional units. These include electrical, water, sewer, and the availability of telephone internet/cable service and access to public streets.
Fiscal Analysis and Impacts
The construction of one single-family residence with accessory dwelling units on each parcel for a total of eight units will add an incremental demand for City services. Prior to project completion, the project applicant will be required to pay park in-lieu fees as required by Parkland Dedications Ordinance, building permit, plan check, affordable housing, and AB 1600 fees to the city. Upon sale of the residential properties, the future owners will pay property tax to the county, a portion of which will be distributed to the city.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 7 of 12
Environmental Assessment
The proposed project is located on a vacant lot in an urban area zoned for residential use. The project is Categorically Exempt per CEQA Guidelines Section 15332: In-Fill Development Projects.
Findings
The Planning Commission has found that, as conditioned, the approval of Minor Subdivision SUB- 07-24-016596 and Design Review DR-08-24-016609 would comply with all applicable provisions of Title 16 (Subdivisions) and Title 17 (Zoning) of the Daly City Municipal Code. Approval of the proposed project will not be detrimental to the health, safety, morals, comfort and general welfare of people residing in or working in the neighborhood or be injurious or detrimental to the property and improvements in the neighborhood or the general welfare of the City. Staff recommends that the City Council also adopt findings are based on the following facts:
1. In accordance with Title 17 of the Daly City Municipal Code, as well as applicable State zoning enabling legislation, the City Council conducted a public hearing on February 23, 2026; notice of said hearing was published in a newspaper of general circulation on January 23, 2026, and by posting and first-class mailing to property owners within 300 feet.
2. The City Council reviewed the proposal under the requirements of the California Environmental Quality Act (CEQA) and has determined that it is Categorically Exempt per CEQA Guidelines Section 15332: In-Fill Development Project. The Council has determined, based on the findings specified herein, that the proposed project would have no significant detrimental effect on the environment.
3. The proposed subdivision, together with any provisions for its improvement, is consistent with the objectives, policies, and general land uses as outlined in the Daly City General Plan.
More specifically, applying the density parameters prescribed by the Residential Medium- Low General Plan designation, up to four dwelling units could be constructed on the property given the subject subdivided parcel sizes. The proposed land use conforms to Objective 6 in the General Plan Land Use Element, which states that, a pattern of variety in residential densities; types and tenure should be maintained to provide housing opportunities.
4. The site is physically suitable for the type and density of the proposed subdivision. Within the subject area, there are predominantly single-family residential dwellings. The parcels are in a fully urbanized area with all public services capable of being extended to the new lots.
5. Pursuant to standards set by the California Environmental Quality Act, staff has the determined that the proposed subdivision will not cause significant environmental damage or injure fish, wildlife, or their habitat. The proposed project would be constructed in a fully urbanized area.
6. The design of the proposed subdivision and related improvements will not conflict with any easements, acquired by the public at large, for access through or use of property within the proposed subdivision. Access to the proposed new lots and utilities for the lots would be available directly from the Crocker Avenue right-of-way.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 8 of 12
7. The newly created lots are physically suitable for both the type and density of the proposed development.
8. The design of the residential buildings would be required to meet all health and safety requirements of the Uniform Building Code and will not cause serious public health problems.
9. The design of the project will not conflict with any easements, acquired by the public at large, for access through or use of property within the proposed subdivision.
10. Utilities to serve the project are in place within the Crocker Avenue public right-of-way and have the capacity to accommodate additional units. These include electrical, water, sewer, and the availability of telephone service and access to public streets.
11. General site considerations, including site layout, open space and topography, orientation and location of buildings, vehicular access, circulation and parking, setbacks, heights, walls, fences, public safety and similar elements have been designed to provide a desirable environment.
12. General architectural considerations, including the character, scale and quality of the design, the architectural relationship with the site and other buildings, building materials, colors, screening of exterior appurtenances, exterior lighting and similar elements have been incorporated to ensure the compatibility of this development with its design concept and the character of other adjacent buildings.
13. The four single-family residential building projects will not have a detrimental effect on sound community planning, the economic, ecological, cultural and aesthetic qualities of the community, and on public health, safety and general welfare.
14. The overall impact on schools, parks, utilities, neighborhood streets, traffic, parking and other community facilities and resources will not be detrimental.
Conditions of Approval
The Planning Commission recommends the City Council approve the Minor Subdivision SUB-07- 24-016596 and Design Review DR-08-24-16609, subject to the following conditions and Daly City General Conditions of Approval. Minor deviations from the conditions of approval may be approved by the Planning Division. Significant deviations will require review and approval by the Planning Commission and City Council.
A. DEPARTMENT OF ECONOMIC AND COMMUNITY DEVELOPMENT
General
1. The minor subdivision shall be valid only in conjunction with detailed plans submitted and approved by the City Council. Any modifications required due to the Conditions of Approval
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 9 of 12
and changes to the plans shall be treated as an amendment and shall be subject to review by a Council Committee appointed by the mayor.
2. All technical corrections or modifications required by the City Engineer shall be incorporated into the Final maps, and all applicable fees paid prior to approval for recordation.
3. The minor subdivision shall conform to the City Standards Conditions for Minor Subdivisions.
4. The minor subdivision shall be valid for a period of two years from the date of City Council approval. The subdivision shall lapse if the parcel map is not recorded within two years. The design review permit is valid for a period of one year.
5. The applicant shall pay park-in-lieu fees, in compliance with DCMC Chapter 16.30 Parkland Dedications. Per DCMC Section 16.30.040.A, the required dedication in this specific case is
0.238 acres. Per DCMC Section 16.30.060, the in-lieu fee shall be based upon said dedication requirement. Per DCMC Section 16.30.090, in-lieu fees are required to be paid to the City of Daly City, prior to approval of the Final Map. The project is subject to full compliance with DCMC Chapter 16.30 Parkland Dedications.
Building Design
6. Prior to the issuance of building permits the texture and color of the front elevation veneer will be approved by the Planning Division.
7. Prior to the issuance of building permits the specific garage doors to be used in the project will be approved by the Planning Division.
Landscaping
8. The applicant shall provide substantial, high-quality landscaping. The use of flowering plants and trees shall be used to reinforce the visual character of the area.
9. Landscaping shall be low-maintenance, drought-resistant and adaptive to Daly City climate.
A full landscape plan should be submitted and subject to review by the Planning Division.
B. PUBLIC WORKS DEPARTMENT - ENGINEERING
GENERAL
10. Provide a storm drain study (hydrology and hydraulic study) for the project. The study shall include calculations verifying that post-development stormwater flow and volume does not exceed pre-development stormwater flow and volume from the project site. Additional stormwater flow and volume generated as a result of the development shall be retained on- site. Provide plans for the proposed storm drain system (public or private), including any public storm drain system modifications. Identification of existing and proposed drainage patterns on the site will also be required. Stormwater flow and volume shall not exceed pre-
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 10 of 12
development conditions for a 2-hour, 10-year storm event, for a duration of 2-hours. Along with the study, a letter from the Engineer-of-Record indicating that the proposed storm drain system (post-development conditions) does not increase runoff above the pre-development conditions shall be submitted to the City Engineer for review and approval.
11. Grading exceeding 50 cubic yards shall require approval of plans and a grading permit. A licensed Civil Engineer shall prepare any grading plans and erosion control plans in conformance with a soil report prepared by a licensed soil engineer or geologist in compliance with NPDES requirements prior to any development on the property.
12. All project improvements shall be ADA compliant.
13. The applicant shall comply with the applicable requirements of the City of Daly City Standard Details and Specifications.
14. An encroachment permit shall be required to be issued by the Public Works Department for all work proposed within the public right-of-way.
15. Following new utility installation, the applicant shall replace areas of street pavement, sidewalk, curb, and gutter damaged by construction to current City standard details and specifications.
16. All electrical and telecommunications services shall be provided through underground connections. There shall be no overhead drops.
17. Provide erosion and storm water pollution plan incorporating the best management practices, including operation and maintenance provisions per the requirements applicable at the time of construction permit application. During the rainy season between October 1st to April 30th, the developer shall submit a revised erosion control plan as necessary/as requested.
18. Provide “will serve” letters of approval by PG&E.
19. No permanent building encroachment including but not limited to awnings, canopies, marquees, signs, windows, balconies, retaining walls, architectural features and mechanical equipment shall be allowed in the Right-of-Way without the written authorization of the City Engineer.
20. All curb, gutter and sidewalk improvements in the public right-of-way shall be designed to current ADA standards and current Daly City Standards.
21. Provide a plan review letter by the geotechnical engineer of record indicating that the grading and drainage plans, and foundation plans have been reviewed and is consistent with the recommendations within the geotechnical investigation report prepared by Smith-Emery San Francisco, dated January 22, 2024.
22. Prior to Final Map approval, the applicant shall enter into a Landscape Maintenance Agreement in a form acceptable to the City Attorney to ensure the Property Owners will
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 11 of 12
provide long-term maintenance of all street trees, landscaping, irrigation, and pedestrian-scale lighting installed in the public right-of-way. Design of planting and irrigation system shall minimize the extent of irrigation lines, controllers, and valves in the public right-of-way and shall be reviewed and approved by the City Engineer.
23. The project’s electrical transformer shall not be installed within the public right-of-way.
24. Retaining walls for driveways that encroach in the City’s right-of-way shall require an encroachment permit issued by the Engineering Division and a Building Permit. The design shall be acceptable to the City.
25. The city has a combined storm/sewer system in the area. City storm drain maps indicate that the 10” line is abandoned. Applicant shall CCTV the 10” line that goes into the PUE to confirm it has been abandoned.
C. PUBLIC WORKS – WATER AND WASTEWATER
26. All water and sewer system construction shall comply with the Daly City Standard Specifications and Drawings.
27. Back flow protection is required on all water services.
28. All water service connections shall be to mains on Crocker Avenue.
29. All sewer discharge shall be to sewer mains on Crocker Avenue.
30. All storm system discharge shall be to mains on Crocker Avenue.
31. Access to the city sewer/storm easement shall be maintained during all phases of construction.
32. The manhole at the northwest corner of the project shall not be impacted at any point during construction.
D. FIRE DEPARTMENT
33. A fire sprinkler system is required. Applicant shall submit plans to NCFA under separate fire permit.
34. Applicant shall provide fire flow information per CFC, Appendix B.
35. Illuminated address identification is required.
36. Utility identification is required.
City Council Agenda Report
Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609 February 23, 2026 933-969 Crocker Avenue – Four Single-Family Residences with ADU’s Page 12 of 12
Recommendation
The Planning Commission recommends that the City Council the take following actions:
1. Adopt the Findings as outlined herein;
2. Affirm the Environmental Assessment;
3. Approve Minor Subdivision SUB-07-24-016596 and Design Review DR-08-24-016609, as conditioned herein.
Staff is available to provide any additional information desired by the City Council.
Respectfully submitted,
Sam Fielding Michael VanLonkhuysen
Associate Planner Acting Director
Economic and Community Development
Attachments
Attachment A – Location Map
Attachment B – Project Description
Attachment C – Tentative Map and Project Plans
933-969 Crocker Avenue: Location Map
1 PROJECT DESCRIPTION OF PROPOSED PROJECT AT 933-969 CROCKER AVENUE
The subject property is a vacant lot measuring approximately 13,051 square feet (about 0.3 acres). Its assessor parcel number is 004-223-110. Zoned R1, the lot features an average downhill slope of 25%.
In 2012, a minor subdivision application (four-lot) with plans for four single-family homes (SUB-10-10-2809, DR-10-10-2809) was approved but was not pursued due to financial constraints. The same owner is now moving forward with a similar project.
The current proposal mirrors the previous application, with plans to subdivide the lot into four parcels. Each parcel will accommodate a single-family home with an attached accessory dwelling unit, resulting in a total of eight units for the entire development. The proposed lot and dwelling breakdown is as follows:
Lot 1 (eastern lot)
Lot area = 3,065 sf
Primary dwelling = 3,373 sf (gross)
ADU = 978 sf (gross)
Lot2:
Lot area = 2,878 sf
Primary dwelling = 3,366 sf (gross)
ADU = 978 sf (gross)
Lot 3:
Lot area = 2,773 sf
Primary dwelling = 3,205 sf (gross)
ADU = 911 sf (gross)
Lot 4 (western lot)
Lot area = 4,334 sf
Primary dwelling = 3,354 sf (gross)
ADU = 877 sf (gross)
Due to an existing public utility easement along the western edge of the lot, the proposed Lot 4 will be larger than the other three lots. Each of the planned dwellings will be four stories high, including a basement. The primary units will each have an approximate area of 2,300 square feet, while the attached accessory dwelling units (ADUs) will each be around 800 square feet.
The proposed design complies with the current Daly City Planning Code regarding building height, setbacks, and parking requirements, and no variance requests are necessary.
The exterior materials and finishes will be chosen for their sustainability. The design will feature thermally- broken anodized aluminum windows and doors, composite wood panels, and tempered glass railings. Grass pavers will be used to ensure a permeable surface for the driveway, complemented by drought-tolerant landscaping. The overall front design of the development will integrate seamlessly with the surrounding area, enhancing the residential character of the neighborhood.
IMPERVIOUS AREAPROPOSED
LANDSCAPE AREA TOTAL DEVELOPED AREA
TOTAL S.F.
TOTAL PROJECT AREAAREA SUBJECT TO CAPTURE12,605 SQUARE FEET (0.289 ACRE) 9,569
CAPTUREDTOTAL S.F.UN-CAPTUREDTOTAL S.F.
6,164
PERVIOUS PAVING
15,733 SQUARE FEET (0.361 ACRE)
PATIO, WALKWAY, PADS, ETC.RESIDENCE ROOF*SIDEWALK, CURB & GUTTER4446,8341,352TOTAL IMPERVIOUS AREA8,630 GRASSPAVE DRIVEWAY939
TOTAL PERVIOUS AREA7,103
8,2174,433
4446,83407,278
939
5,372
1,3521,731
001,3521,352
0 1,731
IMPERVIOUS AREAEXISTING TOTAL S.F.
0 +9,196 SQUARE FEET (NET INCREASE)
GRASSPAVE DRIVEWAY
NET CHANGE IN DEVELOPED AREA
PROPOSEDTOTAL S.F.
PARCEL AREA13,050 SQUARE FEET (0.300 ACRE)
TOTAL DISTURBED AREA15,733 SQUARE FEET (0.361 ACRE)REMOVEDNEWTOTAL S.F.TOTAL S.F.PATIO, WALKWAY, PADS, ETC.RESIDENCE ROOF*00 0 00
*HARDSCAPE AREAS BELOW THE RESIDENCE DECKS & ROOF OVERHANG ARE INCLUDED IN THE ROOF AREA 4446,834
939
4446,834
939
373+8,257 SQUARE FEET (NET INCREASE) TOTAL IMPERVIOUS AREANET CHANGE IN IMPERVIOUS AREA3738,6308,630
PERVIOUS PAVING
+939 SQUARE FEET (NET INCREASE) NET CHANGE IN PERVIOUS PAVING AREA373TOTAL DEVELOPED AREA3739,5699,569 TOTAL PROJECT AREA15,733 SQUARE FEET (0.361 ACRE)
SIDEWALK, CURB & GUTTER373373 1,3521,352
®
®
®
City Council Meeting Agenda Report Item # _____
Meeting Date: February 23, 2026
Subject: RESOLUTION AUTHORIZING A WIFIA LOAN AGREEMENT WITH THE DALY CITY
JOINT POWERS FINANCING AUTHORITY, THE NORTH SAN MATEO COUNTY
SANITATION DISTRICT AND THE UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY AND A FINANCING AGREEMENT (WIFIA LOAN AGREEMENT) WITH THE
DALY CITY JOINT POWERS FINANCING AUTHORITY IN CONNECTION WITH THE
FINANCING OF THE VISTA GRANDE DRAINAGE BASIN IMPROVEMENT PROJECT,
AND AUTHORIZING THE CITY MANAGER (OR DISTRICT MANAGER), OR DESIGNEE,
TO EXECUTE AND DELIVER SUCH AGREEMENTS AND RELATED DOCUMENTS AND
APPROVING A PLEDGE OF REVENUES FOR REPAYMENT OF FUNDING, AND
APPROVING RELATED AGREEMENTS AND ACTIONS
Recommended Action
Consider adoption of a resolution authorizing a WIFIA Loan Agreement with the Daly City Joint Powers Financing Authority, the North San Mateo County Sanitation District, and the United States Environmental Protection Agency in connection with the financing of the Vista Grande Drainage Basin Improvement Project and a related Financing Agreement (WIFIA Loan Agreement), approving a pledge of revenues for repayment of funding, and approving related agreements and actions.
Background
Vista Grande Drainage Basin Improvement Project. The City of Daly City (the “City”) and the North San Mateo County Sanitation District (the “District”) are undertaking the Vista Grande Drainage Basin Improvement Project (the "Project").
District, City and Authority Responsibility for the Project. To jointly finance the Project, the City and the District established the Daly City Joint Powers Financing Authority (the “Authority”) pursuant to a Joint Exercise of Powers Agreement, dated as of March 1, 2021, as amended on November 1, 2022.
The City, the District and the Authority previously entered into a Memorandum of Agreement, dated as of March 29, 2024 (“Original Memorandum of Agreement”), for the purpose of documenting their respective roles with respect to ownership, construction, operation and financing of the Project. The Original Memorandum of Agreement provides that (i) the City will own, construct, operate and maintain the project, (ii) the City’s water enterprise (“Water Enterprise”) is responsible for 49.23% of the costs of constructing, operating, maintaining and financing the Project and (iii) the District’s wastewater enterprise (“Sewer Enterprise”) is responsible for 50.77% of the costs of constructing, operating, maintaining and financing the Project. The Authority acts as a financing conduit between the City and the District on the one hand and Project lenders on the other; the Authority has no responsibilities for operation of the Project and will repay financings with amounts received from the City and the District.
Financing Plan. The City and the District will rely on three categories of funding sources to finance the Project:
• Contributions – The City and the District will coordinate with participants to fund a portion of project costs with up-front contributions or contributions during construction. • Grants – The City and the District will continue to coordinate the effort to identify, apply for, receive, and manage grants and other contributions from state and federal agencies. • Debt - After contributions and grants, the City and the District will fund the remaining Project costs with loans from state and federal agencies and, if other sources are not available with reasonable costs and conditions, public offerings of debt.
City Council Agenda Report
Proposed Resolution approving WIFIA February 23, 2026
Financing for the Vista Grande Drainage Basin Improvement Page 2 of 4
As of the date of this staff report and subject to change, the following table provides the projected funding sources and uses for the Project:
Funding Sources Agreement Funding Access
Contributions
CalTrans 3,400,000$ Executed Expended
City, Water Enterprise Fund 5,000,000 n/a Final amount depends on other sources.
District, Sanitation Fund 5,000,000 n/a Final amount depends on other sources.
San Francisco Public Utilities 35,000,000 Executed Construction Draws San Mateo County 15,000,000 Executed Construction Draws Subtotal 63,400,000$
Grants
Congressionally Directed Spending 2,051,752$ Application Construction Draws State Water Board 5,000,000 Executed Construction Draws Subtotal 7,051,752$
Debt
State Water Board 62,875,411$ Executed Construction Draws EPA, WIFIA 33,890,228 Pending Construction Draws
CA Infrastructure Bank 35,000,000 Application When debt originated.
Public/Market Offering 18,092,479 FY 2028 When debt originated.
Subtotal 131,765,639$
Total Funding Sources 220,309,870$
Funding Uses
Plan & Design 14,038,072$ Includes prior expenses.
Project Management 12,508,712 Includes prior expenses.
Habitat Mitagtion 7,863,086 Includes prior expenses.
Contruction 180,000,000 Project bids as of 2/6/26.
Contingency & Costs of Issuance 5,900,000 Includes prior expenses.
Total Funding Uses 220,309,870$
City Council Agenda Report
Proposed Resolution approving WIFIA February 23, 2026
Financing for the Vista Grande Drainage Basin Improvement Page 3 of 4
Discussion
Proposed WIFIA Financing. Staff has been working with an outside bond counsel (Jones Hall LLP) and an independent municipal advisor (D.A. Davidson) to negotiate with the United States Environmental Protection Agency (“U.S. EPA”), which administers the federal Water Infrastructure Finance and Innovation Act (“WIFIA”) program, (i) the terms of an approximately $34,000,000 loan (the “WIFIA Loan”) from the U.S. EPA to the Authority to finance the Project, (ii) a WIFIA Loan Agreement among the District, the City, the Authority and the U.S. EPA (the “WIFIA Loan Agreement”), (iii) a Financing Agreement (WIFIA Loan Agreement) between the Authority and the District (the “District Financing Agreement”), pursuant to which the District would agree to make payments to the Authority from net revenues of the Sewer Enterprise that the Authority would use to pay 50.77% of the WIFIA Loan payments, when due and (iv) a Financing Agreement (WIFIA Loan Agreement) between the Authority and the City (the “City Financing Agreement”), pursuant to which the City would agree to make payments to the Authority from net revenues of the City’s Water Enterprise that the Authority would use to pay 49.23% of the WIFIA Loan payments
Based on the projected funding sources and uses presented in the table above, City staff anticipates that the principal amount of the City’s payment obligations under the City Financing Agreement will be approximately $16,738,200. Staff expects the WIFIA Loan to mature in 2065, and the true interest cost of the WIFIA Loan to be approximately 4.81%.
