AGENDA
CITY OF EL CENTRO
CITY COUNCIL
TUESDAY, JANUARY 17, 2023
City Hall Regular Meeting 11:30 AM
CITY HALL
COUNCIL CHAMBERS
1275 MAIN STREET
EL CENTRO, CA 92243
City of El Centro Page 1
The public may attend in person. Any member of the public attending in person and wishing to make a comment is asked to complete a speaker slip and follow the instructions below regarding “Notice to the Public”. Any member of the public is invited to submit public comments in advance of the meeting to be answered at the meeting. Please email your questions to [email protected] or call 760-337-4515 by January 17, 2023.
COUNCIL MEMBERS, STAFF AND THE PUBLIC MAY ATTEND VIA ZOOM.
To participate and make a public comment in person, via Zoom or telephone, please raise your hand, speak up and introduce yourself.
Join Zoom Meeting:
https://us06web.zoom.us/j/81754713202?pwd=eUh2alNlZ2VXMHRDWWxEaERKeDB4dz09 Optional dial-in number: 1 (669) 900-6833
Meeting ID: 817 5471 3202 Passcode: 916146
Public comments via zoom are subject to the same time limits as those in person.
Mayor & Council Members may be reached at (760) 336-8989 Mayor: Martha Cardenas-Singh Interim City Manager: Cedric Ceseña Mayor Pro-Tem: Sylvia Marroquin City Attorney: Elizabeth Martyn Evans Council Members: Edgard Garcia City Clerk: Norma Wyles
Tomás Oliva
Sonia Carter
11:30 A.M CLOSED SESSION - CONFERENCE ROOM "A"
ROLL CALL (Open Session)
Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 2
CLOSED SESSION PUBLIC COMMENT:
Any member of the public wishing to address the City Council on any matter appearing on the closed session may do so at this time. Unless the Mayor extends the time limit, remarks shall be limited to three (3) minutes. Additional opportunities for Public Comments will be given during and at the end of the meeting.
CITY COUNCIL ADJOURNS INTO CLOSED SESSION
CITY COUNCIL CLOSED SESSION
LABOR NEGOTIATIONS
The City Council will recess to closed session pursuant to Government Code Section 54957.6 for the following purposes of considering employee compensation in the form of fringe benefits, or, as applicable, other related matters within the scope of representation to consider compensation for the librarian, city clerk and related positions. Any compensation increases will be presented for a vote in open session.
CLOSED SESSION PURSUANT TO GOVT. CODE SECTION 54957
Public Employment - Permanent City Manager Position
ANTICIPATED LITIGATION
A point has been reached where, in the opinion of the City Council upon the advice of its legal counsel, and based upon existing facts and circumstances, there is a significant possibility of initiation of litigation against the City under Govt. Code Section 54956.9(d)(2).
POSSIBLE LITIGATION
A point has been reached where, in the opinion of the City Council upon the advice of its legal counsel, and based upon existing facts and circumstances, there is a significant possibility that the City will initiate litigation under Govt Code Section 54956.9(d)(2).
CLOSED SESSION WILL BE CONTINUED FROM 5:00 PM - 5:45 PM
NOTICE TO THE PUBLIC
This is a public meeting. If there is an item on the agenda on which you wish to be heard, you are asked to complete a blue speaker slip and submit it to the City Clerk prior to the start of the meeting. Persons wishing to address the Council are not required to identify themselves (Gov’t Code § 54953.3); however, this information assists the Mayor by ensuring that all persons wishing to address the Council are recognized and also assists the City Clerk in preparing the City Council meeting minutes. When the item is announced and your name is called by the Mayor, please step to the podium and state your name for the record. Unless the Mayor extends the Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 3
time, there is a three (3) minute time limit for each public presentation. If you wish to address the Council concerning any other matter not appearing on the agenda, you may do so during the public comment portion of the agenda.
* Any information provided on the “Speaker Slip” is voluntary and will be public record.
RECONVENE FOR OPEN SESSION 6:00 P.M.
6:00 P.M. OPEN SESSION
ALL TIMES ARE APPROXIMATE AND MAY VARY
CALL TO ORDER:
ROLL CALL BY CITY CLERK
PLEDGE OF ALLEGIANCE
INVOCATION
6:05-6:10 CITY ATTORNEY REPORT ON CLOSED SESSION
6:10-6:15 (TIME MAY VARY) PUBLIC COMMENTS
The City Council welcomes your input. At this time, members of the public may address the City Council on any matter not listed on the posted agenda. Pursuant to the Brown Act, no action will be taken on any issue brought forth under Public Comments. We ask that you please complete a “Speaker Slip” and submit it to the City Clerk prior to the start of the meeting. Although you are not required to identify yourself (Gov’t Code §54953.3); this information on the “Speaker Slip” assists the Mayor that all persons wishing to address the Council are recognized and also assists the City Clerk in preparing the City Council meeting minutes. Unless the Mayor extends the time, there is a three (3) minute time limit for each public presentation. * Any information provided on the “Speaker Slip” is voluntary and will be public record. 6:15-6:20 CONSENT AGENDA
Consent agenda items are approved by one motion. Council members or members of the public may pull consent items to be considered separately at a time determined by the Mayor.
1. Approve Warrant Registers for the Month of December 2022
2. Approve Payroll Registers for the Month of December 2022
3. Approve Treasurer's Report for the Month of December 2022 Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 4
4. Adopt Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF EL CENTRO CONFIRMING THE CONTINUATION OF THE
LOCAL STATE OF EMERGENCY AND THE STATE OF EMERGENCY
PROCLAIMED BY GOVERNOR NEWSOM ON MARCH 4, 2020 AND
AUTHORIZING REMOTE TELECONFERENCE MEETINGS OF THE CITY
COUNCIL FOR THE PERIOD JANUARY 16, 2023 THROUGH FEBRUARY 15, 2023
5. Approval of City Council Minutes of October 04, 2022.
6. Adopt Resolution No. 23- REVIEWING AND CONFIRMING THE
PROCLAMATION OF LOCAL EMERGENCY IN THE CITY OF EL CENTRO
7. Approve Municipal Advisor Agreement with NHA Advisors, LLC for bond issue continuing disclosure requirements.
8. Approve Municipal Advisor Agreement with NHA Advisors, LLC for general and special project services
6:20-6:35 PUBLIC HEARING
9. Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police Station Project)
PRESENTATION: Cedric Cesena, Interim City Manager & Karla Chaparro, Interim Finance Director
RECOMMENDATION:
1) The City Council approve:
Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
EL CENTRO AUTHORIZING AND APPROVING THE ISSUANCE OF LEASE REVENUE BONDS (POLICE STATION PROJECT), 2023 SERIES A, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $49,500,000; APPROVING
THE FORM OF PRELIMINARY OFFICIAL STATEMENT AND THE EXECUTION AND
DELIVERY OF A FINAL OFFICIAL STATEMENT, A SITE AND FACILITY LEASE, A
LEASE AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT AND A BOND
PURCHASE AGREEMENT, AND AUTHORIZING ACTIONS AND EXECUTION OF DOCUMENTS RELATED THERETO; AND
Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 5
6:35-7:25 NEW BUSINESS
10. City Manager New Staffing Recommendation
PRESENTATION: Dulce Bedolla, Human Resource Director
RECOMMENDATION:
Approve the creation of the Public Information Officer position as described in job description
11. Employment Contract for City Clerk
PRESENTATION: Dulce Bedolla, Human Resource Director
RECOMMENDATION:
Adopt Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF EL CENTRO ESTABLISHING THE COMPENSATION AND
EMPLOYMENT TERMS FOR THE POSITION OF CITY CLERK
12. Discussion and Necessary Action Regarding Award of Bid and Authorizing the Execution of a Contract for the McGee Park Phase III Project PRESENTATION: Adriana Nava, Community Services Director RECOMMENDATION:
Adopt Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF EL CENTRO AWARDING THE BID AND AUTHORIZING THE
EXECUTION OF A CONTRACT FOR THE MC GEE PARK PHASE III PROJECT Approve an additional $350,000 in Measure P funds for the McGee Park Phase III Project.
13. Discussion and any necessary action regarding the award of the Extension of Imperial Avenue from Interstate 8 to Wake Avenue and Wake Avenue East of Imperial Avenue - Phase I - STPL-5169 (049)
PRESENTATION: Abraham Campos, PE - Public Works Director/City Engineer RECOMMENDATION:
Adopt Resolution No 23- , RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF EL CENTRO AWARDING THE BID AND AUTHORIZING THE
EXECUTION OF A CONTRACT FOR THE EXTENSION OF IMPERIAL AVENUE FROM INTERSTATE 8 TO WAKE AVENUE AND WAKE AVENUE EAST OF IMPERIAL AVENUE - PHASE I - STPL-5169(049)
Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 6
14. Discussion and any necessary action regarding the award of the Extension of Imperial Avenue from Wake Avenue to Danenberg Drive - Phase II - STBGL 5169 (054)
PRESENTATION: Abraham Campos, PE - Public Works Director / City Engineer
RECOMMENDATION:
Adopt resolution No 23- , RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF EL CENTRO AWARDING THE BID AND AUTHORIZING THE EXECUTION
OF A CONTRACT FOR THE EXTENSION OF IMPERIAL AVENUE FROM WAKE AVENUE TO DANENBERG DRIVE - PHASE II - STBGL-5169 (054)
15. Discussion and any necessary action regarding an appointment to the Library & Community Services Board.
PRESENTATION: Mayor Martha Cardenas-Singh
RECOMMENDATION:
Mayors Recommendation: Appointment to the Library & Community Services Board for (1) unscheduled vacancy Voting member with term ending on June 30, 2025.
16. Discussion and any necessary action regarding appointments to the El Centro Regional Medical Center (ECRMC) Board of Trustees.
PRESENTATION: Mayor Martha Cardenas-Singh
RECOMMENDATION:
Request that the Mayor make two (2) additional appointments to the El Centro Regional Medical Center for the Chief Medical Officer and UCSD management representative.
LEGISLATIVE ACTION
INFORMATIONAL ITEMS
17. Imperial Avenue / Euclid Avenue sink hole emergency work update
18. Imperial Avenue / Scott Avenue sink hole emergency work update
19. Received and referred to Community Development Department/Planning Department, Application for Alcoholic Beverage License regarding the following: Fujisan Sushi, 1560 Ocotillo Dr., Ste. O, El Centro, California Agenda City Council of the City of El Centro January 17, 2023 City of El Centro Page 7
20. Received and referred to Community Development Department/Planning Department, Application for Alcoholic Beverage License regarding the following: Senoritas Bar & Grill, 446 Broadway Ave., El Centro, California 7:25-7:55 TASK FORCE REPORTS AND MAYOR - COUNCIL MEMBER
REPORTS
7:55-8:05 CITY MANAGER REPORT
ADJOURNMENT
Materials related to an item on this Agenda submitted to the City Council after distribution of the agenda packet will be available for public inspection at the Office of the City Clerk, 1275 Main Street, El Centro, California 92243, Monday-Friday during normal business hours.
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, you should contact the office of the City Clerk at (760)337-4515. Notification at least 48 hours prior to the meeting will enable the City to make reasonable arrangement to assure accessibility to this meeting.
City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: Finance
El Centro, CA 92243 Category: Warrants
Prepared By: Esmeralda Nunez
SCHEDULED Department Head: Richard Romero
ACTION ITEM (ID # 5804) DOC ID: 5804
Warrant Registers for December 2022
CITY MANAGER’S RECOMMENDATION:
Approve Warrant Registers for the Month of December 2022 FISCAL IMPACT:
STRATEGIC PLANNING PROGRAM 2022-2027 RELATION:
DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
BACKGROUND:
DISCUSSION:
CONCLUSION:
ATTACHMENTS:
• December 2022 (PDF)
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Attachment: December 2022 (5804 : Warrant Registers - December 2022) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: Finance
El Centro, CA 92243 Category: Informational
Prepared By: Elsa Montoya
SCHEDULED Department Head: Karla Chaparro
ACTION ITEM (ID # 5828) DOC ID: 5828
Approval of Payroll Registers for the Month of December 2022
CITY MANAGER’S RECOMMENDATION:
Approve Payroll Registers for the Month of December 2022 ATTACHMENTS:
• PAYROLL REGISTERS DECEMBER 2022 (PDF)
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El Centro, CA 92243 Category: Report
Prepared By: Anthony G. Plancarte
SCHEDULED Department Head: Karla Chaparro
ACTION ITEM (ID # 5805) DOC ID: 5805
Treasurer's Report - December 2022
CITY MANAGER’S RECOMMENDATION:
Approve Treasurer's Report for the Month of December 2022 FISCAL IMPACT:
STRATEGIC PLANNING PROGRAM 2013-2018 RELATION:
DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
BACKGROUND:
DISCUSSION:
CONCLUSION:
ATTACHMENTS:
• Treasurer's Report - December 2022 (PDF)
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Packet Pg. 108 Attachment: Treasurer's Report - December 2022 (5805 : Treasurer's Report - December 2022) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: City Clerk's Office
El Centro, CA 92243 Category: Resolution
Prepared By: Norma Wyles
SCHEDULED Department Head: Norma Wyles
ACTION ITEM (ID # 5822) DOC ID: 5822
Resolution Authorizing Remote Teleconference Meetings
CITY MANAGER’S RECOMMENDATION:
Adopt Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF EL CENTRO CONFIRMING THE CONTINUATION OF THE LOCAL STATE OF
EMERGENCY AND THE STATE OF EMERGENCY PROCLAIMED BY GOVERNOR NEWSOM ON MARCH 4, 2020 AND AUTHORIZING REMOTE TELECONFERENCE MEETINGS OF THE CITY COUNCIL FOR THE PERIOD JANUARY 16, 2023 THROUGH FEBRUARY 15, 2023
FISCAL IMPACT:
None
STRATEGIC PLANNING PROGRAM 2022-2027 RELATION:
N/A
DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
None
DISCUSSION:
If the City wishes to continue with virtual meetings, then the Council should consider and adopt this Resolution. It will apply to all Brown Act covered bodies within the City.
The previous teleconferencing provisions continue to apply but only for Council members on a trip or vacation do not change.
The bases for determining to continue virtual meeting participation are either the inability effectively to socially distance at public meetings (a health and safety issue) or a determination that a public meeting would present imminent danger to the participants. The inability to socially distance is set out in this Resolution.
In addition, AB 361 states requirements for virtual meetings (many of which were part of various Governor’s orders): requirements for clear noticing, allowing time for public comment during meetings, and observance of all statutory and constitutional rights of participants. The public may not be required to provide written comments in advance of the meeting. The legislation also provides that if the internet connection is lost, the meeting must stop until it is reacquired. Action taken without an internet connection is subject to challenge.
The ability to hold a virtual meeting lasts only as long as the Governor’s declaration of a statewide emergency. The Council may terminate virtual meetings at any time before that.
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Action Item (ID # 5822) Meeting of January 17, 2023
CONCLUSION:
Adopt Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF EL CENTRO CONFIRMING THE CONTINUATION OF THE LOCAL STATE OF
EMERGENCY AND THE STATE OF EMERGENCY PROCLAIMED BY GOVERNOR NEWSOM ON MARCH 4, 2020 AND AUTHORIZING REMOTE TELECONFERENCE MEETINGS OF THE CITY COUNCIL FOR THE PERIOD JANUARY 16, 2023 THROUGH FEBRUARY 15, 2023.