Pursuant to the proposed resolution, the City Council would approve the WIFIA Loan in a maximum principal amount of $34,000,000 (excluding capitalized interest) and the City’s payment obligations under the City Financing Agreement in a maximum principal amount of $16,738,200 (excluding capitalized interest), in each case with a maximum interest rate of 5.25%; authorize execution and delivery of the WIFIA Loan Agreement and the City Financing Agreement; and approve related agreements and actions.
The proposed resolution approves an amendment and restatement of the Original Memorandum of Agreement; the amendment would not change the allocation of responsibilities or costs for the Project between the City and the District, but it would establish a formal process for interfund loans between the Water Enterprise and the Sewer Enterprise, if needed.
Compared to other debt financing sources, the proposed WIFIA Loan offers the following advantages to the City and the District, which should result in lower rates charged to users of the Water Enterprise and the Sewer Enterprise:
1. Lower Interest Expense – The WIFIA program sets its interest rate based on the U.S.
Treasury rate on the date of loan closing. The rate is calculated using the weighted average (“WAL”) life of the loan rather than the loan maturity date. The WAL is expected to be shorter than the WIFIA Loan’s actual length, resulting in a lower interest rate. In addition, the City and the District will benefit from the “AAA” Treasury rate, even though the Water Enterprise and the Sewer Enterprise will be rated lower than “AAA”.
2. Other Terms and Conditions – The City and the District can repay principal for a period up to 35 years after Project completion, payments may be deferred up to 5 years after Project completion, and the repayment schedule can be customized to match expected revenues and expenses.
Fiscal Impact
Using a finance model that includes historical data, budgets. and projections through June 30, 2053, Staff projected fiscal impacts based on the expected funding sources and uses summarized above.
From July 1, 2016, to June 30, 2025, the Water Enterprise “sales and service” revenues averaged 7.71% annual increases due to rate adjustments, new users, and increased water demand. As part of the adopted FY 2026 Budget, the City budgeted 4% annual revenue increases through June 30, 2028, and 3% annual revenue
City Council Agenda Report
Proposed Resolution approving WIFIA February 23, 2026
Financing for the Vista Grande Drainage Basin Improvement Page 4 of 4
increases for July 1, 2028, through June 30, 2030. Effective July 1, 2030, through final maturity on June 30, 2065, staff forecast 2% annual revenue increases will enable the Water Enterprise to fund its share of Project operating and maintenance costs, pay debt service, and comply with other loan terms and conditions.
After originating debt, the City will be required to annually verify that Water Enterprise revenues are sufficient to:
1. Fund 100% of annual Water Enterprise operating and maintenance expenses,
2. Fund 100% of annual debt service, and
3. Generate additional annual revenue equal to at least 20% of annual debt service.
If revenues are not sufficient, the City will adjust rates and charges as required.
After paying annual operation and maintenance costs and debt service, the City may use remaining Water Enterprise revenues to annually fund capital expenditures, reserves, and other lawful uses and purposes of the Water Enterprise.
The formula for annual “Net Revenues” (which are defined as annual Water Enterprise revenues minus the annual costs of operating/maintaining the Water Enterprise) to “cover” annual debt service is:
Calculation 1: Annual Revenues – Operating & Maintenance Expenses = Annual Net Revenues Calculation 2: Annual Net Revenues = (at least) 1.20 x Annual Debt Service
Using the above “Net Revenues Coverage” formula, staff expects the Water Enterprise will generate annual net revenues at a ratio above 2.5 to 1 to “cover” debt service payments under the City Financing Agreement.
Conclusion
Staff recommends that the City Council adopt a resolution approving the WIFIA Loan from the U.S.
EPA’s WIFIA program in the maximum principal amount of $34,000,000 (excluding capitalized interest), payments by the City under the City Financing Agreement in the maximum principal amount of $16,738,200 (excluding capitalized interest), and an interest rate not to exceed 5.25%; approving a pledge of the Net Revenues of the Water Enterprise; and approving related agreements and actions.
Staff are available to provide any additional information requested by the Mayor or Councilmembers.
Respectfully submitted,
Joshua Cosgrove Rose Zimmerman
Director of Water and Wastewater Resources City Attorney
Attachment 1: Draft Resolution
Attachment 2: WIFIA Loan Agreement
Attachment 3: City Financing Agreement
Attachment 4: Amended and Restated Memorandum of Agreement
2020110601
RESOLUTION NO. ____
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DALY CITY
AUTHORIZING THE EXECUTION AND DELIVERY OF A WIFIA LOAN
AGREEMENT WITH THE DALY CITY JOINT POWERS FINANCING
AUTHORITY, THE NORTH SAN MATEO COUNTY SANITATION DISTRICT
AND THE UNITED STATES ENVIRONMENTAL PROTECTION AGENCY AND
A FINANCING AGREEMENT (WIFIA LOAN AGREEMENT) WITH THE DALY
CITY JOINT POWERS FINANCING AUTHORITY IN CONNECTION WITH THE
FINANCING OF THE VISTA GRANDE DRAINAGE BASIN IMPROVEMENT
PROJECT AND AUTHORIZING THE CITY MANAGER (OR DISTRICT
MANAGER), OR DESIGNEE, TO EXECUTE AND DELIVER SUCH
AGREEMENTS AND RELATED DOCUMENTS AND APPROVING A
PLEDGE OF REVENUES FOR REPAYMENT OF FUNDING, AND APPROVING
RELATED AGREEMENTS AND ACTIONS
R E C I T A L S
WHEREAS, the City of Daly City (the “City”) and the North San Mateo County Sanitation District (the “District”) established the Daly City Joint Powers Financing Authority (the “Authority”) pursuant to a Joint Exercise of Powers Agreement, dated as of March 1, 2021, as amended and restated as of November 1, 2022 (the “Joint Exercise of Powers Agreement”); and
WHEREAS, the Authority is a public entity separate and apart from the City and the District; and
WHEREAS, the City and the District desire to finance the costs of acquiring, constructing and/or reconstructing certain public facilities and improvements to maintain and enhance water quality, manage non-point source pollution, protect drinking water sources, and manage related impacts to City, District and regional water and wastewater systems including certain treatment facilities, pipelines and other infrastructure, which project is commonly referred to as the Vista Grande Drainage Basin Improvement Project (the "Project"); and
WHEREAS, with respect to the Project’s compliance with the California Environmental Quality Act (“CEQA”), (i) on December 11, 2017, the City approved the Project and certified its accompanying Environmental Impact Report (SCH Number 2013032001) (“EIR”) as complying with CEQA, (ii) along with the certification, the City adopted all necessary findings and a mitigation reporting and monitoring plan for the Project, and (iii) since approval of the Project, there have been no substantial changes in the Project, substantial changes in its circumstances, or new information of substantial importance necessitating major revisions of the EIR pursuant to Public Resources Code section 21166 or CEQA Guidelines section 15162, and thus no subsequent or supplemental CEQA review is required; and
WHEREAS, the City intends to finance the construction and/or reconstruction of a portion of the Project with moneys (“Project Funds”) provided by (i) the State of California, acting by and through the State Water Resources Control Board (the “State Water Board”) and (ii) the federal Water Infrastructure Finance and Innovation Act (“WIFIA”) program, which is administered by the United States Environmental Protection Agency (“U.S. EPA”) ; and
2 202011001
WHEREAS, in order to provide financing for the Project, the City Council wishes at this time to authorize the execution and delivery of (i) a WIFIA Loan Agreement among the District, the City, the Authority and the U.S. EPA (including the exhibits and schedules attached thereto, the “WIFIA Loan Agreement”) and (ii) a Financing Agreement (WIFIA Loan Agreement) between the City and the Authority (including the appendix and schedule attached thereto, the “City Financing Agreement”); and
WHEREAS, under the City Financing Agreement, the Authority Bond Payments (as defined in the City Financing Agreement) payable by the City will be secured by a pledge of and payable from City Net Revenues (as defined in the WIFIA Loan Agreement) of the City’s Water Enterprise (as defined in the City Financing Agreement), on a parity basis with the City’s obligation to make certain payments denominated Member Agency Payments pursuant to a Financing Agreement, dated as of September 12, 2024, by and between the Authority and the City, related to financing for the Project from the State Water Board (the “SRF Member Agency Payments”); and
WHEREAS, the Authority is authorized to execute and deliver the WIFIA Loan Agreement and the related bond pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”); and
WHEREAS, the Authority is authorized to enter into and perform its obligations under the City Financing Agreement pursuant to Government Code Section 6504 and the Joint Exercise of Powers Agreement; and
WHEREAS, the City is authorized to enter into and perform its obligations under the City Financing Agreement and the WIFIA Loan Agreement pursuant to Government Code Section 6504 and the Joint Exercise of Powers Agreement; and
WHEREAS, the Authority, the City and the District previously executed a Memorandum of Agreement, dated March 29, 2024 (the “Original Memorandum of Agreement”), documenting their respective roles with respect to ownership, construction, operation and financing of the Project and other related matters, and the Authority, the City and the District have determined that it is in their best interests to amend the Original Memorandum of Agreement to document certain additional terms in connection with the WIFIA Loan Agreement; and
WHEREAS, the City Council of the City has duly considered such transactions and has determined to approve said transactions as being in the public interest of the City; and
WHEREAS, pursuant to Government Code Section 5852.1, certain information relating to the City’s obligation to make Authority Bond Payments under the City Financing Agreement is set forth in Exhibit A attached to this Resolution, and such information is hereby disclosed and made public;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Daly City as follows:
SECTION 1. Each of the above recitals is true and correct and is adopted by the City Council.
SECTION 2. Based on the information provided to the City Council by City staff and consultants, all as set forth in the proceedings and documents providing for the execution and delivery of the WIFIA Loan Agreement and the City Financing Agreement, the City Council
3 202011001
hereby finds and determines that the execution and delivery of the WIFIA Loan Agreement and the City Financing Agreement and the transactions related thereto will result in significant public benefits within the contemplation of Government Code Section 6586, namely, demonstrable savings in effective interest rate and financing costs.
SECTION 3. The City approves the proposed financing from the U.S. EPA pursuant to the WIFIA Loan Agreement in a principal amount not to exceed $34,000,000 (excluding capitalized interest) with an interest rate not to exceed 5.25%.
SECTION 4. The WIFIA Loan Agreement is hereby approved in substantially the form on file with the City Clerk, with such changes as may be approved by the City Manager, the Finance Director or the Public Works Director, acting alone (each an “Authorized Officer”), after consultation with the City Attorney. Execution by an Authorized Officer of the WIFIA Loan Agreement shall constitute conclusive evidence of the City Council’s approval of all such changes.
Each of the Authorized Officers is hereby authorized, together or alone, to execute and deliver the WIFIA Loan Agreement. The City Clerk is hereby authorized to attest to the Authorized Officer's signature, if applicable.
SECTION 5. The City Financing Agreement is hereby approved in substantially the form on file with the City Clerk, with such changes as may be approved by an Authorized Officer, after consultation with the City Attorney. Execution by an Authorized Officer of the City Financing Agreement shall constitute conclusive evidence of the City Council’s approval of all such changes.
Each of the Authorized Officers is hereby authorized, together or alone, to execute and deliver the City Financing Agreement. The City Clerk is hereby authorized to attest to the Authorized Officer's signature, if applicable.
Amounts due under the City Financing Agreement shall be payable by the City from the City Net Revenues of the Water Enterprise and subject to the other terms and conditions set forth in the City Financing Agreement as finally executed and delivered by the City; provided, that the principal component of the Authority Bond Payments payable by the City under the City Financing Agreement shall not exceed 49.23% of the principal amount of the WIFIA Loan (as defined in the WIFIA Loan Agreement) and the interest rate on the principal component of the Authority Bond Payments payable by the City under the City Financing Agreement shall not exceed 5.25% per annum.
The City Council hereby approves the pledge of, and creation of a lien and security interest in, all City Net Revenues under the City Financing Agreement on a parity basis with the pledge and lien of the SRF Member Agency Payments on the City Net Revenues.
SECTION 6. The covenants and obligations of the City set forth in the WIFIA Loan Agreement and the City Financing Agreement to be executed in accordance with Sections 3 and 4 above are hereby approved, shall be deemed to be covenants and obligations of the City Council, and shall be complied with by the City and its officers.
SECTION 7. The City Council hereby approves the Amended and Restated Memorandum of Agreement, which amends and restates the Original Memorandum of Agreement, in substantially the form on file with the City Clerk, with such changes as may be approved by an Authorized Officer, after consultation with the City Attorney. Execution by an Authorized Officer of the Amended and Restated Memorandum of Agreement shall constitute conclusive evidence of the City’s approval of all such changes. Each of the Authorized Officers is hereby authorized, together
4 202011001
or alone, to execute and deliver the Amended and Restated Memorandum of Agreement. The City Clerk is hereby authorized to attest to the Authorized Officer's signature, if applicable.
SECTION 8. Each Authorized Officer and the other officers and staff of the City responsible for the Project, the Water Enterprise or the fiscal affairs of the City are hereby authorized and directed to take any actions and execute and deliver any and all documents and certificates as are necessary to accomplish and to consummate the transactions contemplated by this Resolution, the WIFIA Loan Agreement and the City Financing Agreement. All actions taken by an Authorized Officer and such other officers and staff of the City consistent with this Resolution, the WIFIA Loan Agreement or the City Financing Agreement are hereby ratified, approved and confirmed.
SECTION 9. This Resolution shall take effect immediately upon its passage and adoption.
I hereby certify the foregoing to be a true copy of a Resolution adopted by the City Council of the City of Daly City, California, at a regular meeting thereof held on the ___ day of ____, 2026, by the following vote of the members thereof:
AYES, and in favor thereof, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
CITY CLERK OF THE CITY OF DALY CITY
APPROVED:
MAYOR OF THE CITY OF DALY CITY
2020110601
EXHIBIT A
REQUIRED GOOD FAITH ESTIMATES PURSUANT TO
GOVERNMENT CODE SECTION 5852.1
1. True Interest Cost of the City’s Authority Bond Payments under the City Financing Agreement: 4.81%
2. Finance charge of the City’s Authority Bond Payments under the City Financing Agreement, being the sum of all fees and charges paid to third parties: $199,064
3. Amount of Project Funds expected to be received by the City under the City Financing Agreement, net of proceeds for finance charges in (2) above and net of capitalized interest (if any) and reserves (if any) paid or funded with the Project Funds: $16,920,435
4. Total payment amount for the Project Funds, being the sum of (a) the Authority Bond Payments to be paid by the City under the City Financing Agreement to final maturity ($40,330,008), plus (b) any financing costs not paid from proceeds of the Project Funds ($0): $40,330,008
*All amounts and percentages are estimates, and are made in good faith by the City based on information available as of the date of adoption of this Resolution.
A&O Shearman Draft – February 5, 2026
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WIFIA LOAN AGREEMENT
For Up to $33,890,228
With
DALY CITY JOINT POWERS FINANCING AUTHORITY,
CITY OF DALY CITY and
NORTH SAN MATEO COUNTY SANITATION DISTRICT
For the
VISTA GRANDE DRAINAGE BASIN IMPROVEMENT PROJECT
(WIFIA – N19124CA)
Dated as of [], 2026
i
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1. Definitions ............................................................................................................................3 Section 2. Interpretation ......................................................................................................................23
ARTICLE II THE WIFIA LOAN
Section 3. WIFIA Loan Amount .........................................................................................................24 Section 4. Disbursement Conditions; Quarterly Approval of Eligible Project Costs .........................24 Section 5. Term ...................................................................................................................................25 Section 6. Interest Rate .......................................................................................................................25 Section 7. Security and Priority; Flows of Funds ...............................................................................25 Section 8. Payment of Principal and Interest ......................................................................................26 Section 9. Prepayment ........................................................................................................................28 Section 10. Fees and Expenses .............................................................................................................29
ARTICLE III CONDITIONS PRECEDENT
Section 11. Conditions Precedent .........................................................................................................31
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 12. Representations and Warranties of Obligors. ....................................................................35 Section 13. Representations and Warranties of WIFIA Lender ...........................................................42
ARTICLE V COVENANTS
Section 14. Affirmative Covenants .......................................................................................................42 Section 15. Negative Covenants ...........................................................................................................49 Section 16. Reporting Requirements ....................................................................................................53
ARTICLE VI EVENTS OF DEFAULT
Section 17. Events of Default and Remedies ........................................................................................59
ARTICLE VII MISCELLANEOUS
Section 18. Disclaimer of Warranty. .....................................................................................................62 Section 19. No Personal Recourse. .......................................................................................................62 Section 20. No Third-Party Rights. .......................................................................................................62 Section 21. Obligors’ Authorized Representatives. ..............................................................................63 Section 22. WIFIA Lender’s Authorized Representative. ....................................................................63 Section 23. Servicer. .............................................................................................................................63 Section 24. Amendments and Waivers. ................................................................................................63 Section 25. Governing Law. .................................................................................................................63 Section 26. Severability. .......................................................................................................................63 Section 27. Successors and Assigns. .....................................................................................................63 Section 28. Remedies Not Exclusive. ...................................................................................................64 Section 29. Delay or Omission Not Waiver. .........................................................................................64 Section 30. Counterparts. ......................................................................................................................64 Section 31. Notices. ..............................................................................................................................64 Section 32. Indemnification. .................................................................................................................65 Section 33. Sale of WIFIA Loan. ..........................................................................................................66 Section 34. Effectiveness. .....................................................................................................................66 Section 35. Termination. .......................................................................................................................66 Section 36. Integration. .........................................................................................................................67 Section 37. City Role. ...........................................................................................................................67
ii
SCHEDULE I – Project Budget
SCHEDULE II – Construction Schedule
SCHEDULE III – Existing Indebtedness
SCHEDULE IV – Flows of Funds
SCHEDULE V – Construction Contracts
SCHEDULE VI – WIFIA Loan Amortization Schedule
EXHIBIT A – Form of WIFIA Bond
EXHIBIT B-1 – Requisition Procedures and Form of Requisition EXHIBIT B-2 – Certification of Eligible Project Costs Documentation EXHIBIT C-1 – Opinions Required from Counsel to Obligors EXHIBIT C-2 – Opinions Required from Bond Counsel
EXHIBIT D – Form of Closing Certificate
EXHIBIT E – Form of Certificate of Substantial Completion EXHIBIT F – Form of Construction Monitoring Report
EXHIBIT G – Form of Public Benefits Report
1 WIFIA LOAN AGREEMENT
THIS WIFIA LOAN AGREEMENT (this “Agreement”), dated as of [], 2026, is by and among DALY CITY JOINT POWERS FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the “State”), with an address at 333 90th St, Daly City, CA 94015 (the “Borrower”), CITY OF DALY CITY, a general city and municipal corporation established under the Constitution of the State, with an address at 333 90th St, Daly City, CA 94015 (the “City”), NORTH SAN MATEO COUNTY SANITATION DISTRICT, a county sanitation district and subsidiary district of the City established under the laws of the State, with an address at 333 90th St, Daly City, CA 94015 (the “District” and, together with the City, the “Members,” and the Members, collectively with the Borrower, the “Obligors”), and the UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, an agency of the United States of America, acting by and through the Administrator of the Environmental Protection Agency (the “Administrator”), with an address at 1200 Pennsylvania Avenue NW, Washington, DC 20460 (the “WIFIA Lender”).
RECITALS:
WHEREAS, the Congress of the United States of America enacted the Water Infrastructure Finance and Innovation Act, as amended by Section 1445 of the Fixing America’s Surface Transportation Act of 2015, as further amended by Section 5008 of the Water Infrastructure Improvements For the Nation Act of 2016 and by Section 4201 of America’s Water Infrastructure Act of 2018 (collectively, as the same may be amended from time to time, the “Act” or “WIFIA”), which is codified as 33 U.S.C. §§ 3901-3915;
WHEREAS, the Act authorizes the WIFIA Lender to enter into agreements to provide financial assistance with one or more eligible entities to make loans with appropriate security features to finance a portion of the eligible costs of projects eligible for assistance; WHEREAS, the Obligors previously entered into that certain Memorandum of Agreement, dated as of March 29, 2024 (the “MOA”), pursuant to which the parties thereto (a) allocated ownership of the Project to the City, (b) allocated responsibility for construction of the Project to the City, with 49.23% of the construction costs allocable to the Water Enterprise and 50.77% of the construction costs allocable to the Sewer Enterprise and (c) allocated responsibility for operation and maintenance of the Project to the City, with 49.23% of the operation and maintenance costs allocable to the Water Enterprise and 50.77% of the operation and maintenance costs allocable to the Sewer Enterprise.