ATTACHMENTS:
• Resolution for Teleconferencing - final (DOCX)
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01/2023/cdz/A22-0005/Reso/EmergDecTeleconferenceMeetings RESOLUTION NO. 23-
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CENTRO CONFIRMING
THE CONTINUATION OF THE LOCAL STATE OF EMERGENCY AND THE STATE OF EMERGENCY PROCLAIMED BY GOVERNOR NEWSOM ON MARCH 4, 2020 AND
AUTHORIZING REMOTE TELECONFERENCE MEETINGS OF THE CITY COUNCIL FOR THE PERIOD JANUARY 16, 2023 THROUGH FEBRUARY 15, 2023 WHEREAS, the City is committed to preserving and encouraging public access and participation in City Council meetings; and
WHEREAS, all meetings of the City’s legislative bodies are open and public, as required by the Ralph M. Brown Act (Cal. Gov. Code 54950 – 54963), so that any member of the public may attend, participate, and watch the City’s legislative bodies conduct their business; and
WHEREAS, Government Code section 54953(e), added to the Brown Act effective October 1, 2021, makes provisions for remote teleconferencing participation in meetings by members of a legislative body, without compliance with the requirements of Government Code section 54953(b)(3), subject to the existence of certain conditions; and WHEREAS, a required condition is that a state of emergency has been declared by the Governor pursuant to Government Code section 8625, proclaiming the existence of conditions of disaster or of extreme peril to the safety of persons and property within the state caused by conditions as described in Government Code section 8558; and WHEREAS, a proclamation is made when there is an actual incident, threat of disaster, or extreme peril to the safety of persons and property within the jurisdictions that are within the City’s boundaries, caused by natural, technological, or human-caused disasters; and WHEREAS, it is further required that state or local officials have imposed or recommended measures to promote social distancing, or have determined that meeting in person would present imminent risks to the health and safety of attendees; and WHEREAS, such conditions now exist in the City, specifically, as the state of emergency declared by the City on March 17, 2020 and by Governor Newsom on March 4, 2020 each continues; and
WHEREAS, social distancing orders are in place at the state and County level for indoor public meetings and, given the size of the Council Chambers imposing such social distancing measures could present an imminent risk to the health and safety of attendees and enforcement of such rules could deter participation in a Board meeting; and WHEREAS, the City Council does hereby find that the combination of the emergency order and the requirement for social distancing has caused, and will continue to cause, conditions of peril to the safety of persons within the City that are likely to be beyond the control of services, personnel, equipment, and facilities of the City, and desires to rely upon
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Packet Pg. 111 Attachment: Resolution for Teleconferencing - final (5822 : Resolution Authorizing Remote Teleconference Meetings) 01/2023/cdz/A22-0005/Reso/EmergDecTeleconferenceMeetings those orders to allow remote attendance at meetings subject to the requirements of the Brown Act; and
WHEREAS, City Council does hereby find that, commencing with the October 5, 2021 meeting, it has been and continues to be justified in conducting its meetings without compliance with paragraph (3) of subdivision (b) of Government Code section 54953, as authorized by subdivision (e) of section 54953, and that such the City has and shall continue to comply with the requirements to provide the public with access to the meetings as prescribed in paragraph (2) of subdivision (e) of section 54953; and WHEREAS, the City has and will continue to comply with all other applicable health and safety orders.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EL CENTRO, CALIFORNIA DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. Recitals. The Recitals set forth above are true and correct and are incorporated into this Resolution by this reference.
Section 2. Confirmation of Emergency. The City Council hereby proclaims that the state of emergency continues throughout the City, and meeting in person would be difficult due to the size of the Board room and therefore present imminent risk to those in attendance.
Section 3. Remote Teleconference Meetings. The City Manager, City Clerk and staff are hereby authorized and directed to take all actions necessary to carry out the intent and purpose of this Resolution including, conducting open and public meetings in accordance with Government Code section 54953(e) and other applicable provisions of the Brown Act.
Section 5. Effective Date of Resolution. This Resolution shall take effect immediately upon its adoption and supersedes Resolution No. 22-134. This Resolution shall be effective until the earlier of (i) 30 calendar days from the date of its adoption on January 17, 2023; (ii) or such time the City Council adopts a subsequent resolution in accordance with Government Code section 54953(e)(3) to extend the time during which all City bodies subject to the Brown Act may continue to teleconference without compliance with paragraph (3) of subdivision (b) of section 54953.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of El Centro held on the day of , 2023.
CITY OF EL CENTRO
By ___________________________
Martha Cardenas-Singh, Mayor
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Packet Pg. 112 Attachment: Resolution for Teleconferencing - final (5822 : Resolution Authorizing Remote Teleconference Meetings) 01/2023/cdz/A22-0005/Reso/EmergDecTeleconferenceMeetings ATTEST:
By _________________________
Norma Wyles, City Clerk
APPROVED TO FORM:
Office of the City Attorney
By__________________________
Elizabeth Martyn, City Attorney
STATE OF CALIFORNIA )
COUNTY OF IMPERIAL ) ss
CITY OF EL CENTRO )
I, Norma Wyles, City Clerk of the City of El Centro, California, do hereby certify that the foregoing Resolution No. 23- was duly and regularly adopted at a regular meeting of the City Council of the City of El Centro, California held on the day of , 2023, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
By ___________________________
Norma Wyles, City Clerk
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Packet Pg. 113 Attachment: Resolution for Teleconferencing - final (5822 : Resolution Authorizing Remote Teleconference Meetings) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: City Clerk's Office
El Centro, CA 92243 Category: Minutes
Prepared By: Norma Wyles
SCHEDULED Department Head: Norma Wyles
ACTION ITEM (ID # 5818) DOC ID: 5818
Approval of City Council Minutes of October 04, 2022.
CITY MANAGER’S RECOMMENDATION:
Approval of City Council Minutes of October 04, 2022.
ATTACHMENTS:
• 10-04-22 Regular CC Minutes (DOCX)
5 Packet Pg. 114
Book 37
REGULAR MEETING
EL CENTRO CITY COUNCIL
CITY HALL, COUNCIL CHAMBERS
1275 MAIN STREET, EL CENTRO, CA
TUESDAY, OCTOBER 4, 2022 11:30 A.M.
The El Centro City Council met in a regular session on Tuesday, October 4, 2022 at 11:30 a.m. in Conference Room “A”, El Centro City Hall, 1275 Main Street, El Centro, California for the purpose of closed session.
PRESENT: Council: Viegas-Walker, Cardenas-Singh, Marroquin City Clerk Wyles, City Manager Piedra, City Attorney Martyn Evans ABSENT: Council: Garcia, Oliva (arrived at 12:20 p.m.)
Closed Session Public Comment
None
CITY COUNCIL CLOSED SESSION
Moved by Viegas-Walker, second by Marroquin, to adjourn into closed session for:
EL CENTRO REGIONAL MEDICAL CENTER
Pursuant to Govt. Code Section 37606.1(b), for the purposes only of discussion and deliberation on reports involving hospital trade secrets as defined in Civil Code Section 3426.1(d) which, if prematurely disclosed, would create the probability of depriving the hospital of a substantial economic benefit. There will be discussion of three (3) items: hospital service, hospital programs and hospital facilities.
ANTICIPATED LITIGATION BY THE CITY
Significant Exposure to Litigation Against the City pursuant to Govt. Code Section 54956.9(d)(4). A point has been reached where, in the opinion of the City Council on the advice of its legal counsel, based on existing facts and circumstances, there is a significant possibility of litigation initiated by City. There is one (1) potential case.
Motion unanimously carried.
Closed Session concluded at 1:45 p.m.
City Council recessed to 6:00 p.m.
OPEN SESSION
The El Centro City Council met in a regular session on Tuesday, October 4, 2022 at 6:01 p.m. in Council Chambers, El Centro City Hall, 1275 Main Street, El Centro, California.
PRESENT: Council: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin City Clerk Wyles, City Manager Piedra, City Attorney Martyn Evans ABSENT: Garcia
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Packet Pg. 115 Attachment: 10-04-22 Regular CC Minutes (5818 : Approval of City Council Minutes) Book 37
Pledge of Allegiance to the flag of the United States of America was led by Council Member Marroquin, and Invocation was given by Mayor Oliva.
CITY ATTORNEY REPORT ON CLOSED SESSION
During closed session the City Council discussed agenda items for a joint meeting with ECRMC joint meeting on Monday. They also received a court report from the Fire Chief which will be expanding on a press release regarding an improper organization pretending to act as a Fire Department that is open at the City of El Centro.
PRESENTATIONS AND ANNOUNCEMENTS BY MAYOR
Item #2 was moved up by Mayor Oliva.
*2. Introduction of PD Support Dog – Presented by Heather Johnson.
1. Quarterly Report by IV Regional Chamber of Commerce – Not present
3. Certificate of Recognition – for Tai Chi Instructor, Alex Lee.
4. Proclamation – National Fore Prevention Week, October 9-15, 2022. Presented by Interim Fire Chief Cedric Cesena.
PUBLIC COMMENTS
Public comments were received by Ruben Vildosola.