WHEREAS, in order to provide assistance to Members in connection with financing programs of the Members, including the financing of the Project and for other financing purposes authorized under Article 4 of the Joint Powers Law and other applicable law, the Members entered into a Joint Exercise of Powers Agreement, dated as of March 1, 2021, and as amended and restated on November 1, 2022 (the “Joint Powers Agreement”), under which the Borrower has been organized as a joint powers authority (which is a public entity separate and apart from the Members);
WHEREAS, the Members have asked the Borrower to provide financing for the Project;
2 WHEREAS, the Borrower has requested that the WIFIA Lender make the WIFIA Loan (as defined herein) to the Borrower in a principal amount not to exceed $33,890,228 to be used to pay a portion of the Eligible Project Costs related to the Project pursuant to the application for WIFIA financial assistance received December 31, 2024 (the “Application”); WHEREAS, as of the date hereof, the Administrator has approved WIFIA financial assistance for the Project to be provided in the form of the WIFIA Loan, subject to the terms and conditions contained herein;
WHEREAS, based on the Application and the representations, warranties and covenants set forth herein, the WIFIA Lender proposes to make funding available to the Borrower for a portion of the costs of the Project through the issuance of the WIFIA Bond (as defined herein), upon the terms and conditions set forth herein;
WHEREAS, as of the date hereof, the Borrower has entered into a WIFIA FA with each of the Members, pursuant to which, inter alia, each Member has agreed to pay its Allocable Share of the principal and interest relating to the WIFIA Bond, such payments being secured by the Net Revenues;
WHEREAS, the Borrower agrees to repay any amount due pursuant to this Agreement and the WIFIA Bond in accordance with the terms and provisions of this Agreement and of the WIFIA Bond;
WHEREAS, the Borrower has agreed to pledge and assign to the WIFIA Lender and grant to the WIFIA Lender for its benefit Liens on (a) all of the Authority Revenues, (b) all of the right, title and interest (but none of the obligations) of the Borrower in the WIFIA FAs and (c) the WIFIA Debt Service Account; and
WHEREAS, the WIFIA Lender has entered into this Agreement in reliance upon, among other things, the information and representations of the Obligors set forth in the Application and the supporting information provided by the Obligors.
NOW, THEREFORE, the premises being as stated above, and for good and valuable consideration, the receipt and sufficiency of which are acknowledged to be adequate, and intending to be legally bound hereby, it is hereby mutually agreed by and among the Obligors and the WIFIA Lender as follows:
3 ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1. Definitions.
Unless the context otherwise requires, capitalized terms used in this Agreement shall have the meanings set forth below in this Section 1 (Definitions) or as otherwise defined in this Agreement. Any term used in this Agreement that is defined by reference to any other agreement shall continue to have the meaning specified in such agreement, whether or not such agreement remains in effect.
“Act” means the Act as defined in the recitals hereto.
“Additional Construction Contract” means, with respect to the Project, each Construction Contract entered into after the Effective Date. “Additional Obligations” means Additional Parity Obligations and Additional Subordinated Obligations.
“Additional Parity Obligations” means Obligations issued or incurred on or after the Effective Date and payable from Net Revenues on a parity with the payment of the Authority Bond Payments for the purpose of paying all or a portion of the costs of a System, including the financing of all or a part of the cost of acquisition and construction of any additions to or improvements of such System, which Parity Obligations satisfy the conditions set forth in Section 15(c) (Negative Covenants – Issuance of Parity Obligations), including payments due under Qualified Swap Agreements.
“Additional Subordinated Obligations” means Obligations issued or incurred on or after the Effective Date which are expressly made subordinate and junior in right of payment from a Revenue Fund and right of security to the Parity Obligations and which comply with the provisions of Section 15(d) (Negative Covenants – Issuance of Subordinated Obligations). “Administrator” has the meaning provided in the preamble hereto. “Agreement” has the meaning provided in the preamble hereto. “Allocable Share” means the portion of the proceeds of the WIFIA Bond that is allocable to each of the Members, which portion shall equal 49.23% with respect to the City and 50.77% with respect to the District.
“Anti-Corruption Laws” means all laws, rules and regulations of any jurisdiction from time to time concerning or relating to bribery or corruption. “Anti-Money Laundering Laws” means all U.S. and other applicable laws, rules and regulations of any jurisdiction from time to time concerning or related to anti-money laundering, including but not limited to those contained in the Bank Secrecy Act and the Patriot Act. “Application” has the meaning provided in the recitals hereto.
4 “Authority Bond Payment Date” means the fifth (5 th) Business Day prior to each Payment Date.
“Authority Bond Payments” means the amounts paid by each Member under its respective WIFIA FA representing the principal and interest due on such Member’s Allocable Share with respect to the WIFIA Bond, as such payments are set forth in Appendix B (Authority Bond Payment Schedule) of each WIFIA FA.
“Authority Revenues” means (a) the Authority Bond Payments, (b) all amounts on deposit from time to time in the WIFIA Debt Service Account and (c) income and gains with respect to the investment of amounts on deposit in the WIFIA Debt Service Account. “Authorized Representative” means each of the Borrower’s Authorized Representative, the City’s Authorized Representative and the District’s Authorized Representative. “Bank Secrecy Act” means the Bank Secrecy Act of 1970, as amended, and the regulations promulgated thereunder.
“Bankruptcy Related Event” means, with respect to any Obligor, (a) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of such Obligor or any of its debts, or of a substantial part of the assets thereof, under any Insolvency Laws, or (ii) the appointment of a receiver, trustee, liquidator, custodian, sequestrator, conservator or similar official for such Obligor or for a substantial part of the assets thereof and, in any case referred to in the foregoing subclauses (i) and (ii), such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered; (b) such Obligor (other than with respect to clause (iii) below, which applies to the Borrower only) shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator, custodian, sequestrator, conservator or similar official therefor or for a substantial part of the assets thereof, (ii) generally not be paying its debts as they become due unless such debts are the subject of a bona fide dispute, or become unable to pay its debts generally as they become due, (iii) fail to make a payment of WIFIA Debt Service in accordance with the provisions of Section 8 (Payment of Principal and Interest) and such failure is not cured within thirty (30) days following notification by the WIFIA Lender of failure to make such payment, (iv) make a general assignment for the benefit of creditors, (v) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition with respect to it described in clause (a) of this definition, (vi) commence a voluntary proceeding under any Insolvency Law, or file a voluntary petition seeking liquidation, reorganization, an arrangement with creditors or an order for relief, in each case under any Insolvency Law, (vii) file an answer admitting the material allegations of a petition filed against it in any proceeding referred to in the foregoing subclauses (i) through (v), inclusive, of this clause (b), or (viii) take any action for the purpose of effecting any of the foregoing; (c) (i) any Person shall commence a process pursuant to which all or a substantial part of either Member’s Net Revenues or Authority Revenues may be sold or otherwise disposed of in a public or private sale or disposition pursuant to a foreclosure of the Liens thereon securing the Obligations, or (ii) any Person shall commence a process pursuant to which all or a substantial part of either Member’s Net Revenues or Authority Revenues may be sold or otherwise disposed of pursuant to a sale or disposition of such Net Revenues or Authority Revenues in lieu of foreclosure; or (d) any receiver, trustee, liquidator,
5 custodian, sequestrator, conservator or similar official shall transfer, pursuant to directions issued by the holders of any Obligations, amounts on deposit in any of the funds or accounts of either System upon the occurrence and during the continuation of an Event of Default under this Agreement or an event of default under any Issuing Instrument for application to the prepayment or repayment of any principal amount of the Obligations other than in accordance with the provisions of this Agreement.
“Base Case Financial Model” means a financial model prepared by the Members (or the City on behalf of the Members) forecasting the capital costs of the Systems (including the Project) and the rates, revenues, operating expenses and major maintenance requirements of the Systems (including the Project) for time periods through the Final Maturity Date and based upon assumptions and methodology provided by the Members (or the City on behalf of the Members) and acceptable to the WIFIA Lender as of the Effective Date, which model shall be provided to the WIFIA Lender as a fully functional Microsoft Excel-based financial model or such other format requested by the WIFIA Lender.
“Borrower” has the meaning provided in the preamble hereto. “Borrower’s Authorized Representative” means any Person who shall be designated as such pursuant to Section 21 (Obligors’ Authorized Representatives). “Business Day” means any day other than a Saturday, a Sunday or a day on which offices of the Government or the State are authorized to be closed or on which commercial banks are authorized or required by law, regulation or executive order to be closed in New York, New York or Daly City, California.
“City” has the meaning provided in the preamble hereto. “City Flow of Funds” means the requirements specified in Section 4(b) (Water Fund; Application of Revenues) of the WIFIA City FA, a copy of which is set forth in Part A (City Flow of Funds) of SCHEDULE IV (Flows of Funds).
“City Maintenance and Operation Costs” means the reasonable and necessary costs paid or incurred by the City for maintaining and operating the Water Enterprise, determined in accordance with GAAP, including (a) all reasonable expenses of management, repair and all other expenses necessary to maintain and preserve the Water Enterprise in good repair and working order; (b) all reasonable and necessary administrative costs of the City that are charged directly or apportioned to the operation of the Water Enterprise, such as salaries and wages of employees, overhead, taxes (if any), the cost of permits, licenses and charges to operate the Water Enterprise and insurance premiums; and (c) amounts reasonably required to be set aside in an operations and maintenance contingency reserve for such costs the payment of which is not immediately required and which shall not exceed, for purposes of constituting City Maintenance and Operation Costs for a Fiscal Year that can be paid prior to Debt Service on Outstanding Parity Obligations, the City O&M Reserve Amounts, (for clarity nothing in this clause (c) shall limit the aggregate amount of City O&M Reserve Amounts or the amount of City Net Revenues for a Fiscal Year or any prior Fiscal Year that can be deposited into an operations and maintenance contingency reserve from amounts in the Water Fund pursuant to clause (f) of the City Flow of Funds), but excluding, in all
6 cases (i) depreciation, replacement, and obsolescence charges or reserves therefor and amortization of intangibles, (ii) all costs paid from the proceeds of taxes received by the City and (iii) all interest charges and charges for the payment of principal, or amortization, of bonded or other indebtedness of the City, and payments pursuant to a Qualified Swap Agreement. For the avoidance of doubt, “City Maintenance and Operation Costs” includes amounts payable for maintenance and operation under the Joint Powers Agreement, the MOA and equivalent agreements entered into between the City and the Borrower with respect to other projects, but does not include payments made by the City under the Joint Powers Agreement in respect of debt service on notes, bonds or other obligations issued by the City or the Borrower.
“City Net Revenues” for any Fiscal Year means the City Revenues for such Fiscal Year less all City Maintenance and Operation Costs for such Fiscal Year. “City O&M Reserve Amounts” means five percent (5%) of the budgeted City Maintenance and Operations Costs set forth in the then current adopted budget. “City Revenues” means, for each Fiscal Year, all gross income and revenue received by the City from the ownership or operation of the Water Enterprise, determined in accordance with GAAP, including (a) all rates, fees, and charges (including connection fees and charges) as received by the City for services of the Water Enterprise; (b) amounts transferred into the Water Fund from the Rate Stabilization Fund of the City and (c) all other income and revenue howsoever derived by the City from the ownership or operation of the Water Enterprise or arising from the Water Enterprise, including all income from the deposit or investment of any money in the Water Fund or the Rate Stabilization Fund or held on the City’s behalf, minus amounts, if any, withdrawn by the City from City Revenues during such Fiscal Year for deposit in the Rate Stabilization Fund of the City, and minus any moneys derived from refundable deposits and advances or contributions.
“City’s Authorized Representative” means any Person who shall be designated as such pursuant to Section 21 (Obligors’ Authorized Representatives). “Closing Certificate” has the meaning provided in Section 11(a)(vi) (Conditions Precedent – Conditions Precedent to Effectiveness).
“Code” means the Internal Revenue Code of 1986, or any successor tax code, as amended from time to time, and the applicable regulations proposed or promulgated thereunder. “Congress” means the Congress of the United States of America. “Construction Contract” means, with respect to the Project, any prime contract entered into by any Member that involves any construction activity (such as demolition, site preparation, civil works construction, installation, remediation, refurbishment, rehabilitation, or removal and replacement services) for the Project. For the avoidance of doubt, “Construction Contract” shall include each Existing Construction Contract and, upon the effectiveness thereof, each Additional Construction Contract.
“Construction Contractor” means any Person (other than any Obligor) party to a Construction Contract.
7 “Construction Period” means the period from the Effective Date through the Substantial Completion Date.
“Construction Period Servicing Fee” has the meaning set forth in Section 10(a)(ii) (Fees and Expenses – Fees).
“Construction Schedule” means (a) the initial schedule or schedules on which the construction timetables for the Project are set forth, attached as Schedule II (Construction Schedule), and (b) any updates thereto included in the Construction Monitoring Report most recently submitted to the WIFIA Lender pursuant to Section 16(d) (Reporting Requirements – Construction Reporting).
“Consultant” means a consultant, consulting firm, engineer, architect, engineering firm, architectural firm, accountant or accounting firm retained by a Member to perform acts, prepare certificates or otherwise carry out the duties provided for a Consultant in this Agreement. Such consultant, consulting firm, engineer, architect, engineering firm or architectural firm shall be nationally recognized within its profession for works of the character required. Such accountants or accounting firm shall be Independent Accountants licensed to practice in the State. “CPI” means the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S.
City Average for All Items, 1982-84=100 (not seasonally adjusted) or its successor, published by the Bureau of Labor Statistics, currently available at
https://www.bls.gov/news.release/cpi.t01.htm.
“Credit Provider” means any municipal bond insurance company, bank or other financial institution or organization which is performing in all material respects its obligations under any Credit Support Instrument for some or all of the Parity Obligations. “Credit Provider Reimbursement Obligations” means obligations of a Member to pay from its Revenue Fund amounts due under a Credit Support Agreement, including amounts advanced by a Credit Provider pursuant to a Credit Support Instrument as credit support or liquidity for Parity Obligations and the interest with respect thereto. “Credit Support Agreement” means, with respect to any Credit Support Instrument, the agreement or agreements (which may be the Credit Support Instrument itself) between a Member and the applicable Credit Provider, as originally executed or as it may from time to time be replaced, supplemented or amended in accordance with the provisions thereof, providing for the reimbursement to the Credit Provider for payments under such Credit Support Instrument, and the interest thereon, and includes any subsequent agreement pursuant to which a substitute Credit Support Instrument is provided, together with any related pledge agreement, security agreement or other security document.
“Credit Support Instrument” means a policy of insurance, a letter of credit, a stand-by purchase agreement, revolving credit agreement or other credit arrangement pursuant to which a Credit Provider provides credit or liquidity support with respect to the payment of interest, principal or the purchase price of any Parity Obligations.
8 “Debt Service” means, with respect to any Member for any Fiscal Year, the aggregate amount of principal and interest scheduled to become due (either at maturity or by mandatory redemption) on all Outstanding Parity Obligations; provided that the following adjustments and assumptions shall be made:
(a) principal payments (unless a different paragraph of this definition applies for purposes of determining principal maturities or amortization) are made in accordance with any amortization schedule published for such principal, including any minimum sinking fund payments;
(b) interest on a variable rate Outstanding Parity Obligation that is not subject to a swap agreement and that is issued or will be issued as a Tax-Exempt obligation under federal law, is the average of the SIFMA Index, or its successor index, during the twenty-four (24) months preceding the date of such calculation;
(c) interest on a variable rate Outstanding Parity Obligation that is not subject to a swap agreement and that is issued or will be issued as a taxable obligation under federal law, is the average of SOFR, or its successor index, during the twenty-four (24) months preceding the date of such calculation;
(d) interest on a variable rate Outstanding Parity Obligation that is subject to a swap agreement is the fixed swap rate or cap strike rate, as appropriate, if the variable rate has been swapped to a fixed rate or capped pursuant to an interest rate cap agreement or similar agreement;
(e) interest on a fixed rate Outstanding Parity Obligation that is subject to a swap agreement such that all or a portion of the interest has been swapped to a variable rate shall be treated as variable rate debt under paragraph (b) or (c) above of this definition of Debt Service; (f) payments of principal and interest on an Outstanding Parity Obligation are excluded from the calculation of Debt Service to the extent such payments are to be paid from amounts then currently on deposit with a trustee or other fiduciary and restricted for the defeasance of such Outstanding Parity Obligation; and
(g) if twenty-five percent (25%) or more of the principal of an Outstanding Parity Obligation is not due until its final stated maturity, then principal and interest on that Outstanding Parity Obligation may be projected to amortize over the lesser of thirty (30) years or the useful life of the financed asset, and interest may be calculated according to paragraphs (b) to (e) above of this definition of Debt Service, as appropriate. “Debt Service Payment Commencement Date” means the earlier to occur of (a) the first Payment Date immediately following the Initial Disbursement Date, as set forth in the WIFIA Loan Amortization Schedule, as such schedule may be adjusted in accordance with Section 8(d) (Adjustments to WIFIA Loan Amortization Schedule) and (b) the Payment Date falling closest to, but not later than, the fifth (5th) anniversary of the Substantial Completion Date. “Default” means any event or condition that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
9 “Default Rate” means an interest rate equal to the sum of (a) the WIFIA Interest Rate plus (b) two hundred (200) basis points.
“Development Default” means (a) either Member abandons work or fails, in the reasonable judgment of the WIFIA Lender, to diligently prosecute the work related to the Project or (b) Substantial Completion of the Project fails to occur on a date on or before August 22, 2031. “District” has the meaning provided in the preamble hereto. “District Flow of Funds” means the requirements specified in Section 4(b) (Sewer Funds; Application of Revenues) of the WIFIA District FA, a copy of which is set forth in Part B (District Flow of Funds) of SCHEDULE IV (Flows of Funds).
“District Maintenance and Operation Costs” means the reasonable and necessary costs paid or incurred by the District for maintaining and operating the Sewer Enterprise, determined in accordance with GAAP, including (a) all reasonable expenses of management, repair and all other expenses necessary to maintain and preserve the Sewer Enterprise in good repair and working order; (b) all reasonable and necessary administrative costs of the District that are charged directly or apportioned to the operation of the Sewer Enterprise, such as salaries and wages of employees, overhead, taxes (if any), the cost of permits, licenses and charges to operate the Sewer Enterprise and insurance premiums; and (c) amounts reasonably required to be set aside in an operations and maintenance contingency reserve for such costs the payment of which is not immediately required and which shall not exceed, for purposes of constituting District Maintenance and Operation Costs for a Fiscal Year that can be paid prior to Debt Service on Outstanding Parity Obligations, the District O&M Reserve Amounts, (for clarity nothing in this clause (c) shall limit the aggregate amount of District O&M Reserve Amounts or the amount of District Net Revenues for a Fiscal Year or any prior Fiscal Year that can be deposited into an operations and maintenance contingency reserve from amounts in the Sewer Fund pursuant to clause (f) of the District Flow of Funds), but excluding, in all cases (i) depreciation, replacement, and obsolescence charges or reserves therefor and amortization of intangibles, (ii) all costs paid from the proceeds of taxes received by the District and (iii) all interest charges and charges for the payment of principal, or amortization, of bonded or other indebtedness of the District, and payments pursuant to a Qualified Swap Agreement. For the avoidance of doubt, “District Maintenance and Operation Costs” includes amounts payable for maintenance and operation under the Joint Powers Agreement, the MOA and equivalent agreements entered into between the District and the Borrower with respect to other projects, but does not include payments made by the District under the Joint Powers Agreement in respect of debt service on notes, bonds or other obligations issued by the District or the Borrower.
“District Net Revenues” for any Fiscal Year means the District Revenues for such Fiscal Year less all District Maintenance and Operation Costs for such Fiscal Year. “District O&M Reserve Amounts” means five percent (5%) of the budgeted District Maintenance and Operations Costs set forth in the then current adopted budget. “District Revenues” means, for each Fiscal Year, all gross income and revenue received by the District from the ownership or operation of the Sewer Enterprise, determined in accordance
10 with GAAP, including (a) all rates, fees, and charges (including connection fees and charges) as received by the District for Sewer Service; (b) amounts transferred into the Sewer Fund from the Rate Stabilization Fund of the District and (c) all other income and revenue howsoever derived by the District from the ownership or operation of the Sewer Enterprise or arising from the Sewer Enterprise, including all income from the deposit or investment of any money in the Sewer Fund or the Rate Stabilization Fund of the District or held on the District’s behalf, minus amounts, if any, withdrawn by the District from District Revenues during such Fiscal Year for deposit in the Rate Stabilization Fund of the District, and minus any moneys derived from refundable deposits and advances or contributions.
“District’s Authorized Representative” means any Person who shall be designated as such pursuant to Section 21 (Obligors’ Authorized Representatives). “Dollars” and “$” means the lawful currency of the United States of America. “Effective Date” means the date of this Agreement.
“Eligible Project Costs” means amounts in the Project Budget approved by the WIFIA Lender, which are paid by or for the account of any Obligor in connection with the Project (including, as applicable, Project expenditures incurred prior to the receipt of WIFIA credit assistance), which shall arise from the following:
(a) development-phase activities, including planning, feasibility analysis (including any related analysis necessary to carry out an eligible project), revenue forecasting, environmental review, permitting, preliminary engineering and design work and other preconstruction activities;
(b) construction, reconstruction, rehabilitation, and replacement activities; (c) the acquisition of real property or an interest in real property (including water rights, land relating to the Project and improvements to land), environmental mitigation (including acquisitions pursuant to Section 33 U.S.C. § 3905(8)), construction contingencies, and acquisition of equipment; or
(d) capitalized interest (with respect to Obligations other than the WIFIA Loan) necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction, provided that Eligible Project Costs must be consistent with all applicable federal law, including the Act.
“Eligible Project Costs Documentation” has the meaning provided in Section 1 (General Requirements) of Exhibit B-1 (Requisition Procedures and Form of Requisition). “EMMA” means the Electronic Municipal Market Access system as described in 1934 Act Release No. 59062 and maintained by the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)1 of the Securities Exchange Act of 1934, as amended, and its successors.
11 “Environmental Laws” has the meaning provided in Section 12(q) (Representations and Warranties of Obligors – Environmental Matters).
“EPA” means the United States Environmental Protection Agency. “Event of Default” has the meaning provided in Section 17(a) (Events of Default and Remedies).
“Event of Loss” means any event or series of events that causes any portion of either System to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever, including through a casualty, a failure of title, or any loss of such property through eminent domain.
“Existing Parity Obligations” means the Obligations listed and described in Part A (Parity Obligations of the City ) and Part B (Parity Obligations of the District ) of Schedule III (Existing Indebtedness).
“Existing Construction Contract” means each Construction Contract with respect to the Project in effect as of the Effective Date and set forth in Part A (Existing Construction Contracts) of SCHEDULE V (Construction Contracts).
“Existing Subordinated Obligations” means the Obligations listed and described in Part C ( Subordinated Obligations of the City ) and Part D ( Subordinated Obligations of the District) of Schedule III (Existing Indebtedness).
“Federal Fiscal Year” means the fiscal year of the Government, which is the twelve (12) month period that ends on September 30 of the specified calendar year and begins on October 1 of the preceding calendar year.
“Federal Securities” means any (a) direct general obligations of the Government (including obligations issued or held in book entry form on the books of the Department of the Treasury of the Government), the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the Government; and (b) obligations of any agency, department or instrumentality of the Government the timely payment of principal of and interest on which are fully guaranteed by the Government.
“Final Disbursement Date” means the earliest of (a) the date on which the WIFIA Loan has been disbursed in full; (b) the last anticipated date of disbursement set forth in the then-current WIFIA Loan Disbursement Schedule; (c) the date on which the Borrower has certified to the WIFIA Lender that it will not request any further disbursements under the WIFIA Loan; (d) the date on which the WIFIA Lender terminates its obligations relating to disbursements of any undisbursed amounts of the WIFIA Loan in accordance with Section 17 (Events of Default and Remedies); and (e) the date that is one (1) year after the Substantial Completion Date. “Final Maturity Date” means the earlier of (a) July 1, 2064 (or such earlier date as is set forth in an updated SCHEDULE VI (WIFIA Loan Amortization Schedule) pursuant to Section 8(d) (Payment of Principal and Interest – Adjustments to WIFIA Loan Amortization
12 Schedule)); and (b) the Principal Payment Date immediately preceding the date that is thirty-five (35) years following the Substantial Completion Date.
“Financial Statements” has the meaning provided in Section 12(u) (Representations and Warranties of Obligors – Financial Statements).
“Fiscal Year” means, with respect to any Obligor (a) a fiscal year of such Obligor commencing on July 1 of any calendar year and ending on June 30 of the immediately succeeding calendar year or (b) such other fiscal year as such Obligor may hereafter adopt after giving thirty (30) days’ prior written notice to the WIFIA Lender in accordance with Section 15(i) (Negative Covenants – Fiscal Year).
“Flows of Funds” means, together, the City Flow of Funds and the District Flow of Funds. “Funds and Accounts” means the WIFIA Debt Service Account, the Rate Stabilization Funds and the Revenue Funds.
“GAAP” means generally accepted accounting principles for U.S. state and local governments, as established by the Government Accounting Standards Board (or any successor entity with responsibility for establishing accounting rules for governmental entities), in effect from time to time in the United States of America.
“Government” means the United States of America and its departments and agencies. “Governmental Approvals” means all authorizations, consents, approvals, waivers, exceptions, variances, filings, permits, orders, licenses, exemptions and declarations of or with any Governmental Authority.
“Governmental Authority” means any federal, state, provincial, county, city, town, village, municipal or other government or governmental department, commission, council, court, board, bureau, agency, authority or instrumentality (whether executive, legislative, judicial, administrative or regulatory), of or within the United States of America or its territories or possessions, including the State and its counties and municipalities, and their respective courts, agencies, instrumentalities and regulatory bodies, or any entity that acts “on behalf of” any of the foregoing, whether as an agency or authority of such body. “Indemnitee” has the meaning provided in Section 32 (Indemnification). “Independent Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by a Member, and who, or each of whom (a) is in fact independent and not under domination of such Member, (b) does not have any substantial interest, direct or indirect, in such Member and (c) is not connected with such Member as an officer or employee of such Member but who may be regularly retained to make annual or other audits of the books of or reports to such Member.
“Initial Disbursement Date” means the date of the first disbursement of the WIFIA Loan.
13 “Insolvency Laws” means the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., as from time to time amended and in effect, and any state bankruptcy, insolvency, receivership, conservatorship or similar law now or hereafter in effect. “Interest Payment Date” means each January 1 and July 1. “Interim Financing” means interim bond anticipation notes, commercial paper or other short-term temporary financing, in each case with a maturity not later than five (5) years following the issuance or incurrence thereof.
“Investment Grade Rating” means a rating of ‘BBB-,’ ‘Baa3,’ ‘bbb-,’ ‘BBB (low),’ or higher, from a Nationally Recognized Rating Agency.
“Issuing Instrument” means any indenture, trust agreement, loan agreement or other instrument or agreement under which Obligations are issued. “Joint Powers Agreement” has the meaning provided in the recitals hereto. “Lien” means any mortgage, pledge, hypothecation, assignment, mandatory deposit arrangement, encumbrance, attachment, lien (statutory or other), charge or other security interest, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including any sale-leaseback arrangement, any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of the foregoing, and the filing of any financing statement or similar instrument under the UCC or any other applicable law.
“Loss Proceeds” means any proceeds of builders’ risk or casualty insurance (other than any proceeds from any policy of business interruption insurance insuring against loss of revenues upon the occurrence of certain casualties or events covered by such policy of insurance) or proceeds of eminent domain proceedings resulting from any Event of Loss. “Maintenance and Operation Costs” means (a) with respect to the City, the City Maintenance and Operation Costs, and (b) with respect to the District, the District Maintenance and Operation Costs.
“Material Adverse Effect” means a material adverse effect on (a) the System, the Project, either Member’s Net Revenues or the Authority Revenues, (b) the business, operations, properties, condition (financial or otherwise) or prospects of any Obligor, (c) the legality, validity or enforceability of any material provision of any WIFIA Loan Document, (d) the ability of any Obligor to enter into, perform or comply with any of its material obligations under any WIFIA Loan Document, (e) the validity, enforceability or priority of the Liens provided under the WIFIA Loan Documents on the Net Revenues or the Authority Revenues or (f) the WIFIA Lender’s rights or remedies available under any WIFIA Loan Document.
“Maximum Annual Debt Service” means, with respect to any Member, the maximum amount of Debt Service due on any Outstanding Parity Obligations in any Fiscal Year during the period commencing with the Fiscal Year for which such calculation is made and within the next
14 five (5) years in which Debt Service for such Outstanding Parity Obligations of such Member will become due.
“Members” has the meaning provided in the preamble hereto. “MOA” has the meaning provided in the recitals hereto.
“Nationally Recognized Rating Agency” means any nationally recognized statistical rating organization identified as such by the Securities and Exchange Commission. “NEPA” means the National Environmental Policy Act of 1969, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time.
“NEPA Determination” means the Record of Decision for the Project issued by EPA on July 8, 2025 in accordance with NEPA.
“Net Loss Proceeds” means Loss Proceeds after excluding any proceeds of delay-in-start- up insurance and proceeds covering liability of a Member to third parties. “Net Revenues” means (a) collectively, the City Net Revenues and the District Net Revenues, (b) with respect to the City only, the City Net Revenues and (c) with respect to the District only, the District Net Revenues.
“Obligations” means, with respect to a Member, the following obligations payable from or secured by Net Revenues: (a) obligations with respect to borrowed money and includes loans or other evidences of indebtedness, installment purchase payments under any contract, and lease payments under any financing or capital lease (determined to be such in accordance with GAAP), which are payable from such Member’s Revenue Fund; (b) obligations to replenish any debt service reserve fund with respect to obligations of such Member described in clause (a) of this definition; (c) obligations secured by or payable from any of obligations of such Member described in clause (a) of this definition; (d) obligations payable from such Member’s Revenue Fund and entered into in connection with, relating to, or otherwise serving as a hedge with respect to, an obligation described in clauses (a), (b) or (c) of this definition under (i) any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, (ii) any contract of such Member to exchange cash flows or a series of payments, or (iii) any contract of such Member to hedge payment, currency, rate spread or similar exposure, including but not limited to interest rate swap agreements and interest rate cap agreements; and (e) Credit Provider Reimbursement Obligations of such Member. “Obligors” has the meaning provided in the preamble hereto. “OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Operating Period Servicing Fee” has the meaning set forth in Section 10(a)(iii) (Fees and Expenses – Fees).
15 “Organizational Documents” means, with respect to any Obligor: (a) the constitutional and statutory provisions that are the basis for the existence and authority of such Obligor, including any enabling statutes, ordinances or public charters and any other organic laws establishing such Obligor and (b) the resolutions, bylaws, code of regulations, operating procedures or other organizational documents (including any amendments, modifications or supplements thereto) of or adopted by such Obligor by which such Obligor, its powers, operations or procedures or its securities, bonds, notes or other obligations are governed or from which such powers are derived. “Outstanding” means any Obligation that has not been discharged under the terms of the Issuing Instrument.
“Outstanding WIFIA Loan Balance” means (a) the aggregate principal amount of the WIFIA Loan drawn by the Borrower minus (b) the aggregate principal amount of the WIFIA Loan repaid by the Borrower, as determined in accordance with Section 8(d) (Payment of Principal and Interest – Adjustments to WIFIA Loan Amortization Schedule). “Parity Obligations” means (a) the Authority Bond Payments, (b) the Existing Parity Obligations and (c) any Additional Parity Obligations.
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, and all regulations promulgated thereunder.
“Payment Date” means each Interest Payment Date and each Principal Payment Date. “Payment Default” has the meaning provided in Section 17(a)(i) (Events of Default and Remedies – Payment Default).
“Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:
(a) Federal Securities;
(b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities only as stripped by the agency itself): (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgaged-backed securities and senior debt obligations of the Federal National Mortgage Association; and (iv) consolidated system-wide bonds and notes of the Farm Credit System;
(c) money market mutual funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AAm-G or AAm;
(d) certificates of deposit, demand deposits, time deposits, other deposit products, interest bearing deposits, interest bearing money market accounts, overnight bank deposits, trust funds, trust accounts and bankers’ acceptances which have a maturity not greater
16 than one (1) year from the date of investment and which are issued by commercial banks, savings and loan associations or mutual savings banks whose short-term obligations are rated “A-1+” or better by S&P;
(e) certificates of deposit, savings accounts, deposit accounts or money market deposits, other deposit products, trust funds, trust accounts, overnight bank deposits, interest bearing deposits, interest bearing money market accounts and bankers’ acceptances issued by banks having reported capital and surplus of at least $15,000,000; (f) commercial paper having original maturities of not more than twenty- seven (27) days, rated at the time of investment “A-1+” or better by S&P at the time of purchase; (g) direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least “A-” by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured obligation debt is so rated;
(h) direct general short-term obligations of any state or state agency or subdivision or agency thereof described in paragraph (g) above and rated at least “A-1+” by S&P; (i) federal funds or bankers’ acceptances with a maximum term of one (1) year of any bank or bank deposit products with an unsecured, uninsured and unguaranteed obligation rating of at least “A-1+” by S&P;
(j) any investment agreement (including guaranteed investment contracts, forward delivery agreements, repurchase agreements or similar obligations) with, or guaranteed by, an entity the long-term unsecured obligations or the claims paying ability of which are rated A or better by a Nationally Recognized Rating Agency (without regard to gradations or modifiers within such category) at the time of initial investment; (k) the Local Agency Investment Fund which is administered by the California Treasurer for the investment of funds belonging to local agencies within the State; and (l) any other investment permitted by law.
“Permitted Liens” means:
(a) Liens imposed pursuant to the WIFIA Loan Documents and the other Issuing Instruments;
(b) Liens imposed by law, including Liens for taxes that are not yet due or are being contested in compliance with Section 14(k) (Affirmative Covenants – Material Obligations; Payment of Claims);
(c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations
17 that are not overdue by more than thirty (30) days or are being contested in compliance with Section 14(k) (Affirmative Covenants – Material Obligations; Payment of Claims); (d) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance, and other social security laws or regulations;
(e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(f) judgment Liens in respect of judgments that do not constitute an Event of Default under Section 17(a)(vi) (Events of Default and Remedies – Material Adverse Judgment); and
(g) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that, in any case, do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of any Obligor. “Person” means and includes an individual, a general or limited partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and any Governmental Authority.
“Principal Payment Date” means each July 1.
“Project” means the Vista Grande Drainage Basin Improvement project, located in City of Daly City, California, and consists of improvements to the regional stormwater drainage system infrastructure to manage flooding and enhance stormwater discharges to the Pacific Ocean. “Project Budget” means the budget for the Project attached to this Agreement as Schedule I (Project Budget) showing a summary of Total Project Costs with a breakdown of all Eligible Project Costs and the estimated sources and uses of funds for the Project. “Projected Substantial Completion Date” means August 22, 2029, as such date may be adjusted in accordance with Section 16(d) (Reporting Requirements – Construction Reporting). “Public Benefits Report” has the meaning provided in Section 16(e) (Reporting Requirements – Public Benefits Report).
“Qualified Swap Agreement” means a contract or agreement, payable from Net Revenues on a parity with the payment of Parity Obligations and satisfying the conditions of Section 15(c)(i) (Negative Covenants – Issuance of Parity Obligations), intended to place Parity Obligations or the applicable investments on the interest rate, currency, cash flow or other basis desired by a Member, including any interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract, any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, any contract to exchange cash flows or a series of payments, or any contract, including an interest rate floor or
18 cap, or an option, put or call, to hedge payment, currency, rate, spread or similar exposure, between either Member and a counterparty.
“Rate Covenant” means the requirements specified in Section 14(a)(i) (Affirmative Covenants – Rate Covenant).
“Rate Stabilization Fund” means (a) with respect to the City, the rate stabilization fund of the City established pursuant to Section 12 of the WIFIA City FA, and (b) with respect to the District, the rate stabilization fund of the District established pursuant to Section 12 of the WIFIA District FA.
“Refunding Parity Obligations” means Parity Obligations issued for the purpose of refunding all or any portion of the Outstanding Parity Obligations and satisfying the conditions set forth in Section 15(c)(iii) (Negative Covenants – Issuance of Parity Obligations). “Related Documents” means the WIFIA Loan Documents and the Issuing Instruments. “Requisition” has the meaning provided in Section 4(a) (Disbursement Conditions; Quarterly Approval of Eligible Project Costs).
“Revenues” means (a) collectively, the City Revenues and the District Revenues, (b) with respect to the City only, the City Revenues and (c) with respect to the District only, the District Revenues.
“Revenue Fund” means (a) with respect to the City, the Water Fund and (b) with respect to the District, the Sewer Fund. The Water Fund and the Sewer Fund, together, are referred to as the “Revenue Funds.”
“Sanctioned Country” means, at any time, a country or territory which is itself the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country, or (c) any Person owned or controlled by any such Person or Persons.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered, or enforced from time to time by the Government, including those administered by OFAC or the U.S. Department of State.
“Sanctions Laws” means collectively, any applicable anti-drug trafficking, anti-terrorism, anti-money laundering, anti-bribery, or anti-corruption laws or regulations, as applicable, including those contained in the Bank Secrecy Act and the Patriot Act. “Servicer” means such entity or entities as the WIFIA Lender shall designate from time to time to perform, or assist the WIFIA Lender in performing, certain duties hereunder.
19 “Servicing Fee” means the Servicing Set-Up Fee and any Construction Period Servicing Fee or Operating Period Servicing Fee.
“Servicing Set-Up Fee” has the meaning set forth in Section 10(a)(i) (Fees and Expenses – Fees).
“Sewer Enterprise” means the whole and each and every part of the existing sanitary sewage system of the District comprising all facilities for the wastewater collection, transport, treatment, storage and disposal facilities, together with all additions, betterments, extensions and improvements thereto or any part thereof hereafter acquired or constructed, including the Project. “Sewer Fund” means the fund established and held by the District with respect to the Sewer Enterprise for the receipt and deposit of District Revenues. “Sewer Service” means the service made available or provided by the Sewer Enterprise. “SIFMA Index” means The Securities Industry and Financial Markets Association Index as of the most recent date for which such index was published or such other weekly, high-grade index comprised of seven-day, Tax-Exempt variable rate demand notes produced by Municipal Market Data, or its successor, or as otherwise designated by The Securities Industry and Financial Markets Association; provided that if such index is no longer produced by Municipal Market Data, or its successors, then “SIFMA Index” shall mean such other reasonably comparable index selected by the applicable Member.
“Sinking Fund Installment” means, with respect to any Term Parity Obligations, each amount so designated for such Term Parity Obligations in the Issuing Instrument authorizing the issuance of such Parity Obligations requiring payments by a Member from its Revenue Fund to be applied to the retirement of such Parity Obligations on and prior to the stated maturity date thereof. “SOFR” means the Secured Overnight Financing Rate.
“State” has the meaning provided in the preamble hereto. “Subordinated Obligations” means the Existing Subordinated Obligations and any Additional Subordinated Obligations.
“Substantial Completion” means, with respect to the Project, the stage at which the Project is able to perform the functions for which the Project is designed. “Substantial Completion Date” means the date on which the Members (or the City on behalf of the Members) certify to the WIFIA Lender, with evidence satisfactory to the WIFIA Lender, that Substantial Completion has occurred.
“System” means (a) with respect to the City, the Water Enterprise and (b) with respect to the District, the Sewer Enterprise. The Sewer Enterprise and the Water Enterprise, together, are referred to as the “Systems.”
“S&P” means Standard & Poor’s Ratings Services, its successors and assigns.
20 “Tax-Exempt” means, with respect to interest on any obligations of a state or local government, that such interest is excluded from the gross income of the holders thereof (other than any holder who is a “substantial user” of facilities financed with such obligations or a “related person” within the meaning of Section 147(a) of the Code) for federal income tax purposes, whether or not such interest is includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax under the Code.
“Technical and Rate Consultant” means a single individual or firm, or a combination of one or more individuals or firms, not related to any Obligor and considered independent with respect to each Obligor (i.e. not an employee of any Obligor or any affiliate of any Obligor) authorized to do business in and qualified to practice in the areas required to provide the services required of the Technical and Rate Consultant, that together have expertise in the technical requirements for operation and maintenance of systems similar in size and scope to the Systems and delivering the services provided by the Systems, and establishing rates and charges for governmental water or wastewater systems similar in size and scope to the Systems, selected by a Member and reasonably acceptable to the WIFIA Lender.
“Term Obligations” means Obligations that are payable on or before their specified maturity dates from Sinking Fund Installments established for that purpose and calculated to retire such Obligations on or before their specified maturity dates. “Term Parity Obligations” means Term Obligations that are Parity Obligations. “Total Project Costs” means (a) the costs paid or incurred or to be paid or incurred by the Obligors in connection with or incidental to the acquisition, design, construction and equipping of the Project, including legal, administrative, engineering, planning, design, insurance and financing (including costs of issuance); (b) amounts, if any, required by any WIFIA Loan Document or Issuing Instrument to be paid into any fund or account upon the incurrence of the WIFIA Loan or any other Obligation, in each case in respect of the Project; (c) payments when due (whether at the maturity of principal, the due date of interest, or upon optional or mandatory prepayment) in respect of any indebtedness of any Obligor in connection with the Project (other than the WIFIA Loan); and (d) costs of equipment and supplies and initial working capital and reserves required by the Obligors for the commencement of operation of the Project, including general administrative expenses and overhead of the Obligors.