CONSENT AGENDA
Moved by Viegas-Walker, second by Marroquin, approving consent agenda items #5 – #6.
5. Approval of city council minutes of August 2, 2022, August 16, 2022 August 25, 2022 and September 6, 2022.
6. Approval of Bid Documents for the McGee Park Phase 3 Project and authorize the Community Services Department to send project out to bid.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ASTAINED: None
NEW BUSINESS
7. Moved by Viegas-Walker, second by Cardenas-Singh, approval of Community Sponsorship request from WomanHaven. City Council approved a sponsorship of $700.00 for their Annual Mariposa Award Fundraiser Gala event. Christian Gamble, Kelly, Ranasinghe and Gina Vargas spoke on behalf of WomanHaven.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
5.a
Packet Pg. 116 Attachment: 10-04-22 Regular CC Minutes (5818 : Approval of City Council Minutes) Book 37
8. Moved by Viegas-Walker, second by Cardenas-Singh, approved Request for Proposals for Security Services at various City Facilities. Council Member Viegas-Walker and Council Member Marroquin had several questions regarding the request for proposal which Ms. Nava and Police Chief Sawyer addressed.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
9. Moved by Viegas-Walker, second by Cardenas-Singh, approval of Measure P funds for City Hall HVAC system rehabilitation and modernization project, Option 1. Option 1 provides long term performance and redundancy. In addition, RTU’s are easier to maintain with local staff and vendors. The above estimates will be revised once design is complete to account for facility conditions and bidding environment. Staff will return to Council should budget revisions be necessary and to award the construction contract. Sky Ainsworth spoke regarding this item.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
10. Moved by Viegas-Walker, second Marroquin, adoption of Resolution No. 22-104, RESOLUTION OF
THE CITY COUNCIL OF THE CITY OF EL CENTRO APPROVING AND AUTHORIZING THE PURCHASE OF A 2022 JOHN DEERE 310LEP FOR THE WATER TREATMENT PLANT.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
11. Moved by Viegas-Walker, second Marroquin, adoption of Resolution No. 22-105, RESOLUTION OF
THE CITY COUNCIL OF THE CITY OF EL CENTRO AUTHORIZING THE PURCHASE OF A CATERPILLAR 415-07 BACKHOE LOADER FOR THE WASTEWATER TREATMENT PLANT AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
ADDED NEW BUSINESS ITEM 11b.
Moved by Viegas-Walker, second by Cardenas-Singh
11b. Moved by Viegas-Walker, second by Cardenas-Singh, adoption of Resolution No. 22-106,
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CENTRO AUTHORIZING AN
EMERGENCY CONTRACT CHANGE ORDER FOR THE REPAIR OF THE IMPERIAL AVENUE
SEWER MAIN NEAR EUCLID AVENUE
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
5.a
Packet Pg. 117 Attachment: 10-04-22 Regular CC Minutes (5818 : Approval of City Council Minutes) Book 37
12. Presentation by Elizabeth Marty, City Attorney, clarification and authorization for City departments’ use of the City seal, logos and other insignia.
Moved by Viegas-Walker, second by Marroquin, clarification and authorization for City departments’ use of City Seal, logos and other insignia.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
City Council recessed and convened as the Successor Agency to the Redevelopment Agency at 7:34 p.m.
SUCCESSOR AGENCY TO THE REDEVOPMENT AGENCY
PRESENT: Agency Members: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin Secretary Wyles, Executive Officer Manager Piedra, Agency Counsel Martyn Evans ABSENT: Agency Member: Garcia
13. Moved by Viegas-Walker, second by Marroquin, adoption of Resolution No. SA 22-04,
RESOLUTION OF THE SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY OF THE CITY OF EL CENTRO DECLARING PURSUANT TO GOVERNMENT CODE SECTION 54221
THAT CERTAIN PROPERTIES OWNED BY THE SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF EL CENTRO ARE SURPLUS AND NOT NECESSARYT FOR THE AGENCY’S USE.
AYES: Viegas-Walker, Oliva, Cardenas-Singh, Marroquin
NOES: None
ABSENT: Garcia
ABSTAINED:None
Successor Agency to the Redevelopment Agency adjourned at 7:39 p.m. and reconvened at City Council.
LEGISLATIVE ACTION
None
TASK FORCE AND MAYOR & COUNCIL MEMBERS REPORTS
Mayor and Council Members reported on their activities since last City Council meeting and upcoming events.
CITY MANAGER REPORT
Reported on activities.
ADJOURNMENT
With no further business to come before City Council, meeting was adjourned at 7:55 p.m. __________________________
Norma Wyles, City Clerk
APPROVED BY:
________________________________
Tomás Oliva, Mayor
5.a
Packet Pg. 118 Attachment: 10-04-22 Regular CC Minutes (5818 : Approval of City Council Minutes) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: Engineering Division
El Centro, CA 92243 Category: Resolution
Prepared By: Abraham Campos
SCHEDULED Department Head: Abraham Campos
RESOLUTION (ID # 5826) DOC ID: 5826
Renewal of Resolution Declaring a Local Emergency in the City of El Centro due to Hurricane Kay
CITY MANAGER’S RECOMMENDATION:
Adopt Resolution No. 23- REVIEWING AND CONFIRMING THE PROCLAMATION
OF LOCAL EMERGENCY IN THE CITY OF EL CENTRO
BACKGROUND:
On September 9, 2022, Tropical Storm Kay bands resulted in rains and damage to critical infrastructure in the City of El Centro.
In a time of disaster, the City's Municipal Code Section 8-29 empowers the City Manager as Director of Emergency Services, the ability to issue a proclamation of emergency for local emergencies as defined in City Municipal Code Section 8-3.
A Proclamation of Emergency was issued on September 21, 2022 through Resolution 22-103 by Council.
The proclamation was renewed by Council on November 15, 2022.
DISCUSSION:
State law requires that a city adopt and thereafter review a declaration of emergency every 60 days. This review and confirmation of the local declaration of emergency indicates the City’s on-going emergency authority and meets the requirements for funding, should any be available.
CONCLUSION:
Adopt Resolution No. 23- REVIEWING AND CONFIRMING THE PROCLAMATION
OF LOCAL EMERGENCY IN THE CITY OF EL CENTRO
ATTACHMENTS:
• Reso 23- Review and Confirm Kay Emergency (PDF)
6 Packet Pg. 119
09/2022/liz/A22-0206/Reso/DeclEmer/HurricanKay
RESOLUTION NO. 23-
REVIEWING AND CONFIRMING THE PROCLAMATION OF LOCAL EMERGENCY IN THE
CITY OF EL CENTRO
WHEREAS, the California Emergency Services Act, including, but not limited to, Government Code Sections 8630 et seq, and Chapter 8, Article 1 empower the City Manager to proclaim the existence or threatened existence of a local emergency in the City when the City Council is not in session; and
WHEREAS, a local emergency as defined in City Municipal Code Section 8.2 now exists in the City due to the former Hurricane Kay residual weather system, then Tropical Storm Kay, a storm event which took place on the weekend of September 9, 2022, and which resulted in damage to critical infrastructure including but not limited to the City’s sewer system, roads and other properties; and
WHEREAS, the City Council was not in session on Wednesday, September 21, 2022 when it became necessary to proclaim such local emergency; and WHEREAS, representatives of Imperial County and the Imperial Irrigation District have communicated with the El Centro Interim Fire Chief (acting as the Director of Emergency Services), Imperial County Fire Chief and OES Coordinator, and have indicated that the Imperial County Board of Supervisors and the Imperial Irrigation District each expects to or has passed a resolution proclaiming a local emergency within their jurisdictions as a result of the storm event; and
WHEREAS, the storm event has created conditions of extreme peril warrant and necessitate the proclamation of the existence of a Local Emergency as defined in City Code Section 8.2; and
WHEREAS, these conditions are or are likely to be beyond the control of the services, personnel, equipment, roads, sewers and facilities, of the City; and WHEREAS, on October 4, 2022, pursuant to Resolution No. 22-103, the City Council of the City of El Centro proclaimed a local emergency for the reasons set out above; and WHEREAS, Govt. Code Section 8630(c) provides that the City Council shall review the continuing need for such declaration of emergency every 60 days thereafter until the emergency terminates; and
WHEREAS, the City Council renewed the Declaration in their November 15, 2022 City Council Meeting; and
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Packet Pg. 120 Attachment: Reso 23- Review and Confirm Kay Emergency (5826 : Renewal Hurricane Kay Declaration of Emergency) 09/2022/liz/A22-0206/Reso/DeclEmer/HurricanKay
WHEREAS, the conditions of peril resulting from Hurricane Kay, and specifically but not limited to certain sink holes in or around City facilities, continue and new conditions may still be discovered; and
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EL CENTRO HEREBY PROCLAIMS AND ORDERS:
1. That the recitals are true and correct and are incorporated herein as though set forth in full.
2. The City Council has reviewed the proclamation of Local Emergency and finds that such emergency continues.
The City Council therefore finds that Resolution No. 22-103 shall remain in full force and effect so that a Local Emergency continues to exist in the City of El Centro.