“UEI Number” means, with respect to any Person, a Unique Entity Identifier number issued by the Federal Government (including through SAM.gov) as the unique entity identifier for such Person.
“Uncontrollable Force” means any cause beyond the control of the Obligors, including:
(a) a hurricane, tornado, flood or similar occurrence, landslide, earthquake, fire or other casualty, strike or labor disturbance, freight embargo, act of a public enemy, explosion, war, blockade, terrorist act, insurrection, riot, general arrest or restraint of government and people, civil disturbance or similar occurrence, sabotage, pandemic or act of God (provided that no Obligor shall be required to settle any strike or labor disturbance in which it may be involved) or (b) the order or judgment of any federal, state or local court, administrative agency or governmental
21 officer or body, if it is not also the result of willful or negligent action or a lack of reasonable diligence of any Obligor and no Obligor controls the administrative agency or governmental officer or body; provided that the diligent contest in good faith of any such order or judgment shall not constitute or be construed as a willful or negligent action or a lack of reasonable diligence of an Obligor.
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code, as in effect from time to time in the State.
“Updated Financial Model” means the Base Case Financial Model, updated in accordance with Section 16(a) (Reporting Requirements – Updated Financial Model). “Water Enterprise” means all water collection, pumping, transport, treatment, storage, and disposal facilities, including land and easements thereof, owned by the City, including the Project, and all other properties, structures, or works hereafter acquired and constructed by the City and determined to be a part of the Water Enterprise, together with all additions, betterments, extensions, or improvements to such facilities, properties, structures, or works, or any part thereof hereafter acquired and constructed.
“Water Fund” means the fund or funds established and held by the City with respect to the Water Enterprise for the receipt and deposit of City Revenues. “WIFIA” has the meaning provided in the recitals hereto. “WIFIA Bond” means the bond issued and delivered by the Borrower in substantially the form of Exhibit A (Form of WIFIA Bond).
“WIFIA Borrower Resolution” means Resolution No. __, adopted by the board of the Borrower on [], 2026, authorizing the execution and delivery of this Agreement, the WIFIA Bond and the WIFIA FAs, and certain related actions by the Borrower in connection with the issuance of the WIFIA Loan.
“WIFIA City FA” means that certain Financing Agreement, dated as of the date hereof, by and between the City and the Borrower with respect to the Project. “WIFIA City Resolution” means Resolution No.__, adopted by the City Council of the City on [], 2026, authorizing the execution and delivery of this Agreement and the City FA and certain related actions by the City in connection with the issuance of the WIFIA Loan. “WIFIA CUSIP Number” has the meaning provided in Section 11(a)(vi)(F) (Conditions Precedent to Effectiveness).
“WIFIA Debt Service” means with respect to any Payment Date occurring on or after the Debt Service Payment Commencement Date, the principal portion of the Outstanding WIFIA Loan Balance and any interest payable on such Outstanding WIFIA Loan Balance (including interest accruing after the date of any filing by the Borrower of any petition in bankruptcy or the commencement of any bankruptcy, insolvency or similar proceeding with respect to the Borrower), in each case, (a) as set forth on the WIFIA Loan Amortization Schedule and (b) due
22 and payable on such Payment Date in accordance with the provisions of Section 8(a) (Payment of Principal and Interest – Payment of WIFIA Debt Service). “WIFIA Debt Service Account” means the debt service account of the Borrower established and maintained pursuant to Section 14(i) (Affirmative Covenants – WIFIA Debt Service Account).
“WIFIA District FA” means that certain Financing Agreement, dated as of the date hereof, by and between the District and the Borrower with respect to the Project. “WIFIA District Resolution” means Resolution No. __, adopted by the board of the District on [], 2026, authorizing the execution and delivery of this Agreement and the WIFIA District FA and certain related actions by the District in connection with the issuance of the WIFIA Loan.
“WIFIA FAs” means, together, the WIFIA City FA and the WIFIA District FA. “WIFIA Interest Rate” has the meaning provided in Section 6 (Interest Rate). “WIFIA Lender” has the meaning provided in the preamble hereto. “WIFIA Lender’s Authorized Representative” means the Administrator and any other Person who shall be designated as such pursuant to Section 22 (WIFIA Lender’s Authorized Representative).
“WIFIA Loan” means the secured loan made by the WIFIA Lender to the Borrower on the terms and conditions set forth herein, pursuant to the Act, in a principal amount not to exceed $33,890,228, to be used in respect of Eligible Project Costs. “WIFIA Loan Amortization Schedule” means the loan amortization schedule reflected in SCHEDULE VI (WIFIA Loan Amortization Schedule), as adjusted from time to time in accordance with Section 8(d) (Payment of Principal and Interest – Adjustments to WIFIA Loan Amortization Schedule).
“WIFIA Loan Disbursement Schedule” means the disbursement schedule set forth in SCHEDULE VI (WIFIA Loan Amortization Schedule), reflecting the anticipated disbursement of proceeds of the WIFIA Loan, as such schedule may be adjusted from time to time pursuant to Section 4(b) (Disbursement Conditions; Quarterly Approval of Eligible Project Costs). “WIFIA Loan Documents” means this Agreement, the WIFIA Bond, the WIFIA FAs and the WIFIA Resolutions.
“WIFIA Resolutions” means, collectively, the WIFIA City Resolution, the WIFIA District Resolution and the WIFIA Borrower Resolution.
Section 2. Interpretation.
23 (a) Unless the context shall otherwise require, the words “hereto,” “herein,” “hereof” and other words of similar import refer to this Agreement as a whole. (b) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders and vice versa. (c) Words importing the singular number shall include the plural number and vice versa unless the context shall otherwise require.
(d) The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”
(e) Whenever an Obligor’s knowledge is implicated in this Agreement or the phrase “to any Obligor’s knowledge” or a similar phrase is used in this Agreement, such Obligor’s knowledge or such phrase(s) shall be interpreted to mean to the best of such Obligor’s knowledge after reasonable and diligent inquiry. Unless the context shall otherwise require, references to any Person shall be deemed to include such Person’s successors and permitted assigns. (f) Unless the context shall otherwise require, references to preambles, recitals, sections, subsections, clauses, schedules, exhibits, appendices and provisions are to the applicable preambles, recitals, sections, subsections, clauses, schedules, exhibits, appendices and provisions of this Agreement.
(g) The schedules and exhibits to this Agreement, and the appendices and schedules to such exhibits, are hereby incorporated by reference and made an integral part of this Agreement.
(h) The headings or titles of this Agreement and its sections, schedules or exhibits, as well as any table of contents, are for convenience of reference only and shall not define or limit its provisions.
(i) Unless the context shall otherwise require, all references to any resolution, contract, agreement, lease or other document shall be deemed to include any amendments or supplements to, or modifications or restatements or replacements of, such documents that are approved from time to time in accordance with the terms thereof and hereof. (j) Every request, order, demand, application, appointment, notice, statement, certificate, consent or similar communication or action hereunder by any party shall, unless otherwise specifically provided, be delivered in writing in accordance with Section 31 (Notices) and signed by a duly authorized representative of such party. (k) References to “disbursements of WIFIA Loan proceeds” or similar phrasing shall be construed as meaning the same thing as “paying the purchase price of the WIFIA Bond.” (l) Whenever this Agreement requires a change in principal amount, interest rate or amortization schedule of the WIFIA Loan, it is intended that such change be reflected in the WIFIA Bond. Whenever there is a prepayment of the WIFIA Loan, it is intended that such prepayment be implemented through a prepayment of the WIFIA Bond.
24 (m) Whenever this Agreement sets forth a time period for a number of days by when a deliverable must be provided or an action must be taken, such time period shall be computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months.
ARTICLE II
THE WIFIA LOAN
Section 3. WIFIA Loan Amount. The principal amount of the WIFIA Loan shall not exceed $33,890,228. WIFIA Loan proceeds available to be drawn shall be disbursed from time to time in accordance with Section 4 (Disbursement Conditions; Quarterly Approval of Eligible Project Costs) and Section 11(b) (Conditions Precedent – Conditions Precedent to Disbursements).
Section 4. Disbursement Conditions; Quarterly Approval of Eligible Project Costs. (a) WIFIA Loan proceeds shall be disbursed solely in respect of Eligible Project Costs paid or incurred and approved for payment by or on behalf of an Obligor in connection with the Project, including for the purpose of paying or redeeming, in whole or in part, amounts owed by the Borrower under an Interim Financing the proceeds of which were applied to pay Eligible Project Costs. Each disbursement of the WIFIA Loan shall be made pursuant to a requisition and certification (a “Requisition”) in the form set forth in Appendix 1 (Form of Requisition) to Exhibit B-1 (Requisition Procedures and Form of Requisition), along with all documentation and other information required thereby, submitted by the Obligors (or the City on behalf of the Obligors) to, and approved by, the WIFIA Lender, all in accordance with the procedures of Exhibit B-1 (Requisition Procedures and Form of Requisition) and subject to the requirements of this Section 4 (Disbursement Conditions; Quarterly Approval of Eligible Project Costs) and the conditions set forth in Section 11(b) (Conditions Precedent – Conditions Precedent to Disbursements); provided that no disbursements of WIFIA Loan proceeds shall be made after the Final Disbursement Date.
(b) Subject to this Section 4 (Disbursement Conditions; Quarterly Approval of Eligible Project Costs), any scheduled disbursement (as reflected in the WIFIA Loan Disbursement Schedule) that remains undrawn as of its scheduled date shall automatically be available for the next scheduled disbursement date, up to the Final Disbursement Date, with the effect of automatically updating the WIFIA Loan Disbursement Schedule (and the WIFIA Loan Amortization Schedule) without need for the WIFIA Lender's approval. The Borrower may also propose adjustments to the WIFIA Loan Disbursement Schedule by submitting a revised version thereof to the WIFIA Lender no later than thirty (30) days prior to the proposed effective date of such adjustment, together with a detailed explanation of the reasons for such revisions. Such revised WIFIA Loan Disbursement Schedule shall become effective upon the WIFIA Lender's approval thereof, which approval shall be deemed granted if the WIFIA Lender has not objected within thirty (30) days from receipt of the revised schedule, and which approval shall have the effect of updating the WIFIA Loan Amortization Schedule to reflect the updated WIFIA Loan Disbursement Schedule.
25 Section 5. Term. The term of the WIFIA Loan shall extend from the Effective Date to the Final Maturity Date or to such earlier date as all amounts due or to become due to the WIFIA Lender hereunder have been irrevocably paid in full in immediately available funds.
Section 6. Interest Rate. The interest rate with respect to the Outstanding WIFIA Loan Balance (the “WIFIA Interest Rate”) shall be [] and [] hundredths percent ([]%) per annum.
Interest shall (a) accrue on the WIFIA Loan commencing on the date of the first disbursement of the WIFIA Loan, (b) be payable commencing on the Debt Service Payment Commencement Date and (c) be computed on the Outstanding WIFIA Loan Balance on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months; provided that, upon the occurrence of an Event of Default, the Borrower shall pay interest on the Outstanding WIFIA Loan Balance at the Default Rate, (i) in the case of any Payment Default, from (and including) its due date to (but excluding) the date of actual payment and (ii) in the case of any other Event of Default, from (and including) the date of such occurrence to (but excluding) the earlier of the date on which (A) such Event of Default has been cured or waived (if applicable) in accordance with the terms of this Agreement and (B) the Outstanding WIFIA Loan Balance, and all fees and expenses with respect thereto, has been irrevocably paid in full in immediately available funds.
Section 7. Security and Priority; Flows of Funds.
(a) Pursuant to the WIFIA FAs, as security for the Authority Bond Payments, and concurrently with the issuance and delivery of this Agreement, the Members have pledged and assigned to the Borrower for its benefit, Liens on the Net Revenues. The Liens on the Net Revenues to secure the Authority Bond Payments shall be (i) pari passu in right of payment and right of security with the Liens on the Net Revenues in favor of all other Parity Obligations and (ii) senior in right of payment and right of security to the Liens on the Net Revenues in favor of the Subordinated Obligations. The obligations of the Members to make their respective Authority Bond Payments constitute Parity Obligations.
(b) Except for Permitted Liens, the Net Revenues will be free and clear of any pledge, Lien, charge or encumbrance thereon or with respect thereto that is of equal rank with or senior to the pledges of the Members created under the WIFIA FAs for the benefit of the Borrower; provided that no Lien on the Net Revenues created pursuant to any Issuing Instrument shall be senior to the Lien on the Net Revenues created under the WIFIA FAs for the benefit of the Borrower. All organizational, regulatory or other necessary action on the part of the Obligors with respect to the foregoing has been duly and validly taken. (c) As security for the WIFIA Loan, the Borrower hereby unconditionally pledges and assigns to the WIFIA Lender and grants to the WIFIA Lender Liens for its benefit on (i) all of the Authority Revenues, (ii) all of the right, title and interest (but none of the obligations) of the Borrower in the WIFIA FAs and (iii) the WIFIA Debt Service Account. The Members hereby consent to such pledge, assignment and grant. Notwithstanding anything in this Agreement or any other WIFIA Loan Document to the contrary, the Borrower does not and shall not assign, and the WIFIA Lender does not and shall not assume, any obligation, duty or liability of the Borrower under either WIFIA FA. The WIFIA Loan is and shall be secured by the Liens on the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account. The Authority Revenues, the right, title and interest of the Borrower in the
26 WIFIA FAs and the WIFIA Debt Service Account shall be free and clear of any pledge, Lien, charge or encumbrance thereon or with respect thereto other than the Liens with respect to the WIFIA Loan.
(d) The Members shall not use any Revenues to make any payments or satisfy any obligations other than in accordance with the provisions of this Section 7 (Security and Priority; Flows of Funds) and the Related Documents and shall not apply any portion of the Revenues in contravention of this Agreement or the other Related Documents. (e) The Borrower shall not use any Authority Revenues, including any amounts on deposit in the WIFIA Debt Service Account, to make any payments or satisfy any obligations other than the payment of WIFIA Debt Service and other amounts payable to the WIFIA Lender hereunder and under the WIFIA Bond.
(f) Each Member’s Revenues shall, immediately upon receipt thereof, be deposited by such Member into its respective Revenue Fund. Amounts deposited in the Revenue Funds shall be applied in the order of priority described in, and in accordance with, the Flows of Funds.
Section 8. Payment of Principal and Interest.
(a) Payment of WIFIA Debt Service.
(i) Pursuant to the WIFIA FAs, not later than each Authority Bond Payment Date, each Member shall, from moneys in its respective Revenue Fund, transfer to the WIFIA Debt Service Account the Authority Bond Payment due and payable on such Authority Bond Payment Date. All Authority Bond Payments shall be paid directly by the Members to the WIFIA Debt Service Account for the benefit of the WIFIA Lender. All Authority Bond Payments and any other amounts deposited into the WIFIA Debt Service Account shall be held by the Borrower in trust for the benefit of the WIFIA Lender until the immediately succeeding Payment Date, whereupon such money shall be applied to the payment of WIFIA Debt Service. The obligations of each Member to make its respective Authority Bond Payments shall survive any withdrawal by either Member as a member of the Borrower.
(ii) No WIFIA Debt Service shall be due or payable prior to the Debt Service Payment Commencement Date. On each Payment Date occurring on or after the Debt Service Payment Commencement Date, the Borrower shall pay WIFIA Debt Service by making (A) semi-annual payments of interest on each Interest Payment Date, (B) annual payments of principal on each Principal Payment Date, and (C) payments of any other amounts on each other date on which payment thereof is required to be made hereunder (including the Final Maturity Date and any date on which payment is due by reason of the acceleration of the maturity of the WIFIA Loan or otherwise); provided that if any such date is not a Business Day, payment shall be made on the next Business Day following such date. Payments of WIFIA Debt Service shall be made in the amounts and on the Payment Dates as set forth in the WIFIA Loan Amortization Schedule, as the same may be revised pursuant to Section 8(d) (Payment of Principal and Interest – Adjustments to Loan
27 Amortization Schedule), and shall be calculated by the WIFIA Lender in such manner that the Outstanding WIFIA Loan Balance is reduced to $0 on the Final Maturity Date. (iii) Notwithstanding anything herein to the contrary, the Outstanding WIFIA Loan Balance and any accrued interest thereon shall be due and payable in full on the Final Maturity Date (or on any earlier date on which the maturity of the WIFIA Loan and WIFIA Bond has been accelerated pursuant to the terms hereof). (b) WIFIA Bond. As evidence of the Borrower’s obligation to repay the WIFIA Loan, the Borrower shall issue and deliver to the WIFIA Lender, on or prior to the Effective Date, the WIFIA Bond substantially in the form of Exhibit A (Form of WIFIA Bond), having a maximum principal amount of $33,890,228, bearing interest at the WIFIA Interest Rate and having principal and interest payable on the same dates set forth herein. Any payment in respect of the WIFIA Bond shall be treated as a payment in respect of the WIFIA Loan and any prepayment of principal in respect of the WIFIA Loan shall be treated as a redemption in respect of the WIFIA Bond.
(c) Manner of Payment. Payments under this Agreement (and the WIFIA Bond, which payments shall not be duplicative) shall be made by wire transfer on or before each Payment Date in Dollars and in immediately available funds (without counterclaim, offset or deduction) in accordance with the payment instructions provided by the WIFIA Lender prior to the relevant payment, as may be modified in writing from time to time by the WIFIA Lender; provided that the failure to provide updated payment instructions shall not affect in any manner the Borrower’s obligations hereunder or under any other WIFIA Loan Document. The Borrower shall make any such payment with funds then on deposit in the WIFIA Debt Service Account in accordance with the terms of this Agreement.
(d) Adjustments to WIFIA Loan Amortization Schedule.
(i) The Outstanding WIFIA Loan Balance will be (A) increased on each occasion on which the WIFIA Lender disburses WIFIA Loan proceeds hereunder, by the amount of such disbursement of loan proceeds; and (B) decreased upon each payment or prepayment of the Outstanding WIFIA Loan Balance, by the amount of principal so paid.
The WIFIA Lender may in its discretion at any time and from time to time, or when so requested by an Obligor, advise such Obligor by written notice of the amount of the Outstanding WIFIA Loan Balance as of the date of such notice. The WIFIA Lender’s determination of such amount in any such notice shall be deemed conclusive absent manifest error. WIFIA Loan proceeds borrowed and repaid may not be reborrowed. (ii) The WIFIA Lender is hereby authorized to modify the WIFIA Loan Amortization Schedule, in accordance with the principles set forth below in this Section 8(d) (Payment of Principal and Interest – Adjustments to WIFIA Loan Amortization Schedule), to reflect (A) any change to the Outstanding WIFIA Loan Balance, (B) any change to the date and amount of any principal or interest due and payable or to become due and payable by the Borrower under this Agreement, and (C) such other information as the WIFIA Lender may determine is necessary for administering the WIFIA Loan and this Agreement. Any calculations described above shall be rounded up to the
28 nearest whole cent. Any adjustments or revisions to the WIFIA Loan Amortization Schedule as a result of changes in the Outstanding WIFIA Loan Balance shall be applied to reduce future payments due on the WIFIA Bond pro rata across all principal payments remaining. Absent manifest error, the WIFIA Lender’s determination of such matters as set forth in SCHEDULE VI (WIFIA Loan Amortization Schedule) shall be conclusive evidence thereof; provided that neither the failure to make any such recordation nor any error in such recordation shall affect in any manner the Obligors’ obligations hereunder or under any other WIFIA Loan Document. The WIFIA Lender shall provide the Obligors with a copy of SCHEDULE VI (WIFIA Loan Amortization Schedule) as revised pursuant to this Section 8(d)(ii) (Payment of Principal and Interest – Adjustments to WIFIA Loan Amortization Schedule), but no failure to provide or delay in providing the Obligors with such copy shall affect any of the obligations of the Obligors under this Agreement or the other WIFIA Loan Documents.
(iii) Any Obligor shall have the right to propose adjustments to the WIFIA Loan Amortization Schedule exercisable once on or prior to the date that is one hundred twenty (120) days preceding the first Principal Payment Date, such adjustments to be submitted by such Obligor to the WIFIA Lender in the form of an updated WIFIA Loan Amortization Schedule, together with (A) an explanation setting out the reason for such proposed adjustments (such as material unforeseen changes to the Project schedule, costs, or the Obligors’ funding strategy) and (B) an updated rating affirmation or current public rating from a Nationally Recognized Rating Agency on the WIFIA Loan (or other Parity Obligations, as the WIFIA Lender may agree) demonstrating the Obligors’ continued creditworthiness; provided that (x) the form of and any adjustment to the WIFIA Loan Amortization Schedule, together with the Obligors’ explanation and the rating affirmation, shall be acceptable to the WIFIA Lender, (y) the weighted average life of the WIFIA Loan shall not exceed forty two (42) years measured as of the initial disbursement date of the WIFIA Loan and (z) the WIFIA Loan Amortization Schedule shall comply with all applicable requirements under this Agreement and law. Such revised WIFIA Loan Amortization Schedule shall become effective upon the approval by the WIFIA Lender in its sole discretion.