3. During the existence of said Local Emergency, the powers, functions and duties of the Director of Emergency Services and the emergency organization of the City shall be those prescribed by the laws of the State of California, including but not limited to Government Code Section 8634, by Chapter 8 Article 1 of the City Code and by the City Emergency Plan.
4. During the existence of this Local Emergency, the City shall follow and impose all directives, mandates, Executive Orders and any other emergency-related restrictions issued by the State of California.
5. That during the existence of this Local Emergency, the powers, functions and duties of the emergency organization of the City shall be prescribed by state law, ordinances and resolutions of the City.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of El Centro, California held on the 17th day of January, 2023.
CITY OF EL CENTRO
By _____________________
Martha Cardenas-Singh, Mayor
ATTEST:
By _____________________________
Norma Wyles, City Clerk
6.a
Packet Pg. 121 Attachment: Reso 23- Review and Confirm Kay Emergency (5826 : Renewal Hurricane Kay Declaration of Emergency) 09/2022/liz/A22-0206/Reso/DeclEmer/HurricanKay
APPROVED AS TO FORM:
Office of the City Attorney
By________________________________
Elizabeth L. Martyn, City Attorney
STATE OF CALIFORNIA )
COUNTY OF IMPERIAL ) ss
CITY OF EL CENTRO )
I, Norma Wyles, City Clerk of the City of El Centro, California do hereby certify that the foregoing Resolution No. 23- was duly and regularly adopted at a regular meeting of the City Council of the City of El Centro, California, held on the 17th day of January, 2023, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAINED:
By__________________________
Norma Wyles, City Clerk
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Packet Pg. 122 Attachment: Reso 23- Review and Confirm Kay Emergency (5826 : Renewal Hurricane Kay Declaration of Emergency) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: City Attorney's Office
El Centro, CA 92243 Category: Agreement
Prepared By: Norma Wyles
SCHEDULED Department Head: Cedric Cesena
ACTION ITEM (ID # 5827) DOC ID: 5827
Municipal Advisor Agreement with NHA Advisors, LLC
CITY MANAGER’S RECOMMENDATION:
Approve Municipal Advisor Agreement with NHA Advisors, LLC for bond issue continuing disclosure requirements.
FISCAL IMPACT:
Annual cost of $18,250 for 5 years. Depending upon the nature of the bond issue, that cost will be paid by the underlying enterprise fund or by the general fund. This appropriation and budget item, if approved, will need to be added to the budget by mid-year adjustment.
STRATEGIC PLANNING PROGRAM 2022-2027 RELATION:
Goal #2 - Environmental Sustainability & Infrastructure DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
Yes
BACKGROUND:
The City and Successor Agency have these outstanding bond issues:
Lease Revenue Bonds, 2021 Series A General Fund $2,000
Lease Revenue Refunding Bonds, 2021 Series B General Fund $1,000(2) Wastewater Revenue Refunding Bonds, 2014 Series A Wastewater Fund $2,750 Wastewater Revenue Refunding Bonds, 2012 Series A Wastewater Fund $1,000(2) Water Revenue Refunding Bonds, 2014 Series A Water Fund $2,750 Tax Allocation Refunding Bonds, Series 2018A Successor Agency $2,750 Revenue Bonds, Series 2011 Successor Agency $1,000(2)
Tax Allocation Bonds, Series 2007B (Taxable)
For each of these, federal law requires that the City annually file one or more types of continuing disclosure requirement confirming that there have been no material changes to the representations in the bond documents. There are administrative and monetary penalties for failure to file accurate and complete annual statements in a timely manner. While the Finance Department has never failed to meet this obligation, continuing disclosure details and obligations are increasing, as is their review.
This agreement is separate from the proposed agreement with NHA for more general, 7 Packet Pg. 123
Action Item (ID # 5827) Meeting of January 17, 2023
on-call financial services.
DISCUSSION:
This agreement essentially replaces staff responsibilities, time and costs with consulting services. Timely and accurate disclosure is especially important given heightened review by the federal government. Given the penalties for failure to report or report in a timely and complete manner, this type of consulting arrangement is especially important when there are changes in the Finance Department and heavy workloads. NHA performs this service for a number of other municipal clients.
NHA has a consistent and ongoing relationship with the City (specifically including the Finance Department) and has worked well with staff in the role of independent financial adviser. The cost to provide such ongoing services is $18,250 annually for five (5) years commencing with 2023 and ending on June 30, 2027.
CONCLUSION:
Recommend approval of the Municipal Advisory Agreement for Continuing Disclosure Services.
ATTACHMENTS:
• Agreement - Municipal Advisor with NHA Advisors, LLC. (DOCX) 7 Packet Pg. 124
January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
MUNICIPAL ADVISOR AGREEMENT
BETWEEN
CITYOF EL CENTRO
AND
NHA ADVISORS, LLC
THIS AGREEMENT for consulting services is made by and between the City of El Centro (the “City”) and NHA Advisors, LLC (“Consultant”) (together referred to as the “Parties”) as of January , 2023 (the “Effective Date”).
SECTION 1 – SERVICES
Asthe City’s registered municipal advisor,subject to the terms and conditions set forth in this Agreement, Consultant shall provide to the City the services described in the Scope of Services attached as Exhibit A, and incorporated herein, at the time and place and in the manner specified therein. In the event of a conflict in or inconsistency between the terms of this Agreement and Exhibit A, the Agreement shall prevail.
If acting in the capacity of an Independent Registered Municipal Advisor (“IRMA”) with regard to the “IRMA exemption” of the SEC Rule, Consultant will review all third‐party recommendations submitted to the City in writing, if requested.
Recommendation. If Consultant makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the City and is within the scope of the engagement, Consultant will determine, based on the information obtained through reasonable diligence of Consultant whether a municipal securitiestransaction or municipal financial product issuitable forthe City. In addition, Consultant will inform the City of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which Consultant reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and • whether Consultant hasinvestigated or considered otherreasonably feasible alternatives to the recommendation that might also or alternatively serve the City’s objectives.
If the City elects a course of action that is independent of or contrary to the advice provided by Consultant, Consultant is not required on that basis to disengage from the City.
1.1 Term of Services. The term of this Agreement shall begin on the Effective Date and shall end on June 30, 2027, unless the term of the Agreement is otherwise terminated or extended, as provided for in Section 8. The time provided to Consultant to complete the services required by this Agreement shall not affect the City’s right to terminate the Agreement, as referenced in Section 8.
1.2 Standard of Performance. Consultant shall perform all services required pursuant to this Agreement according to the standards observed by a competent practitioner of the profession in which Consultant is engaged.
7.a
Packet Pg. 125 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
1.3 Assignment of Personnel. Consultant shall assign only competent personnel to perform services pursuant to this Agreement. In the event the City, in its sole discretion, at any time during the term of this Agreement, desires the reassignment of any such persons, Consultant shall, immediately upon receiving notice from the City of such desire of the City, reassign such person or persons.
1.4 Time. Consultant shall devote such time to the performance of services pursuant to this Agreement as may be reasonably necessary to meet the standard of performance provided in Section 1.1 above and to satisfy Consultant’s obligations hereunder.
SECTION 2 ‐ COMPENSATION
The City hereby agrees to pay Consultant compensation for services outlined in the Scope of Services (Exhibit A) under the Compensation Schedule (Exhibit B).