Section 9. Prepayment.
(a) Optional Prepayments. The Borrower may prepay the WIFIA Loan, without penalty or premium, (i) in full on any date on or after the Final Disbursement Date or (ii) in part on any Payment Date on or after the Final Disbursement Date (and, if in part, the amounts thereof to be prepaid shall be determined by the Borrower; provided, that any such prepayment shall be in principal amounts of $1,000,000 or any integral multiple of $1.00 in excess thereof), in each case from time to time but not more than once annually in accordance with 33 U.S.C. § 3908(c)(4)(A). The Borrower may make such prepayment by paying to the WIFIA Lender such principal amount of the WIFIA Loan to be prepaid, together with the unpaid interest accrued on the amount of principal so prepaid to the date of such prepayment and all fees and expenses then due and payable to the WIFIA Lender. Each prepayment of the WIFIA Loan pursuant to this Section 9(a) (Prepayment – Optional Prepayments) shall be made on such date of payment and in such principal amount as shall be specified by the Borrower in a written notice delivered to the WIFIA Lender not less than ten (10) days or more than thirty (30) days prior to the date set for
29 prepayment, unless otherwise agreed by the WIFIA Lender. At any time between delivery of such written notice and the applicable optional prepayment, the Borrower may, without penalty or premium, rescind its announced optional prepayment by further written notice to the WIFIA Lender. Anything in this Section 9(a) (Prepayment – Optional Prepayments) to the contrary notwithstanding, the failure by the Borrower to make any optional prepayment shall not constitute a breach or default under this Agreement.
(b) Borrower’s Certificate. Each prepayment pursuant to this Section 9 (Prepayment) shall be accompanied by a certificate signed by the Borrower’s Authorized Representative identifying the provision of this Agreement pursuant to which such prepayment is being made and containing a calculation in reasonable detail of the amount of such prepayment. (c) General Prepayment Instructions. Upon the WIFIA Lender’s receipt of confirmation that payment in full in immediately available funds of the entire Outstanding WIFIA Loan Balance and any unpaid interest, fees and expenses with respect thereto has occurred as a result of a prepayment, the WIFIA Lender shall surrender the WIFIA Bond to the Borrower or its representative at the principal office of the WIFIA Lender. If the Borrower prepays only part of the unpaid balance of principal of the WIFIA Loan, the WIFIA Lender may make a notation on the WIFIA Loan Amortization Schedule indicating the amount of principal of and interest on the WIFIA Loan then being prepaid. Absent manifest error, the WIFIA Lender’s determination of such matters as set forth on an updated WIFIA Loan Amortization Schedule shall be conclusive evidence thereof; provided that neither the failure to make any such recordation nor any error in such recordation shall affect in any manner any Obligor’s obligations hereunder or under any other WIFIA Loan Document. All partial prepayments of principal shall be applied to reduce future payments due on the WIFIA Loan pro rata across all principal payments remaining. If such funds have not been so paid on the prepayment date, such principal amount of the WIFIA Loan shall continue to bear interest until payment thereof at the rate provided for in Section 6 (Interest Rate).
Section 10. Fees and Expenses.
(a) Fees. The Obligors shall, on a joint and several basis, pay to the WIFIA Lender:
(i) a servicing set-up fee equal to $13,080 (the “Servicing Set-Up Fee”), which shall be due and payable within thirty (30) days after receipt by the Borrower of an invoice from the WIFIA Lender with respect thereto (or, if earlier, the Initial Disbursement Date);
(ii) an annual construction period servicing fee equal to $13,080 (the “Construction Period Servicing Fee”), which shall accrue on the first Business Day of the then-current Federal Fiscal Year and shall be due and payable on or prior to each November 15 during the Construction Period (including the Federal Fiscal Year during which the Substantial Completion Date occurs); provided that the initial Construction Period Servicing Fee shall be due and payable within thirty (30) days after receipt by the
30 Borrower of an invoice from the WIFIA Lender with respect thereto (or, if earlier, the Initial Disbursement Date), in a pro-rated amount equal to $[];1 and (iii) an annual operating period servicing fee equal to $9,810 (the “Operating Period Servicing Fee”), which shall accrue on the first Business Day of the then-current Federal Fiscal Year and shall be due and payable on or prior to each November 15, beginning with the first November 15 following the end of the Federal Fiscal Year during which the Substantial Completion Date occurs, until (and including) the Final Maturity Date; provided that the Operating Period Servicing Fee due and payable with respect to the Federal Fiscal Year during which the Final Maturity Date occurs shall be equal to the pro-rata monthly portion of the then applicable Operating Period Servicing Fee multiplied by the number of partial or whole months remaining between October 1 and the Final Maturity Date.
(b) The amount of each Construction Period Servicing Fee (other than the initial Construction Period Servicing Fee) and each Operating Period Servicing Fee shall be adjusted in proportion to the percentage change in CPI for the calendar year immediately preceding the calendar year during which such fee is due. The WIFIA Lender shall notify the Borrower of the amount of each such fee at least thirty (30) days before payment is due, which determination shall be conclusive absent manifest error.
(c) Expenses. Each Obligor agrees, whether or not the transactions hereby contemplated shall be consummated, to reimburse on a joint and several basis the WIFIA Lender on demand from time to time, within thirty (30) days after receipt by the Borrower of an invoice from the WIFIA Lender, for any and all documented fees, costs, charges, and expenses incurred by it (including the documented fees, costs, and expenses of its legal counsel, financial advisors, auditors and other consultants and advisors) in connection with the negotiation, preparation, execution, delivery, and performance of this Agreement and the other WIFIA Loan Documents and the transactions hereby and thereby contemplated, including documented attorneys’, and engineers’ fees and professional costs, including all such documented fees, costs, and expenses incurred as a result of or in connection with: (i) the enforcement of or attempt to enforce, or the protection or preservation of any right or claim under, the Liens on the Authority Revenues, the Net Revenues or the WIFIA Debt Service Account or any provision of this Agreement or any of the other WIFIA Loan Documents or the rights of the WIFIA Lender thereunder; (ii) any amendment, modification, waiver, or consent with respect to this Agreement or any other Related Document; and (iii) any work-out, restructuring, or similar arrangement of the obligations of any Obligor under this Agreement or the other WIFIA Loan Documents, including during the pendency of any Event of Default.
(d) The obligations of the Obligors under this Section 10 (Fees and Expenses) shall survive the payment or prepayment in full or transfer of the WIFIA Loan, the enforcement of any provision of this Agreement or the other WIFIA Loan Documents, any such amendments, waivers or consents, any Event of Default, and any such workout, restructuring, or similar arrangement.
1 Note to draft: To be determined once the closing date is determined.
31 ARTICLE III
CONDITIONS PRECEDENT
Section 11. Conditions Precedent.
(a) Conditions Precedent to Effectiveness. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not become effective until each of the following conditions precedent has been satisfied or waived in writing by the WIFIA Lender in its sole discretion:
(i) Each Obligor shall have duly executed and delivered to the WIFIA Lender this Agreement and each other WIFIA Loan Document to which it is a party, each in form and substance satisfactory to the WIFIA Lender. (ii) Each Obligor shall have delivered to the WIFIA Lender complete and fully executed copies of each Related Document (other than the WIFIA Loan Documents) and each Existing Construction Contract to which it is a party, together with any amendments, supplements, waivers or modifications thereto, that has been entered into on or prior to the Effective Date, along with a certification in the Closing Certificate that each such document is complete, fully executed and in full force and effect, and that all conditions contained in such documents that are necessary to the closing of the WIFIA transactions contemplated hereby have been fulfilled.
(iii) Each Obligor shall have delivered to the WIFIA Lender a copy of its Organizational Documents, as in effect on the Effective Date, along with a certification in the Closing Certificate that such Organizational Documents are in full force and effect. (iv) Each Obligor shall have delivered to the WIFIA Lender all instruments and documents (including any resolutions, ordinances, and supplements) other than the Related Documents as are necessary for such Obligor to execute and deliver, and to perform its obligations under, the WIFIA Loan Documents to which it is a party and to consummate and implement the transactions contemplated by the WIFIA Loan Documents to which it is a party.
(v) Counsel to the Obligors shall have rendered to the WIFIA Lender legal opinions satisfactory to the WIFIA Lender in its sole discretion (including those opinions set forth on Exhibit C-1 (Opinions Required from Counsel to Obligors)) and bond counsel to the Obligors shall have rendered to the WIFIA Lender legal opinions satisfactory to the WIFIA Lender in its sole discretion (including those opinions set forth on Exhibit C-2 (Opinions Required from Bond Counsel)).
(vi) The Obligors shall have delivered to the WIFIA Lender a certificate, signed by each Authorized Representative, substantially in the form attached hereto as Exhibit D (Form of Closing Certificate) (the “Closing Certificate”), designating the Borrower’s Authorized Representative, the City’s Authorized Representative or the District’s Authorized Representative, as applicable, confirming such persons’ positions and incumbencies, and certifying as to the satisfaction of the following conditions
32 precedent (and, if requested by the WIFIA Lender, have provided evidence satisfactory to the WIFIA Lender of such satisfaction):
(A) the aggregate of all funds secured and appropriated, or expected to be secured and appropriated for the development and construction of the Project as set forth in the Base Case Financial Model and in the Project Budget are reasonably expected to be sufficient to carry out the Project, pay all Total Project Costs anticipated for the Project and achieve Substantial Completion by the Projected Substantial Completion Date;
(B) the Obligors (or the City on behalf of the Obligors) have obtained all Governmental Approvals required to have been obtained as of the Effective Date (1) in connection with the Project and (2) to execute and deliver, and perform their obligations under the WIFIA Loan Documents, and all such Governmental Approvals obtained as of the Effective Date are final, non- appealable, and in full force and effect (and are not subject to any notice of violation, breach, or revocation);
(C) as of the Effective Date, (1) the maximum principal amount of the WIFIA Loan, together with the amount of any other credit assistance provided under the Act to the Borrower, does not exceed forty-nine percent (49%) of reasonably anticipated Eligible Project Costs; (2) the aggregate amount of Eligible Project Costs previously incurred prior to the Effective Date does not exceed fifty-one percent (51%) of Eligible Project Costs; and (3) the total federal assistance provided to the Project, including the maximum principal amount of the WIFIA Loan, does not exceed eighty percent (80%) of Total Project Costs; (D) each Obligor is in compliance with NEPA and any
applicable federal, state or local environmental review and approval requirements with respect to the Project;
(E) (1) the Borrower has obtained a Federal Employer
Identification Number (as evidenced by the delivery of a copy of the Borrower’s W-9), (2) each Obligor has obtained a UEI Number and (3) each Obligor has registered with, and obtained confirmation of active SAM registration status; (F) the Borrower has obtained a CUSIP Number (the “WIFIA CUSIP Number”);
(G) the representations and warranties of each Obligor set forth in this Agreement and in each other Related Document to which such Obligor is a party are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct as of such earlier date; and (H) no Material Adverse Effect, or any event or condition that could reasonably be expected to have a Material Adverse Effect, has occurred or arisen since the date of the Application.
33 (vii) The Obligors shall have provided evidence to the WIFIA Lender’s satisfaction, prior to the Effective Date, of the assignment by at least one (1) Nationally Recognized Rating Agency of a public Investment Grade Rating on the WIFIA Loan and the Parity Obligations then Outstanding, along with a certification in the Closing Certificate that no such rating has been reduced, withdrawn or suspended as of the Effective Date. (viii) The Members (or the City on behalf of the Members) shall have delivered to the WIFIA Lender a Base Case Financial Model in form and substance acceptable to the WIFIA Lender, along with a certification in the Closing Certificate that such Base Case Financial Model (A) demonstrates that projected Net Revenues and Authority Revenues are each sufficient to meet the WIFIA Loan Amortization Schedule, (B) demonstrates compliance with the Rate Covenant for each Fiscal Year through the Final Maturity Date, (C) reflects principal amortization and interest payment schedules acceptable to the WIFIA Lender and (D) demonstrates that the Members (or the City on behalf of the Members) have developed, and identified adequate revenues to implement, a plan for operating, maintaining and repairing the Project over the useful life of the Project. (ix) The Obligors (or the City on behalf of the Members) shall have delivered to the WIFIA Lender the Public Benefits Report. (x) Each Obligor shall have paid in full all invoices delivered by the WIFIA Lender to such Obligor as of the Effective Date and the fees and expenses of the WIFIA Lender’s counsel and financial advisors and any auditors or other consultants retained by the WIFIA Lender for the purposes hereof.
(xi) The Obligors shall have provided evidence to the WIFIA Lender’s satisfaction of the (A) establishment by the Borrower of the WIFIA Debt Service Account, and (B) the pledge of such account for the exclusive benefit of the WIFIA Lender. (b) Conditions Precedent to Disbursements. Notwithstanding anything in this Agreement to the contrary, the WIFIA Lender shall have no obligation to make any disbursement of the WIFIA Loan to the Borrower (including the initial disbursement hereunder) until each of the following conditions precedent has been satisfied or waived in writing by the WIFIA Lender in its sole discretion:
(i) The Obligors (or the City on behalf of the Obligors) shall have delivered to the WIFIA Lender a Requisition that complies with the provisions of Section 4 (Disbursement Conditions; Quarterly Approval of Eligible Project Costs), Exhibit B-1 (Requisition Procedures and Form of Requisition) and Appendix 1 (Form of Requisition) to Exhibit B-1 (Requisition Procedures and Form of Requisition), including satisfactory Eligible Project Costs Documentation relating to such Requisition. Each Authorized Representative shall also certify in such Requisition that:
(A) at the time of, and immediately after giving effect to, any Disbursement of WIFIA Loan proceeds then currently requested, (1) no Default or Event of Default and no event of default under any other Related Document has occurred and is continuing and (2) no event that, with the giving of notice or the
34 passage of time or both, would constitute an event of default under any other Related Document has occurred and is continuing;
(B) no Material Adverse Effect, or any event or condition that could reasonably be expected to result in a Material Adverse Effect, has occurred since the Effective Date;
(C) the aggregate amount of all disbursements does not exceed (1) the maximum principal amount of the WIFIA Loan or (2) the amount of Eligible Project Costs paid or incurred by the Obligors;
(D) the Eligible Project Costs for which reimbursement or payment is being requested has not been reimbursed or paid by any previous disbursement of (1) WIFIA Loan proceeds or (2) any other source of funding for the Project as identified in the Project Budget;
(E) (1) each Obligor, and, to the knowledge of each of the Obligors, each of each Obligor’s contractors and subcontractors at all tiers with respect to the Project, has complied with all applicable laws, rules, regulations and requirements, including 40 U.S.C. §§ 3141-3144, 3146, and 3147 (relating to Davis-Bacon Act requirements) (and regulations relating thereto), 33 U.S.C. § 3914 (relating to American iron and steel products), 2 C.F.R. § 180.320 and 2 C.F.R. Part 1532 (relating to non-debarment), 31 U.S.C. § 1352 and 40 C.F.R. §
34.100 (relating to non-lobbying), and any applicable Sanctions Laws; and (2) supporting documentation, such as certified payroll records and certifications for all iron and steel products used for the Project, are being maintained and are available for review upon request by the WIFIA Lender;
(F) the representations and warranties of each Obligor set forth in this Agreement and in each other Related Document are true and correct as of each date on which any disbursement of the WIFIA Loan is made, except to the extent such representations and warranties expressly relate to an earlier date (in which case, such representations and warranties are true and correct as of such earlier date);
(G) the Borrower represents that it has delivered all required deliverables under and in compliance with the requirements of Section 16 (Reporting Requirements), except as has been otherwise agreed by the WIFIA Lender; and
(H) the amount being requested for disbursement is with respect to Eligible Project Costs for which all or a portion of the Eligible Project Costs Documentation was previously submitted to and approved by the WIFIA Lender in accordance with Exhibit B-1 (Requisition Procedures and Form of Requisition) or the Borrower has set out in the Requisition (or attached separately to the Requisition) a summary of any Eligible Project Costs that have not otherwise been
35 previously submitted to the WIFIA Lender for approval, together with supporting Eligible Project Costs Documentation.
(ii) [Reserved.]
(iii) To the extent not previously delivered to the WIFIA Lender, the Obligors (or the City on behalf of the Obligors) shall have delivered to the WIFIA Lender copies of (1) any Related Document (including any amendment, waiver, modification or supplement thereto) entered into after the Effective Date, along with a certification in the Requisition that each such document is complete, fully executed and in full force and effect and (2) all Construction Contracts requested by the WIFIA Lender, including, in each case, any amendment, modification or supplement thereto, entered into after the Effective Date. (iv) The Obligors shall have paid in full (A) any outstanding Servicing Fees due and payable under Section 10 (Fees and Expenses) and (B) all invoices delivered by the WIFIA Lender to any Obligor, for the fees and expenses of the WIFIA Lender’s counsel and financial advisors and any auditors or other consultants retained by the WIFIA Lender for the purposes hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 12. Representations and Warranties of Obligors. Each Obligor hereby represents and warrants that, as of the Effective Date and, as to each of the representations and warranties below other than those (x) contained in Section 12(b) (Representations and Warranties of Obligors – Officers’ Authorization), the first sentence of Section 12 (f) (Representations and Warranties of Obligors – Litigation), Section 12(l) (Representations and Warranties of Obligors – Credit Ratings) or (y) which expressly relate only to another Obligor, as of each date on which any disbursement of the WIFIA Loan is requested or made:
(a) Organization; Power and Authority. The City is a general city and municipal corporation duly organized and validly existing under its Organizational Documents and the laws of the State, has full legal right, power and authority to do business in the State and to enter into the Related Documents then in existence to which it is a party, to execute and deliver this Agreement, and to carry out and consummate all transactions contemplated hereby and thereby and has duly authorized the execution, delivery and performance of this Agreement and the other Related Documents to which it is a party. The District is a county sanitation district and subsidiary district of the City established under the laws of the State, duly organized and validly existing under its Organizational Documents and the laws of the State, has full legal right, power and authority to do business in the State and to enter into the Related Documents then in existence to which it is a party, to execute and deliver this Agreement, and to carry out and consummate all transactions contemplated hereby and thereby and has duly authorized the execution, delivery and performance of this Agreement and the other Related Documents to which it is a party. The Borrower is a joint exercise of powers authority duly organized and validly existing under its Organizational Documents and the laws of the State, has full legal right, power and authority to do business in the State and to enter into the Related Documents then in existence to which it is a party, to execute and deliver this Agreement and the WIFIA Bond, and to carry out and
36 consummate all transactions contemplated hereby and thereby and has duly authorized the execution, delivery and performance of this Agreement, the WIFIA Bond, and the other Related Documents to which it is a party. Other than such Organizational Documents and the WIFIA Resolutions, there are no additional instruments for each Obligor to execute and deliver, or to perform its obligations under, the WIFIA Loan Documents to which it is a party and to consummate and implement the transactions contemplated by the WIFIA Loan Documents. (b) Officers’ Authorization. As of the Effective Date, the officers of each Obligor executing (or that previously executed) the Related Documents, and any certifications or instruments related thereto, to which such Obligor is a party are (or were at the time of such execution) duly and properly in office and fully authorized to execute the same. (c) Due Execution; Enforceability. Each of the Related Documents in effect as of any date on which this representation and warranty is made, and to which any Obligor is a party has been duly authorized, executed and delivered by such Obligor and constitutes the legal, valid and binding agreement of such Obligor enforceable against such Obligor in accordance with its terms, except as such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) is subject to general principles of equity (regardless of whether enforceability is considered in equity or at law).
(d) Non-Contravention. The execution and delivery of the Related Documents to which any Obligor is a party, the consummation of the transactions contemplated by such Related Documents, and the fulfillment of or compliance with the terms and conditions of such Related Documents, will not (i) conflict with such Obligor’s Organizational Documents, (ii) conflict in any material respect with, or constitute a violation, breach or default (whether immediately or after notice or the passage of time or both) by such Obligor of or under, any indenture, mortgage, deed of trust, loan agreement, lease, contract or other agreement or instrument to which such Obligor is a party or by which it or its properties or assets are otherwise subject or bound, (iii) conflict in any material respect with, or constitute a violation, breach or default (whether immediately or after notice or the passage of time or both) by such Obligor of or under any applicable law, administrative rule or regulation, any applicable court or administrative decree or order, or (iv) result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of such Obligor, other than Permitted Liens.
(e) Consents and Approvals. No consent or approval of any trustee, holder of any indebtedness of any Obligor or any other Person, and no consent, permission, authorization, order or license of, or filing or registration with, any Governmental Authority is necessary in connection with (i) the execution, delivery and performance by such Obligor of the Related Documents to which it is a party, except as have been obtained or made and as are in full force and effect, or (ii) (A) the consummation of any transaction contemplated by such Related Documents or (B) the fulfillment of or compliance by such Obligor with the terms and conditions of such Related Documents, except as have been obtained or made and as are in full force and effect or, if not required to be obtained as of the date this representation and warranty is made, as can reasonably be expected to be obtained or made in the ordinary course on commercially reasonable terms and conditions when needed.