The City shall pay Consultant for services rendered pursuant to this Agreement at the time and in the manner set forth herein. The payments specified below shall be the only payments from the City to Consultant for services rendered pursuant to this Agreement. Consultant shall submit all invoices to the City in the manner specified herein. Except as specifically authorized by the City in writing, Consultant shall not bill the City for duplicate services performed by more than one person.
Consultant and the City acknowledge and agree that compensation paid by the City to Consultant under this Agreement is based upon Consultant’s estimated costs of providing the services required hereunder, including salaries and benefits of employees and subcontractors of Consultant. Consequently, the Parties further agree that compensation hereunder is intended to include the costs of contributions to any pensions and/or annuities to which Consultant and its employees, agents, and subcontractors may be eligible. The City therefore has no responsibility for such contributions beyond compensation required under this Agreement.
2.1 Invoices. Consultant shall submit invoices, not more often than once a month during the term of this Agreement, based on the cost for services performed and reimbursable costs incurred prior to the invoice date. Invoices shall contain the following information:
▪ The beginning and ending dates of the billing period. ▪ At the City’s option, for each work item in each task, a copy of the applicable time entries or time sheets shall be submitted showing the name of the person doing the work, the hours spent by each person, a brief description of the work, and each reimbursable expense.
▪ For work performed on an hourly Compensation Schedule, the total number of hours of work performed under the Agreement by Consultant and each employee, agent, and subcontractor of Consultant performing services hereunder.
2.2 Monthly Payment. The City shall make monthly payments, based on invoices received, for services satisfactorily performed, and for authorized reimbursable costs incurred. The City shall have 30 days from the receipt of an invoice that complies with all of the requirements above to pay Consultant.
7.a
Packet Pg. 126 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
2.3 Final Payment. The City shall pay the final sum due pursuant to this Agreement within 60 days after completion of the services and submittal to the City of a final invoice if all services required have been satisfactorily performed.
2.4 Total Payment. The City shall pay for the services to be rendered by Consultant pursuant to this Agreement. The City shall not pay any additional sum for any expense or cost whatsoever incurred by Consultant in rendering services pursuant to this Agreement. The City shall make no payment for any extra, further, or additional service pursuant to this Agreement.
In no event shall Consultant submit any invoice for an amount in excess of the maximum amount of compensation provided above either for a task or for the entire Agreement, unless the Agreement is modified prior to the submission of such an invoice by a properly executed change order or amendment.
2.5 Hourly Fees. Fees for work performed by Consultant on an hourly basis shall not exceed the amounts shown on the compensation schedule attached hereto as Exhibit B.
2.6 Reimbursable Expenses. Reimbursable expenses are specified in Exhibit B. Expenses will typically include third‐party data collection or services not provided by the City.
Reimbursable expenses are in addition to the total amount of compensation provided under this Agreement that shall not be exceeded.
2.7 Payment of Taxes. Consultant is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes.
2.8 Payment upon Termination. In the event the City or Consultant terminates this Agreement pursuant to Section 8, the City shall compensate Consultant for all outstanding costs and reimbursable expenses incurred for work satisfactorily completed as of the date of written notice of termination. Consultant shall maintain adequate logs and timesheets to verify costs incurred to that date.
2.9 Authorization to Perform Services. Consultant is not authorized to perform any services or incur any costs whatsoever under the terms of this Agreement until receipt of authorization from the Contract Administrator.
SECTION 3 ‐ FACILITIES AND EQUIPMENT
Except as set forth herein, Consultant shall, at its sole cost and expense, provide all facilities and equipment that may be necessary to perform the servicesrequired by this Agreement. The City shall make available to Consultant only the facilities and equipment listed in this section, and only under the terms and conditions set forth herein.
The City shall furnish physical facilities such as desks, filing cabinets, and conference space, as may be reasonably necessary for Consultant’s use while consulting with the City employees and reviewing records and the information in possession of the City. The location, quantity, and time of furnishing those facilities shall be in the sole discretion of the City. In no event shall the City be obligated to furnish any facility that may involve incurring any direct expense, including but not limited to computer, long‐distance telephone or other communication charges, vehicles, and reproduction facilities.
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
SECTION 4 ‐ INSURANCE REQUIREMENTS
Before beginning any work under this Agreement, Consultant, at its own cost and expense, unless otherwise specified below, shall procure the types and amounts of insurance listed below against claims for injuries to persons or damages to property that may arise from or in connection with the performance of the work hereunder by Consultant and its agents, representatives, employees, and subcontractors.
Consistent with the following provisions, Consultant shall provide proof satisfactory to the City of such insurance that meets the requirements of this section and under forms of insurance satisfactory in all respects, and that such insurance is in effect prior to beginning work to the City. Consultant shall maintain the insurance policies required by this section throughout the term of this Agreement. The cost of such insurance shall be included in Consultant’s bid. Consultantshall not allow any subcontractor to commence work on any subcontract until Consultant has obtained all insurance required herein for the subcontractor(s) and provided evidence that such insurance is in effect to the City. Verification of the required insurance shall be submitted and made part of this Agreement prior to execution. Consultant shall maintain all required insurance listed herein for the duration of this Agreement.
4.1 Workers’ Compensation. Consultant shall, at its sole cost and expense, maintain Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance for any and all persons employed directly or indirectly by Consultant. The Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance shall be provided with limits of not less than $1,000,000 per accident. In the alternative, Consultant may rely on a self‐ insurance program to meet those requirements, but only if the program of self‐insurance complies fully with the provisions of the California Labor Code. Determination of whether a self‐insurance program meets the standards of the Labor Code shall be solely in the discretion of the Contract Administrator. The insurer, if insurance is provided, or Consultant, if a program ofself‐insurance is provided,shall waive all rights ofsubrogation against the City and its officers, officials, employees, and volunteers for loss arising from work performed under this Agreement.
4.2 Commercial General and Automobile Liability Insurance.
4.2.1 General Requirements. Consultant, at its own cost and expense, shall maintain commercial general and automobile liability insurance for the term of this Agreement in an amount not less than $1,000,000 per occurrence, combined single limit coverage for risks associated with the work contemplated by this Agreement. If Commercial General Liability Insurance or an Automobile Liability form or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the work to be performed under this Agreement or the general aggregate limit shall be at least twice the required occurrence limit. Such coverage shall include but shall not be limited to, protection against claims arising from bodily and personal injury, including death resulting therefrom, and damage to property resulting from activities contemplated under this Agreement, including the use of owned and non‐owned automobiles.
4.2.2 Minimum Scope of Coverage. Commercial general coverage shall be at least as broad as Insurance Services Office Commercial General Liability occurrence form CG 0001 (most recent edition) covering comprehensive General Liability on an “occurrence” basis. Automobile coverage shall be at least as broad as Insurance
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
Services Office Automobile Liability form CA 0001 (most recent edition), Code 1 (any auto). No endorsement shall be attached limiting the coverage.
4.2.3 Additional Requirements. Each of the following shall be included in the insurance coverage or added as a certified endorsement to the policy:
a) The Insurance shall cover on an occurrence or an accident basis, and not on a claims‐made basis.
b) The City, its officers, officials, employees, and volunteers are to be covered as additional insured as respects: liability arising out of work or operations performed by or on behalf of Consultant; or automobiles owned, leased, hired, or borrowed by Consultant.
c) For any claims related to this Agreement or the work hereunder, Consultant’s insurance covered shall be primary insurance as respects the City, its officers, officials, employees, and volunteers. Any insurance or self‐insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of Consultant’s insurance and shall not contribute with it.
d) Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled by either party, except after 30 days’ prior written notice has been provided to the City.
4.3 Professional Liability Insurance.
4.3.1 General Requirements. Consultant, at its own cost and expense, shall maintain for the period covered by this Agreement professional liability insurance for licensed professionals performing work pursuant to this Agreement in an amount not less than $2,000,000 covering the licensed professionals’ errors and omissions. Any deductible orself‐insured retention shall not exceed $250,000 per claim.