37 (f) Litigation. There is no action, suit, proceeding or, to the knowledge of any Obligor, any inquiry or investigation, in any case before or by any court or other Governmental Authority pending or, to the knowledge of such Obligor, threatened against or affecting either System (including the Project) or the ability of such Obligor to execute, deliver and perform its obligations under the Related Documents to which it is a party or that in any case could reasonably be expected to result in a Material Adverse Effect. As of the Effective Date and as of each other date on which the representations and warranties herein are made or confirmed, there is no action, suit, proceeding or, to the knowledge of any Obligor, any inquiry or investigation before or by any court or other Governmental Authority pending, or to the knowledge of such Obligor, threatened against or affecting the System (including the Project), such Obligor or the assets, properties or operations of such Obligor, that in any case could reasonably be expected to result in a Material Adverse Effect.
(g) Security Interests.
(i) (A) The WIFIA FAs and Section 5451 of the California Government Code establish, and (B) the Members have taken all necessary action to pledge, assign, and grant, in each case in favor of the Borrower, legal, valid, binding and enforceable Liens on the Net Revenues purported to be created, pledged, assigned, and granted pursuant to and in accordance with the WIFIA FAs, irrespective of whether any Person has notice of the pledge and without the need for any physical delivery, recordation, filing, or further act, and the security interests created in the Net Revenues have been duly perfected under applicable State law. Such Liens are in full force and effect and are (1) pari passu in right of payment and right of security with the Liens on the Net Revenues in favor of all other Parity Obligations and (2) senior in right of payment and right of security to the Liens on the Net Revenues in favor of the Subordinated Obligations. (ii) Neither Member is in breach of any covenant set forth in Section 14(b)(i) (Affirmative Covenants – Securing Liens) or in the WIFIA Loan Documents with respect to the matters described in Section 14(b)(i) (Affirmative Covenants – Securing Liens). As of the Effective Date and as of each other date this representation and warranty is made, (A) all documents and instruments have been recorded or filed for record in such manner and in such places as are required and all other action as is necessary or desirable has been taken to establish a legal, valid, binding, and enforceable and perfected Lien on the Net Revenues for the benefit of the Borrower, and (B) all taxes and filing fees that are due and payable in connection with the execution, delivery or recordation of any WIFIA Loan Document or any instruments, certificates or financing statements in connection with the foregoing, have been paid. Neither the attachment, perfection, validity, enforceability or priority of the security interest in the Net Revenues granted pursuant to the WIFIA FAs is governed by Article 9 of the UCC. (iii) (A) This Agreement and Section 5451 of the California Government Code establish, and (B) the Borrower has taken all necessary action to pledge, assign, and grant, in each case in favor of the WIFIA Lender, legal, valid, binding and enforceable Liens on (1) all of the Authority Revenues, (2) all of the right, title and interest (but none of the obligations) of the Borrower in the WIFIA FAs and (3) the WIFIA Debt Service Account, in each case purported to be created, pledged, assigned, and granted pursuant to
38 and in accordance with this Agreement, irrespective of whether any Person has notice of the pledge and without the need for any physical delivery, recordation, filing, or further act, and the security interests created in the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account have been duly perfected under applicable State law. Such Liens are in full force and effect and are the only Liens in respect of the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account.
(iv) The Borrower is not in breach of any covenant set forth in Section 14(b)(ii) (Affirmative Covenants – Securing Liens) or in the WIFIA Loan Documents with respect to the matters described in Section 14(b)(ii) (Affirmative Covenants – Securing Liens). As of the Effective Date and as of each other date this representation and warranty is made, (A) all documents and instruments have been recorded or filed for record in such manner and in such places as are required and all other action as is necessary or desirable has been taken to establish a legal, valid, binding, and enforceable and perfected Lien on the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account for the benefit of the WIFIA Lender, and (B) all taxes and filing fees that are due and payable in connection with the execution, delivery or recordation of any WIFIA Loan Document or any instruments, certificates or financing statements in connection with the foregoing, have been paid. Neither the attachment, perfection, validity, enforceability or priority of the security interest in the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account is governed by Article 9 of the UCC. (h) No Debarment. Each Obligor has fully complied with its verification obligations under 2 C.F.R. § 180.320 and confirms, based on such verification, that, to its knowledge, neither it nor any of its principals (as defined in 2 C.F.R. § 180.995 and supplemented by 2 C.F.R. § 1532.995) (i) is debarred, suspended or voluntarily excluded from participation in Government contracts, procurement or non-procurement matters, (ii) is presently indicted for or otherwise criminally or civilly charged by a Governmental Authority with commission of any of the offenses listed in 2 C.F.R. § 180 or 2 C.F.R. § 1532; and (iii) have, within the three (3) year period preceding the Effective Date, (A) been convicted for or had a civil judgment rendered against it for any of the offenses within such period or (B) had any public transactions (federal, state or local) terminated for cause or default.
(i) No Lobbying. Pursuant to 31 U.S.C. § 1352, to the best of each Obligor’s knowledge and belief, (i) no federal appropriated funds have been paid or will be paid, by or on behalf of any Obligor, to any Person for influencing or attempting to influence an officer or employee of an agency, a member (or employee of a member), officer, or employee of the U.S.
Congress, in connection with the making of the WIFIA Loan, execution (including amendments or modifications) of the Related Documents, or any other federal action under 31 U.S.C. § 1352(a)(2); and (ii) if any funds other than federal appropriated funds have been paid or will be paid to any Person for influencing or attempting to influence an officer or employee of any agency, a member (or employee of a member), officer, or employee of the U.S. Congress in connection with the WIFIA Loan, each Obligor has completed and submitted to the WIFIA Lender Standard Form-LLL, “Disclosure Form to Report Lobbying,” in accordance with its instructions.
39 (j) Accuracy of Representations and Warranties. The representations, warranties and certifications of each Obligor set forth in this Agreement and the other Related Documents to which such Obligor is a party are true, correct, and complete in all material respects, except to the extent such representations and warranties expressly relate to an earlier date (in which case, such representations and warranties shall be true, correct, and complete as of such earlier date).
(k) Compliance with Laws.
(i) Each Obligor, and, to the best of the knowledge of each Obligor, each of such Obligor’s contractors and subcontractors at all tiers with respect to the Project, has complied with all applicable laws, rules, regulations and requirements, including 40 U.S.C. §§ 3141-3144, 3146, and 3147 (relating to Davis-Bacon Act requirements) (and regulations relating thereto), 33 U.S.C. § 3914 (relating to American iron and steel products), 20 C.F.R. § 180.320 and 20 C.F.R. § 1532 (relating to non-debarment), 31 U.S.C. § 1352 and 49 C.F.R. § 20.100 (relating to non-lobbying), and any applicable Sanctions Laws.
(ii) To ensure such compliance, each Obligor has included in all contracts to which it is a party with respect to the Project (A) the contract clauses relating to the applicable federal requirements (such as Davis-Bacon Act) and (B) requirements that its contractors (1) shall comply with all applicable laws, rules, regulations, and requirements set forth in this Section 12(k) (Representations and Warranties of Obligors – Compliance with Laws) and follow applicable federal guidance and (2) incorporate in all subcontracts (and cause all subcontractors to include in lower tier subcontracts) such terms and conditions as are required to be incorporated therein by any applicable laws, rules, regulations and requirements set forth in this Section 12(k) (Representations and Warranties of Obligors – Compliance with Laws).
(l) Credit Ratings. The WIFIA Loan and the Outstanding Parity Obligations have received a public Investment Grade Rating from at least one (1) Nationally Recognized Rating Agency, written evidence of such rating has been provided to the WIFIA Lender prior to the Effective Date, and such rating has not been reduced, withdrawn or suspended as of the Effective Date.
(m) No Defaults. No Default or Event of Default, and no default or event of default by any Obligor under any other Related Document to which such Obligor is a party, has occurred and is continuing.
(n) Governmental Approvals. All Governmental Approvals required as of the Effective Date and required as of any subsequent date on which this representation is made (or deemed made) for the undertaking and completion by the Members (or the City on behalf of the Members) of the Project, and for the operation and management thereof, have been obtained or effected and are in full force and effect and there is no basis for, nor proceeding that is pending or threatened that could reasonably be expected to result in, the revocation of any such Governmental Approval.
40 (o) Construction Contracts. Attached as SCHEDULE V (Construction Contracts) is a list of the Existing Construction Contracts, including the name of the contract, the parties thereto, the effective date and a description thereof. Each Construction Contract is in full force and effect and all conditions precedent to the obligations of the respective parties under each Construction Contract have been satisfied. To the extent requested by the WIFIA Lender, the Borrower has delivered to the WIFIA Lender a fully executed, complete and correct copy of each Construction Contract (including in each case all exhibits, schedules and other attachments), including any amendments or modifications thereto and any related credit support instruments or side letters.
(p) Information. The information furnished by, or on behalf of, the Obligors to the WIFIA Lender, when taken as a whole, is true and correct in all material respects (other than for projections and other forward-looking statements contained in the Base Case Financial Model and any Updated Financial Model which have been made in good faith and based on reasonable assumptions) and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading as of the date made or furnished. (q) Environmental Matters. Each Obligor and, to such Obligor’s knowledge, each Construction Contractor, is in compliance with all laws applicable to the related System (including the Project) relating to (i) air emissions, (ii) discharges to surface water or ground water, (iii) noise emissions, (iv) solid or liquid waste disposal, (v) the use, generation, storage, transportation or disposal of toxic or hazardous substances or wastes, (vi) biological resources (such as threatened and endangered species), and (vii) other environmental, health or safety matters, including all laws applicable to the related System (including the Project) (collectively, the “Environmental Laws”). All Governmental Approvals for the Project relating to Environmental Laws have been, or, when required, will be, obtained and are (or, as applicable, will be) in full force and effect. No Obligor has received any written communication or notice, whether from a Governmental Authority, employee, citizens group, or any other Person, that alleges that such Obligor is not in full compliance with all Environmental Laws and Governmental Approvals relating thereto in connection with the Project and, to such Obligor’s knowledge, there are no circumstances that may prevent or interfere with full compliance in the future by such Obligor with any such Environmental Law or Governmental Approval. Each Obligor has provided to the WIFIA Lender all material assessments, reports, results of investigations or audits, and other material information in the possession of or reasonably available to such Obligor regarding such Obligor’s or the Project’s compliance with (A) Environmental Laws and (B) Governmental Approvals that are required for the Project and relate to Environmental Laws. (r) Sufficient Rights. Each Member possesses either valid legal and beneficial title to, leasehold title in, or other valid legal rights with respect to the real property relating to the related System (including the Project), in each case as is necessary and sufficient as of the date this representation is made for the construction, operation, maintenance and repair of the related System (including the Project). As of any date on which this representation and warranty is made, the Construction Contracts then in effect and the Governmental Approvals that have been obtained and are then in full force and effect create rights in each Member sufficient to enable such Member to own, construct, operate, maintain and repair the related System (including the Project) and such Member to perform its obligations under the Construction Contracts to which it is a party.
41 (s) Insurance. Each Obligor is in compliance with all insurance obligations required under each Related Document to which such Obligor is a party as of the date on which this representation and warranty is made.
(t) No Prohibited Liens. Except for Permitted Liens, no Obligor has created, and is not under any obligation to create, and has not entered into any transaction or agreement that would result in the imposition of, any Lien on the Net Revenues, the Systems, the Project or any Obligor’s respective rights in any of the foregoing. The Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account are free and clear of any pledge, Lien, charge or encumbrance thereon or with respect thereto other than the pledge and Lien thereon for the benefit of the WIFIA Lender. (u) Financial Statements. Each income statement, balance sheet and statement of operations and cash flows (collectively, “Financial Statements”) delivered to the WIFIA Lender pursuant to Section 16(b) (Reporting Requirements – Annual Financial Statements) has been prepared in accordance with GAAP and presents fairly, in all material respects, the financial condition (including any liabilities or obligations that are required to be disclosed in accordance with GAAP) of each Obligor as of the respective dates of the balance sheets included therein and the results of operations of such Obligor for the respective periods covered by the statements of income included therein. Except as reflected in such Financial Statements, there are no liabilities or obligations of any Obligor of any nature whatsoever for the periods to which such Financial Statements relate that are required to be disclosed in accordance with GAAP. (v) Securities Laws. Under existing law, the WIFIA Bond may be issued and sold without registration under the Securities Act of 1933, as amended, and any State blue sky laws.
(w) Taxes. Each Obligor has paid all applicable taxes and other material taxes and assessments payable by such Obligor that have become due (other than those taxes or assessments that such Obligor is contesting in good faith and by appropriate proceedings, for which adequate reserves have been established to the extent required by GAAP). (x) Sufficient Funds. The amount of the WIFIA Loan, when combined with secured financing and appropriated cash and funds expected to be secured and appropriated for the development and construction of the Project as set forth under the various sources of funds in the Base Case Financial Model and the Project Budget will be sufficient to carry out the Project, pay all Total Project Costs anticipated for the development and construction of the Project and achieve Substantial Completion by the Projected Substantial Completion Date. The total federal assistance provided to the Project, including the maximum principal amount of the WIFIA Loan, does not exceed eighty percent (80%) of Total Project Costs. The Updated Financial Model most recently delivered to the WIFIA Lender pursuant to Section 16 (Reporting Requirements) demonstrates that the projected Revenues are sufficient to meet the WIFIA Loan Amortization Schedule. Each Obligor has developed, and identified adequate revenues to implement, a plan for operating, maintaining, and repairing the Project over the useful life of the Project. (y) Sovereign Immunity. Each Obligor either has no immunity from the jurisdiction of any court of competent jurisdiction or from any legal process therein which could
42 be asserted in any action to enforce the obligations of such Obligor under any of the Related Documents to which it is a party or the transactions contemplated hereby or thereby, including the obligations of such Obligor hereunder and thereunder, or, to the extent that such Obligor has such immunity, such Obligor has waived such immunity pursuant to Section 14(n) (Affirmative Covenants – Immunity).
(z) No Federal Debt. No Obligor has any delinquent federal debt (including tax liabilities but excluding any delinquencies that have been resolved with the appropriate federal agency in accordance with the standards of the Debt Collection Improvement Act of 1996).
Section 13. Representations and Warranties of WIFIA Lender. The WIFIA Lender represents and warrants that:
(a) Power and Authority. The WIFIA Lender has all requisite power and authority to make the WIFIA Loan and to perform all transactions contemplated by the Related Documents to which it is a party.
(b) Due Execution; Enforceability. The Related Documents to which it is a party have been duly authorized, executed and delivered by the WIFIA Lender, and are legally valid and binding agreements of the WIFIA Lender, enforceable in accordance with their terms. (c) Officers’ Authorization. The officers of the WIFIA Lender executing each of the Related Documents to which the WIFIA Lender is a party are duly and properly in office and fully authorized to execute the same on behalf of the WIFIA Lender.
ARTICLE V
COVENANTS
Section 14. Affirmative Covenants. Each Obligor covenants and agrees as follows (except to the extent such obligation is an express obligation of another Obligor) until the date the WIFIA Bond and all of the obligations of the Borrower under this Agreement (other than contingent indemnity obligations) are irrevocably paid in full in immediately available funds and the WIFIA Lender no longer has any commitment to make disbursements to the Borrower, unless the WIFIA Lender waives compliance in writing:
(a) Rate Covenant.
(i) Each Member shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the related System during each Fiscal Year which are at least sufficient to yield (A) Net Revenues of such Member for such Fiscal Year at least equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on all Parity Obligations of such Member for such Fiscal Year and (B) Net Revenues of such Member for such Fiscal Year at least equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on all Subordinated Obligations of such Member for such Fiscal Year, except that coverage of at least one hundred percent (100%) of Debt Service on all Subordinated Obligations of such Member shall be deemed sufficient with respect to Subordinated Obligations of such Member so long as Obligations of such Member other than the relevant WIFIA FA are outstanding and, upon defeasance of all
43 Obligations of such Member other than the relevant WIFIA FA, this ratio must be at least one hundred twenty percent (120%), except where such Obligations of such Member are defeased pursuant to Refunding Parity Obligations. For the purposes of the calculation of the rate covenant described in clauses (A) and (B) above, Net Revenues of each Member may include transfers from the applicable Rate Stabilization Fund; provided that the Net Revenues of such Member excluding such transfers are at least one hundred percent (100%) of the Maximum Annual Debt Service for the relevant Fiscal Year with respect to all Outstanding Obligations of such Member.
(ii) Each Member may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates and charges then in effect unless the Net Revenues of such Member from such reduced rates and charges will at all times be sufficient to meet the requirements of Section 14(a)(i) (Affirmative Covenants – Rate Covenant). Each Member shall increase such rates, fees and charges whenever necessary to produce Net Revenues sufficient to meet the requirements of Section 14(a)(i) (Affirmative Covenants – Rate Covenant). (iii) If the forecast furnished by the Members (or the City on behalf of the Members) in the most recent Updated Financial Model delivered by the Members pursuant to Section 16(a) (Reporting Requirements – Updated Financial Model) demonstrates that projected Net Revenues of either Member may be inadequate to satisfy the Rate Covenant for any Fiscal Year until the Final Maturity Date, or if either Member fails to satisfy the Rate Covenant for the most recently ended Fiscal Year, such Member shall (A) within thirty (30) days after request by the WIFIA Lender, engage the Technical and Rate Consultant to review and analyze the operations of the applicable System and recommend actions regarding revising the rates or changing the methods of operations, or any other actions to increase such Member’s Net Revenues so as to satisfy the Rate Covenant, (B) cause the Technical and Rate Consultant to issue its report, including any such recommended actions, no later than ninety (90) days following such engagement, and (C) either, within thirty (30) days, (1) to the extent permitted by law, implement the Technical and Rate Consultant’s recommendation or (2) undertake an alternative course of action after demonstrating to the WIFIA Lender’s satisfaction that an alternative plan will generate sufficient Net Revenues so as to satisfy the Rate Covenant. (b) Securing Liens.
(i) The Members shall at any and all times, to the extent permitted by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable in connection with assuring, conveying, granting, assigning, securing and confirming the Liens on the Net Revenues (whether now existing or hereafter arising) granted to the Borrower for its benefit pursuant to the WIFIA FAs, or intended so to be granted pursuant to the WIFIA FAs, or which the Members may become bound to grant, and the Members shall at all times maintain the Net Revenues free and clear of any pledge, Lien, charge or encumbrance thereon or with respect thereto that has priority over, or equal rank with, the Liens created by the WIFIA FAs, other than as permitted by this Agreement, and all organizational, regulatory or other necessary action on the part of the
44 Members to that end shall be duly and validly taken at all times. The Members shall at all times, to the extent permitted by law, defend, preserve and protect the Liens on the Net Revenues granted pursuant to the WIFIA FAs and for the benefit of the Borrower under the WIFIA FAs against all claims and demands of all Persons whomsoever, subject to Permitted Liens.
(ii) The Borrower shall at any and all times, to the extent permitted by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable in connection with assuring, conveying, granting, assigning, securing and confirming the Liens on the Authority Revenues (whether now existing or hereafter arising), the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account granted to the WIFIA Lender for its benefit pursuant to the this Agreement, or intended so to be granted pursuant to this Agreement, or which the Borrower may become bound to grant, and the Borrower shall at all times maintain the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account free and clear of any pledge, Lien, charge or encumbrance thereon or with respect thereto other than the Liens with respect to the WIFIA Loan, and all organizational, regulatory or other necessary action on the part of the Borrower to that end shall be duly and validly taken at all times. The Borrower shall at all times, to the extent permitted by law, defend, preserve and protect the Liens on the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs and the WIFIA Debt Service Account granted pursuant to this Agreement and for the benefit of the WIFIA Lender under this Agreement against all claims and demands of all Persons whomsoever. (c) Use of Proceeds. Each Obligor shall use the proceeds of the WIFIA Loan solely for purposes permitted by applicable law, this Agreement and the other Related Documents. (d) Prosecution of Work; Verification Requirements.
(i) The Members (or the City on behalf of the Members) shall diligently prosecute the work relating to the Project and complete the Project in accordance with the Construction Schedule, the Governmental Approvals in connection with the Project, and prudent utility practice.
(ii) Each Member (or the City on behalf of the Members) shall ensure that each Construction Contractor complies with all applicable laws and legal or contractual requirements with respect to any performance security instrument delivered by such Construction Contractor to the Borrower and shall ensure that any letter of credit provided pursuant to any Construction Contract meets the requirements therefor set forth in such Construction Contract.
(iii) Each Obligor shall comply with Subpart C of 2 C.F.R. Part 180, as supplemented by Subpart C of 2 C.F.R. Part 1532 (relating to debarment), including the verification requirements set forth in 2 C.F.R. §§ 180.300 and 180.320, and shall include in its contracts with respect to the Project similar terms or requirements for compliance.