4.3.2 Claims‐Made Limitations. The following provisions shall apply if the professional liability coverage is written on a claims‐made form:
a) The retroactive date of the policy must be shown and must be before the date of the Agreement.
b) Insurance must be maintained, and evidence of insurance must be provided for at least five years after completion of the Agreement or the work, so long as commercially available at reasonable rates. c) If coverage is canceled or not renewed and it is not replaced with another claims‐made policy form with a retroactive date that precedes the date of this Agreement, Consultant must purchase an extended period coverage for a minimum of five years after completion of work under this Agreement.
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
d) A copy of the claim reporting requirements must be submitted to the City for review prior to the commencement of any work under this Agreement.
4.4 All Policies Requirements.
4.4.1 Acceptability of Insurers. All insurance required by this section is to be placed with insurers with a Best’s rating of no less than A:VII.
4.4.2 Verification of Coverage. Prior to beginning any work under this Agreement, Consultant shall furnish the City with complete copies of all policies delivered to Consultant by the insurer, including complete copies of all endorsements attached to those policies. All copies of policies and endorsements shall show the signature of a person authorized by that insurer to bind coverage on its behalf. If the City does not receive the required insurance documents prior to Consultant beginning work, it shall not waive Consultant’s obligation to provide them. The City reserves the right to require complete copies of all required insurance policies at any time.
4.4.3 Deductibles and Self‐Insured Retentions. Consultant shall disclose to and obtain the written approval of the City for the self‐insured retentions and deductibles before beginning any of the services or work called for by any term of this Agreement. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self‐insured retentions as respects the City, its officers, employees, and volunteers; or Consultant shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration and defense expenses.
4.4.4 Wasting Policies. No policy required by this Section 4 shall include a “wasting” policy limit (i.e., limit that is eroded by the cost of defense).
4.4.5 Waiver of Subrogation. Consultant hereby agrees to waive subrogation which any insurer or contractor may require from vendor by virtue of the payment of any loss. Consultant agrees to obtain any endorsements that may be necessary to affect this waiver of subrogation.
The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the entity for all work performed by the contractor, its employees, agents, and subcontractors.
4.4.6 Subcontractors. Consultant shall include all subcontractors as insureds under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all the requirements stated herein.
4.4.7 Primary/non-contributing: Coverage provided by Consultant shall be primary and any insurance or self-insurance procured or maintained by City shall not be required to contribute with it. None of the coverages require here will be in compliance with these requirements is they include any limiting endorsement of any kind that has not first been approved by the City.
4.4.8 City’s rights of enforcement. In the event any police of insurance required under
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
this Agreement does not comply with these requirements or is canceled and not replaced, City has the right, but not the duty, to obtain insurance it deems necessary; City shall be reimbursed by Consultant or may withhold such amounts from funds due to Consultant, or may cancel the agreement.
4.4.9 Non-estoppel: Consultant acknowledges and agrees that any actual or alleged failure on the part of the city to inform Consultant of non-compliance imposes no additional obligations on the City nor does it waive City’s rights under this Agreement.
4.4.10 Requirements not limiting. If the Consultant maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for those higher limits. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. The City reserves the right to change the aounts and types of insurance required by giving the Consultant 90 days prior written notice of such change. If such change results in substantial additional cost, the City and Consultant may negotiate the payment of that cost.
4.4.11 Notice of Cancellation. Consultant shall require that its insurance agent or broker provide City with a 30 day prior notice of cancellation (except for nonpayment for which a ten day notice is required) or nonrenewal of coverage for each required coverage.
4.4.12 Additional insured status. General liability policies shall bbe endorsed to provide that City, its officers, agents, employees and volunteers shall be additional insured under such policies.
4.4.13 Notice of Claims: Consultant shall give City prompt and timely notice of any claims or suits that arise out of or result from Consultant’s performance under this Agreement or that may involve coverage under any of the required policies.
4.4.14 Separation of insureds: A severability of interests provision must apply for all additional insureds ensuring that Consultant’s insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of liability. The policies shall not contain any cross-liability exclusions.
4.5 Remedies. In addition to any other remedies the City may have if Consultant fails to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, the City may, at its sole option exercise any of the
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
following remedies, which are alternatives to other remedies the City may have and are not the exclusive remedy for Consultant’s breach:
▪ obtain such insurance and deduct and retain the amount of the premiums for such insurance from any sums due under the Agreement;
▪ order Consultant to stop work under this Agreement or withhold any payment that becomes due to Consultant hereunder, or both stop work and withhold any payment, until Consultant demonstrates compliance with the requirements hereof; and/or
▪ terminate this Agreement.
SECTION 5 – CONSULTANT’S RESPONSIBILITIES AND INDEMNIFICATION Consultant is registered as a Municipal Advisor with the SEC and Municipal Securities Rulemaking Board (“MSRB”). As such, Consultant has a fiduciary duty to the City and must provide both a Duty of Care and a Duty of Loyalty that entail the following.
Duty of Care:
a) exercise due care in performing its municipal advisory activities; b) possessthe degree of knowledge and expertise needed to provide the City with informed advice; c) make a reasonable inquiry as to the facts that are relevant to the City’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the City; and
d) undertake a reasonable investigation to determine that Consultant is not forming any recommendation on materially inaccurate or incomplete information; Consultant must have a reasonable basis for:
i. any advice provided to or on behalf of the City;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the City, any other party involved in the municipal securities transaction or municipal financial product, or investors in the City securities; and iii. any information provided to the City or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty:
Consultant must deal honestly and with the utmost good faith with the City and act in the City’s best interests without regard to the financial or other interests of Consultant. Consultant will eliminate or provide full and fair disclosure (included herein) to the City about each material conflict of interest (as applicable). Consultant will not engage in municipal advisory activities with the City as a municipal entity, if it cannot manage or mitigate its conflictsin a mannerthat will permit it to act in the City’s best interests.
Conflicts of Interest and Other Matters Requiring Disclosures As ofthe commencement date of the Project,there are no actual or potential material conflicts of interest, other than those noted below, that Consultant is aware of that might impair its ability to render unbiased and competent advice orto fulfill itsfiduciary duty. If Consultant becomes aware of any material potential
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
conflict of interest that arises after this disclosure, Consultant will disclose the detailed information in writing to the City in a timely manner.
The following are potential conflicts of interest to be considered. • Fees under this Project, while set at fixed fee levels, are based on hourly fees of Consultant’s personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreed‐upon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for Consultant to recommend alternatives that would result in more hours worked. This conflict of interest will not impair Consultant’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City. • The fee paid to Consultant increases the cost of investment to the City. The increased cost occurs from compensating Consultant for municipal advisory services provided. • Consultant serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another Consultant client. For example, Consultantserves as municipal advisorto other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the City. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, Consultant could potentially face a conflict of interest arising from these competing client interests. Consultant fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the City. • Gerald Craig Hill, the Managing Principal of NHA Advisors is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA Advisors’ clients. HdL Companies have affiliatesincluding, but not limited to, HdL Coren & Cone. From time to time, NHA Advisors utilizes the services of HdL Coren & Cone for its clients. NHA Advisors is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.
• Consultant does not have any affiliate that provides any advice,service, or product to or on behalf of the City that is directly or indirectly related to the municipal advisory activities to be performed by Consultant.
• Consultant has not made any payments directly or indirectly to obtain or retain Consultant’s municipal advisory business.
• Consultant has not received any payments from third parties to enlist Consultant’s recommendation to the City of its services, any municipal securities transaction, or any municipal finance product.
• Consultant has not engaged in any fee‐splitting arrangements involving Consultant and any provider of investments or services to the City.
• Consultant does not have any legal or disciplinary event that is material to the City’s evaluation of the municipal advisory or the integrity of its management or advisory personnel.
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
• Consultant does not act as principal in any of the transaction(s) related to this Project. • During the term of the municipal advisory relationship, this disclosure will be promptly amended orsupplemented to reflect any material changesin or additionsto the terms orinformation within this disclosure and the revised writing will be promptly delivered to the City.
Pursuant to MSRB Rule G‐10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:
• Consultant is currently registered as a Municipal Advisor with the SEC and the MSRB. • Within the MSRB website at www.msrb.org, City may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities.
Recommendations
If Consultant makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the City and is within the scope of the engagement, Consultant will determine, based on the information obtained through reasonable diligence of Consultant whether a municipal securities transaction or municipal financial product is suitable for the City. In addition, Consultant will inform the City of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which Consultant reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and • whether Consultant has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the City’s objectives.