45 (e) Operation and Maintenance of the Systems; Insurance. (i) The City has agreed in the MOA to operate and maintain the Project.
Each Member covenants and agrees to operate its System in an efficient and economical manner and to operate, maintain and preserve its System in good repair and working order.
Each Member shall at all times maintain with responsible insurers all such insurance on its System as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to such System. Each Member shall also maintain, with responsible insurers, worker’s compensation insurance and insurance against public liability and property damage to the extent reasonably necessary to protect such Member, the Borrower and the WIFIA Lender.
(ii) Promptly upon request by the WIFIA Lender, the Members (or the City on behalf of the Members) shall deliver to the WIFIA Lender copies of any underlying insurance policies obtained by or on behalf of such Member in respect of the Project. All such policies shall be available at all reasonable times for inspection by the WIFIA Lender, its agents and representatives.
(f) Events of Loss; Loss Proceeds. If an Event of Loss shall occur with respect to a System (including the Project) or any part thereof, the applicable Member (or the City on behalf of the Members) shall (i) diligently pursue all of its rights to compensation against all relevant insurers, reinsurers and Governmental Authorities, as applicable, in respect of such Event of Loss and (ii) apply all Net Loss Proceeds in respect of such Event of Loss to repair, reconstruct, and/or replace the portion of the System in respect of which the applicable Loss Proceeds were received to the extent such repair, reconstruction and/or replacement is necessary to comply with the first sentence of Section 14(e) (Operation and Maintenance of the Systems; Insurance). Such Member (or the City on behalf of the Members) shall begin such repair, reconstruction or replacement promptly after such damage or destruction shall occur, and shall continue and properly complete such repair, reconstruction or replacement as expeditiously as possible, and shall pay out of such Loss Proceeds all costs and expenses in connection with such repair, reconstruction or replacement so that the same shall be completed and the System shall be free and clear of all claims and Liens. If such Net Loss Proceeds exceed the costs of such repair, reconstruction or replacement, then the excess Net Loss Proceeds shall be deposited in the applicable Revenue Fund and be available for other proper uses of funds deposited in such Revenue Fund. If such Net Loss Proceeds are insufficient to enable such Member to restore or replace the damaged portions of such System, such Member shall provide additional funds for that purpose.
(g) Maintain Legal Structure. The City shall maintain its existence as a general city and municipal corporation organized and existing under its Organizational Documents and the laws of the State. The District shall maintain its existence as a county sanitation district and subsidiary district of the City established under the laws of the State. The Borrower shall maintain its existence as a joint exercise of powers authority organized and existing under its Organizational Documents and the laws of the State.
(h) System Accounts; Permitted Investments.
46 (i) Each Member shall maintain its Revenue Fund in accordance with the terms hereof and the other WIFIA Loan Documents. Each Member’s Revenues received shall be deposited in the applicable Revenue Fund when and as received in trust for the benefit of the holders of the Obligations, subject to the application of Revenues to Maintenance and Operation Costs. Moneys in the Revenue Funds shall be used and applied by the Members as provided in the Flows of Funds.
(ii) Amounts on deposit in the Funds and Accounts shall be held uninvested or invested in Permitted Investments. Permitted Investments must mature or be redeemable at the election of the applicable Obligor at such times as may be necessary to ensure that funds will be available within the applicable account to be applied towards the purpose for which the applicable account has been established. (i) WIFIA Debt Service Account. The Borrower shall (i) establish the WIFIA Debt Service Account on or prior to the Effective Date and (ii) maintain the WIFIA Debt Service Account in accordance with this Agreement for the exclusive benefit of the WIFIA Lender. The WIFIA Debt Service Account shall be subject to a Lien and has been pledged by the Borrower hereunder to the WIFIA Lender as security solely for the benefit of the WIFIA Lender and shall not be subject to any security interest in favor of any Person other than the WIFIA Lender.
Amounts on deposit in the WIFIA Debt Service Account shall be applied by the Borrower solely to pay WIFIA Debt Service and other amounts due with respect to the WIFIA Loan or the WIFIA Bond.
(j) Compliance with Laws.
(i) Each Obligor shall, and each Obligor shall require, its contractors and subcontractors at all tiers with respect to the Project to comply with all applicable laws, rules, regulations and requirements, including 40 U.S.C. §§ 3141-3144, 3146, and 3147 (relating to Davis-Bacon Act requirements) (and regulations relating thereto) and 33 U.S.C. § 3914 (relating to American iron and steel products).
(ii) To ensure such compliance, each Obligor shall include in all contracts to which it is a party with respect to the Project (A) the contract clauses relating to the Davis-Bacon Act requirements that are set forth in the Code of Federal Regulations, Title 29 Part 5.5 and (B) requirements that its contractors (1) shall comply with all applicable laws, rules, regulations, and requirements set forth in this Section 14(j) (Affirmative Covenants – Compliance with Laws) and follow applicable federal guidance and (2) incorporate in all subcontracts (and cause all subcontractors to include in lower tier subcontracts) such terms and conditions as are required to be incorporated therein by any applicable laws, rules, regulations and requirements set forth in this Section 14(j) (Affirmative Covenants – Compliance with Laws) (including with respect to the Davis- Bacon Act requirements).
(iii) No use of proceeds of the WIFIA Loan or any other transaction contemplated by this Agreement or any other Related Document shall violate any applicable Sanctions, Anti-Money Laundering Laws, or Anti-Corruption Laws, or any applicable anti-drug trafficking or anti-terrorism laws.
47 (k) Material Obligations; Payment of Claims.
(i) Each Obligor shall pay its material obligations promptly and in accordance with their terms.
(ii) Each Member shall pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its Revenues or other assets of the related System, before the same shall become delinquent or in default; provided that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy, claim or Lien so long as the validity or amount thereof shall be contested by the applicable Member in good faith by appropriate proceedings and so long as such Member shall have set aside adequate reserves with respect thereto in accordance with and to the extent required by GAAP, applied on a consistent basis. (iii) The Borrower shall pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon the Authority Revenues, before the same shall become delinquent or in default; provided that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy, claim or Lien so long as the validity or amount thereof shall be contested by the Borrower in good faith by appropriate proceedings and so long as the Borrower shall have set aside adequate reserves with respect thereto in accordance with and to the extent required by GAAP, applied on a consistent basis.
(iv) Each Member shall pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a Lien on such Member’s System (or any part thereof), the Project, such Member’s Net Revenues or any fund or account of the applicable Member pledged to pay Parity Obligations. (v) The Borrower shall pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a Lien on the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs, or the WIFIA Debt Service Account.
(l) SAM Registration. Each Obligor shall (i) obtain prior to the Effective Date (and provide such registration information to the WIFIA Lender) and maintain through the Final Disbursement Date an active registration status with the federal System for Award Management (www.SAM.gov) (or any successor system or registry) and (ii) within sixty (60) days prior to each anniversary of the Effective Date until the Final Disbursement Date, provide to the WIFIA Lender evidence of such active registration status with no active exclusions reflected in such registration. (m) UEI Number. The Borrower shall obtain and maintain, on or prior to the Effective Date through the Final Maturity Date, a UEI Number. (n) Immunity. To the fullest extent permitted by applicable law, each Obligor agrees that it will not assert any immunity (and hereby waives any such immunity) it may have as a governmental entity from lawsuits, other actions and claims, and any judgments with respect to the enforcement of any of the obligations of such Obligor under this Agreement or any other WIFIA Loan Document.
48 (o) Accounting and Audit Procedures.
(i) Each Obligor shall establish fiscal controls and accounting procedures sufficient to assure proper accounting for all of the following, as applicable to such Obligor: (A) Net Revenues, Authority Revenues, operating expenses, capital expenses, depreciation, reserves, debt issued and outstanding and debt payments; and (B) Project-related costs, WIFIA Loan requisitions submitted, WIFIA Loan proceeds received, payments made by the Obligors with regard to the Project, and other sources of funding for the Project (including amounts paid from such sources for Project costs so that audits may be performed to ensure compliance with and enforcement of this Agreement). Each Obligor shall use accounting, audit and fiscal procedures conforming to GAAP, including, with respect to the WIFIA Loan, accounting of principal and interest payments, disbursements, prepayments and calculation of interest and principal amounts Outstanding. (ii) The Borrower shall have a single or program-specific audit conducted in accordance with 2 C.F.R. Part 200 Subpart F and 31 U.S.C. § 7502 for the first Fiscal Year in which a disbursement is made under this Agreement and annually thereafter, except to the extent biennial audits are permitted for the Borrower pursuant to 2 C.F.R. § 200.504 and 31 U.S.C. § 7502(b). Upon reasonable notice, each Obligor shall cooperate fully in the conduct of any periodic or compliance audits conducted by the WIFIA Lender, or designees thereof, pursuant to 40 C.F.R. Part 35, 31 U.S.C. § 7503(b), or 31 U.S.C. § 6503(h) and shall provide full access to any books, documents, papers or other records that are pertinent to the Project or the WIFIA Loan, to the WIFIA Lender, or the designee thereof, for any such project or programmatic audit. (p) Access; Records.
(i) So long as the WIFIA Loan or any portion thereof shall remain outstanding and until five (5) years after the WIFIA Loan shall have been paid in full, the WIFIA Lender shall have the right, upon reasonable prior notice, to visit and inspect any portion of the Project, to examine books of account and records of each Obligor relating to the Project, to make copies and extracts therefrom at such Obligor’s expense, and to discuss each Obligor’s affairs, finances and accounts relating to the Project with, and to be advised as to the same by, its officers and employees and its independent public accountants (and by this provision each Obligor irrevocably authorizes its independent public accountants to discuss with the WIFIA Lender the affairs, finances and accounts of such Obligor, whether or not any representative of such Obligor is present, it being understood that nothing contained in this Section 14(p) (Affirmative Covenants – Access; Records) is intended to confer any right to exclude any such representative from such discussions), all at such reasonable times and intervals as the WIFIA Lender may request. Each Obligor agrees on a joint and several basis to pay all out-of-pocket expenses incurred by the WIFIA Lender in connection with the WIFIA Lender’s exercise of its rights under this Section 14(p) (Affirmative Covenants – Access; Records) at any time when an Event of Default shall have occurred and be continuing.
(ii) Each Obligor shall maintain and retain all files relating to the Project and the WIFIA Loan until five (5) years after the later of the date on which (A) all rights
49 and duties under this Agreement and under the WIFIA Bond (including payments) have been fulfilled and any required audits have been performed and (B) any litigation relating to the Project, the WIFIA Loan or this Agreement is finally resolved or, if the WIFIA Lender has reasonable cause to extend such date, a date to be mutually agreed upon by the WIFIA Lender and the Obligors. Each Obligor shall provide to the WIFIA Lender in a timely manner all records and documentation relating to the Project that the WIFIA Lender may reasonably request from time to time.
Section 15. Negative Covenants. Each Obligor covenants and agrees as follows (except to the extent such obligation is an express obligation of another Obligor) until the date the WIFIA Bond and all of the obligations of the Borrower under this Agreement (other than contingent indemnity obligations) are irrevocably paid in full in immediately available funds and the WIFIA Lender no longer has any commitment to make disbursements to the Borrower, unless the WIFIA Lender waives compliance in writing:
(a) Borrower Indebtedness. The Borrower shall not create, incur or suffer to exist (i) any debt obligations unless such obligations are secured by Liens on payments by one or more of the Members, which are (A) documented under a financing agreement, lease or other instrument and (B) at least equal in amount to the principal, interest and redemption amounts, as applicable, owed to the holders of such debt obligations or (ii) any debt obligations that are senior or prior in right to the payment by the Borrower from Authority Revenues of the WIFIA Loan, and in no event shall any obligations other than the WIFIA Loan be secured by Liens on Authority Revenues.
(b) Senior Lien and Project Obligations. Neither Member shall create, incur or suffer to exist (i) any Obligations which are senior or prior in right to (A) the payment by the Members of the Authority Bond Payments and the other Parity Obligations or (B) the Lien on the Net Revenues in favor of the Borrower or (ii) any obligations, all or a portion of the proceeds of which are or will be applied at any time to fund all or any portion of Total Project Costs, that are secured by a Lien on any assets or property of such Member other than the Net Revenues. (c) Issuance of Parity Obligations.
(i) Without regard to Section 15(c)(iii) (Negative Covenants – Issuance of Parity Obligations), either Member may at any time issue or enter into an obligation or commitment which is a Qualified Swap Agreement; provided (A) the Qualified Swap Agreement shall relate to a principal amount of Outstanding Parity Obligations or investments held under an Issuing Instrument for Parity Obligations, in each case specified by the City’s Authorized Representative or the District’s Authorized Representative, as applicable, and (B) the notional amount of the Qualified Swap Agreement shall not exceed the principal amount of the related Parity Obligation or the amount of such investments, as applicable.
(ii) Subject to Section 15(c)(iii) (Negative Covenants – Issuance of Parity Obligations), either Member may enter into Credit Support Instruments or otherwise become obligated for Credit Provider Reimbursement Obligations from time to time.
50 (iii) Either Member may, at any time and from time to time, issue any Additional Parity Obligations: provided such Member obtains or provides a certificate or certificates, prepared by such Member or at such Member’s option by a Consultant, showing that all of the following conditions are met:
(A) Net Revenues of such Member in the most recent Fiscal Year, excluding transfers from the Rate Stabilization Fund, if any, meet the ratio required to satisfy the Rate Covenant as set forth in Section 14(a)(i) (Rate Covenant);
(B) such Member is not in default on any Outstanding
Obligation; and
(C) (1) the estimated Net Revenues of such Member for the Fiscal Year in which the proposed Additional Parity Obligation is issued, and (2) projected Net Revenues of such Member for the five (5) Fiscal Years immediately following the Fiscal Year in which the Additional Parity Obligation is issued, will be at least equal to one hundred twenty percent (120%) of the maximum Annual Debt Service for such Fiscal Year(s) with respect to all Outstanding Parity Obligations, including the Additional Parity Obligation proposed to be issued. For purposes of clause (2), (x) if all or a portion of the interest on any Parity Obligations during such five (5) Fiscal Year period is being or will be capitalized, the five (5) Fiscal Year period will commence with the first Fiscal Year beginning on or after the last date on which such interest is capitalized, (y) projected Net Revenues of such Member for each Fiscal Year in the five (5) Fiscal Year period may include Revenues arising from increases in the rates and charges estimated to be fixed and prescribed or received for the services of the Water Enterprise or Sewer Enterprise, as applicable, and which are economically feasible and reasonably considered necessary based on projected operations for such Fiscal Years, and (z) Net Revenues of such Member may include Rate Stabilization Fund transfers, provided that the Net Revenues of such Member, excluding the amounts of such transfers, equals at least one hundred percent (100%) of the Maximum Annual Debt Service for the relevant Fiscal Year with respect to all Outstanding Parity Obligations, including the Additional Parity Obligation proposed to be issued. (iv) For purposes of preparing the certificate or certificates described in Section 15(c)(iii) (Negative Covenants – Issuance of Parity Obligations) and Section 15(c)(v) (Negative Covenants – Issuance of Parity Obligations), the applicable Member and any Consultant may rely upon the books and records of such Member or any financial statements prepared by such Member which have not been subject to audit by an Independent Accountant if audited financial statements for the particular Fiscal Year selected by such Member are not available.
(v) Upon the incurrence of any Additional Parity Obligations, the applicable Member shall provide to the WIFIA Lender a certificate signed by the City’s Authorized Representative or District’s Authorized Representative, as applicable, (A) specifying the closing date with respect to such Additional Parity Obligations and (B)
51 confirming that such Additional Parity Obligations are authorized pursuant to, and satisfy the applicable requirements under, this Section 15(c) (Negative Covenants – Issuance of Parity Obligations).
(d) Issuance of Subordinated Obligations.
(i) Either Member may, at any time and from time to time, issue any Subordinated Obligations; provided such Member obtains or provides a certificate or certificates, prepared by such Member or at such Member’s option by a Consultant, showing that all of the following conditions are met:
(A) Net Revenues of such Member in the most recent Fiscal Year, excluding transfers from the Rate Stabilization Fund, if any, meet the ratio required to satisfy the Rate Covenant as set forth in Section 14(a)(i) (Rate Covenant);
(B) such Member is not in default on any Outstanding
Obligation; and
(C) such Subordinated Obligation is fully subordinated to the Parity Obligations in priority of payment (as to both principal and interest), voting and priority of security interest with respect to the Net Revenues, including with respect to payment from revenues and reserves and payment upon default or acceleration of any such Obligations; provided that no Subordinated Obligation document shall supersede or conflict with any provision of the relevant WIFIA FA or contain a right to accelerate without the consent of the WIFIA Lender. (ii) For purposes of preparing the certificate or certificates described in Section 15(d)(i) (Negative Covenants – Issuance of Subordinated Obligations) and Section 15(d)(iii) (Negative Covenants – Issuance of Subordinated Obligations), the applicable Member and any Consultant may rely upon the books and records of such Member or any financial statements prepared by such Member which have not been subject to audit by an Independent Accountant if audited financial statements for the particular Fiscal Year selected by such Member are not available.
(iii) Upon the incurrence of any Subordinated Obligations, the applicable Member shall provide to the WIFIA Lender a certificate signed by the City’s Authorized Representative or District’s Authorized Representative, as applicable, (A) specifying the closing date with respect to such Subordinated Obligations and (B) confirming that such Subordinated Obligations are authorized pursuant to, and satisfy the applicable requirements under, this Section 15(d) (Negative Covenants – Issuance of Subordinated Obligations).
(e) No Lien Extinguishment or Adverse Amendments. No Obligor shall, and no Obligor shall permit any Person to, without the prior written consent of the WIFIA Lender, (i) extinguish or impair the Liens on (A) the Net Revenues granted pursuant to the WIFIA FAs or on (B) the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs or the WIFIA Debt Service Account granted pursuant to this Agreement, (ii) amend, modify, terminate,
52 assign, replace or supplement, or permit a waiver of any provision of, either WIFIA FA, (iii) amend, modify, replace or supplement any Related Document (other than the WIFIA FAs, which are addressed in subclause (ii) above) or permit a waiver of any provision thereof in a manner that could adversely affect the WIFIA Lender or could reasonably be expected to result in a Material Adverse Effect, or (iv) terminate, assign or replace any Related Document (other than the WIFIA FAs, which are addressed in subclause (ii) above) in a manner that could adversely affect the WIFIA Lender or could reasonably be expected to have a Material Adverse Effect. (f) No Prohibited Liens. Except for Permitted Liens, neither Member shall create, incur, assume or permit to exist any Lien on its System, the Project, its Net Revenues, or such Member’s respective rights therein. Except for the Liens with respect to the WIFIA Loan for the benefit of the WIFIA Lender, the Borrower shall not create, incur, assume or permit to exist any Lien on the Authority Revenues, the right, title and interest of the Borrower in the WIFIA FAs or the WIFIA Debt Service Account.
(g) Restricted Payments and Transfers. Neither Member shall permit its Revenues or any funds in any other fund or account held by or on behalf of such Member with respect to its System, to be paid or transferred or otherwise applied for purposes other than ownership, operation or maintenance of its System.
(h) No Prohibited Sale, Lease or Assignment. Neither Member shall sell, lease or assign its rights in and to its System, a substantial portion of the assets included in its System, or its rights and obligations under any Construction Contract, in each case unless such sale, lease or assignment (i) could not reasonably be expected to have a Material Adverse Effect and (ii) is made by such Member in the ordinary course of business. (i) Fiscal Year. No Obligor shall at any time adopt any fiscal year other than the Fiscal Year, except with thirty (30) days’ prior written notice to the WIFIA Lender. (j) Mergers and Acquisitions. No Obligor shall, or shall agree to, reorganize, consolidate with or merge into another Person unless (i) such reorganization, merger or consolidation is with or into another entity established by State law and such reorganization, merger or consolidation is permissible by State law, and in each case, does not adversely affect or impair (A) the Net Revenues (which shall be determined by reference by a pro forma provided by the affected Member that shows compliance with the applicable Rate Covenant in the Fiscal Year in which such merger occurs and the Fiscal Year immediately following the Fiscal Year in which such merger occurs), (B) the Authority Revenues or (C) the availability of the Authority Revenues for the payment and security of the obligations of the Borrower under this Agreement, and (ii) the applicable Obligor provides to the WIFIA Lender, no later than sixty (60) days prior to the date of reorganization, consolidation or merger, prior written notice of such reorganization, consolidation or merger and the agreements and documents authorizing the reorganization, consolidation or merger, satisfactory in form and substance to the WIFIA Lender. In addition, such Obligor shall provide all information concerning such reorganization, consolidation or merger as shall have been reasonably requested by the WIFIA Lender.
(k) No Defeasance. Notwithstanding anything to the contrary in any document, the WIFIA Loan shall not be subject to defeasance and no amounts in respect of the WIFIA Loan