If the City elects a course of action that is independent of or contrary to the advice provided by Consultant, Consultant is not required on that basis to disengage from the City.
Record Retention
Effective July 1, 2014, pursuant to the Securities and Exchange Commission (SEC) record retention regulations, Consultant is required to maintain in writing, all communication and created documents between Consultant and the City for five (5) years.
Indemnification
Consultant shall indemnify, defend with counsel acceptable to the City, and hold harmless the City and its officers, officials, employees, agents and volunteers from and against any and all liability, loss, damage, claims, expenses, and costs (including without limitation, attorney’s fees and costs and fees of litigation) (collectively, “Liability”) of every nature arising out of or in connection with Consultant’s performance of
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Packet Pg. 134 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
the Services or its failure to comply with any of its obligations contained in this Agreement, except such Liability caused by the sole negligence or willful misconduct of the City.
Consultant’s obligation to defend and indemnify shall not be excused because of Consultant’s inability to evaluate Liability or because Consultant evaluates Liability and determines that Consultant is not liable to the claimant. Consultant must respond within 30 days, to the tender of any claim for defense and indemnity by the City, unlessthis time has been extended by the City. If Consultant failsto accept or reject a tender of defense and indemnity within 30 days, in addition to any other remedy authorized by law, so much of the money due Consultant under and by virtue of this Agreement as shall reasonably be considered necessary by the City, may be retained by the City until disposition has been made of the claim or suit for damages, or until Consultant accepts or rejects the tender of defense, whichever occurs first.
With respect to third party claims against Consultant, Consultant waives any and all rights of any type to express or implied indemnity against the Indemnitees.
Notwithstanding the forgoing, to the extent this Agreement is a “construction contract” as defined by California Civil Code Section 2782, as may be amended from time to time, such duties of Consultant to indemnify shall not apply when to do so would be prohibited by California Civil Code Section 2782.
In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of the City, Consultant shall indemnify, defend, and hold harmless the City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of the City.
SECTION 6 ‐ STATUS OF CONSULTANT
6.1 Independent Contractor. At all times during the term of this Agreement, Consultant shall be an independent contractor and shall not be an employee of the City. The City shall have the right to control Consultant only insofar as the results of Consultant’s services rendered pursuant to this Agreement and assignment of personnel pursuant to Subparagraph 1.3; however, otherwise the City shall not have the right to control how Consultant accomplishes servicesrendered pursuant to this Agreement. Notwithstanding any other City, state, or federal policy, rule, regulation, law, or ordinance to the contrary, Consultant and any of its employees, agents, and subcontractors providing services under this Agreement shall not qualify for or become entitled to, and hereby agree to waive any and all claims to, any compensation, benefit, or any incident of employment by the City, including but not limited to eligibility to enroll in the California Public Employees Retirement System (PERS) as an employee of the City and entitlement to any contribution to be paid by the City for employer contributions and/or employee contributionsfor PERS benefits.
6.2 Consultant Not an Agent. Except as the City may specify in writing, Consultant shall have no authority, express or implied, to act on behalf of the City in any capacity whatsoever as an agent. Consultant shall have no authority, express or implied, pursuant to this Agreement to bind the City to any obligation whatsoever.
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Packet Pg. 135 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
SECTION 7 ‐ LEGAL REQUIREMENTS
7.1 Governing Law. The laws of the State of California shall govern this Agreement.
7.2 Compliance with Applicable Laws. Consultant and any subcontractors shall comply with all laws applicable to the performance of the work hereunder.
7.3 Other Governmental Regulations. To the extent that this Agreement may be funded by fiscal assistance from another governmental entity, Consultant and any subcontractors shall comply with all applicable rules and regulations to which the City is bound by the terms of such fiscal assistance program.
7.4 Licenses and Permits. Consultant represents and warrants to the City that Consultant and its employees, agents, and any subcontractors have all licenses, permits, qualifications, and approvals of whatsoever nature that are legally required to practice their respective professions. Consultant represents and warrants to the City that Consultant and its employees, agents, any subcontractorsshall, at their sole cost and expense, keep in effect during the term of this Agreement any licenses, permits, and approvals that are legally required to practice their respective professions. In addition to the foregoing, Consultant and any subcontractorsshall obtain and maintain during the term of this Agreement valid Business Licenses from the City.
7.5 Legal Events and Disciplinary History. Consultant does not have any legal events and disciplinary history on its Form MA and Form MA‐I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations, and civil litigation. The City may electronically access Consultant’s most recent Form MA and each most recent Form MA‐ I filed with the Commission at the following website:
www.sec.gov/edgar/searchedgar/companysearch.html
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA‐I filed with the SEC.
7.6 Nondiscrimination and Equal Opportunity. Consultant shall not discriminate, based on a person’s race, religion, color, national origin, age, physical or mental handicap or disability, medical condition, marital status, sex, or sexual orientation, against any employee, applicant for employment, subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant for any services or programs provided by Consultant under this Agreement. Consultant shall comply with all applicable federal, state, and local laws, policies, rules, and requirements related to equal opportunity and nondiscrimination in employment, contracting, and the provision of any services that are the subject of this Agreement, including but not limited to the satisfaction of any positive obligations required of Consultant thereby.
Consultant shall include the provisions of this Subsection in any subcontract approved by the Contract Administrator or this Agreement.
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Packet Pg. 136 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
SECTION 8 ‐ TERMINATION AND MODIFICATION
8.1 Termination. The City may cancel this Agreement at any time and without cause upon written notification to Consultant.
Consultant may cancel this Agreement upon 45 days’ written notice to the City and shall include in such notice the reasons for cancellation.
In the event of termination, Consultant shall be entitled to compensation for services performed to the effective date of termination; the City, however, may condition payment of such compensation upon Consultant delivering to the City any or all documents, photographs, computersoftware, video and audio tapes, and other materials provided to Consultant or prepared by or for Consultant or the City in connection with this Agreement.
8.2 Extension. The City may, in its sole and exclusive discretion, extend the end date of this Agreement beyond that provided for in Subsection 1.1. Any such extension shall require a written amendment to this Agreement, as provided for herein. Consultant understands and agrees that, if the City grants such an extension, the City shall have no obligation to provide Consultant with compensation beyond the maximum amount provided for in this Agreement. Similarly, unless authorized by the Contract Administrator, the City shall have no obligation to reimburse Consultant for any otherwise reimbursable expenses incurred during the extension period.
8.3 Amendments. The Parties may amend this Agreement only by a writing signed by all the Parties.
8.4 Assignment and Subcontracting. The City and Consultant recognize and agree that this Agreement contemplates personal performance by Consultant and is based upon a determination of Consultant’s unique personal competence, experience, and specialized personal knowledge. Moreover, a substantial inducement to the City for entering into this Agreement was and is the professional reputation and competence of Consultant.
Consultant may not assign this Agreement or any interest therein without the prior written approval of the Contract Administrator. Consultant shall not subcontract any portion of the performance contemplated and provided for herein, other than to the subcontractors noted in the proposal, without prior written approval of the Contract Administrator.
8.5 Survival. All obligations arising prior to the termination of this Agreement and all provisions of this Agreement allocating liability between the City and Consultant shall survive the termination of this Agreement.
8.6 Options upon Breach by Consultant. If Consultant materially breaches any of the terms of this Agreement, the City’s remedies shall include, but not be limited to, the following:
8.6.1 Immediately terminate the Agreement
8.6.2 Retain the plans, specifications, drawings, reports, design documents, and any other work product prepared by Consultant pursuant to this Agreement
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
8.6.3 Retain a different consultant to complete the work described in Exhibit A not finished by Consultant
8.6.4 Charge Consultant the difference between the cost to complete the work described in Exhibit A that is unfinished at the time of breach and the amount that the City would have paid Consultant pursuant to Section 2 if Consultant had completed the work
SECTION 9 ‐ MISCELLANEOUS PROVISIONS
9.1 Attorneys’ Fees. If a party to this Agreement brings any action, including an action for declaratory relief, to enforce or interpret the provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose.
9.2 Venue. In the event that either party brings any action against the other under this Agreement, the Parties agree that trial of such action shall be vested exclusively in the state courts of California in the county in which the City is located.
9.3 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement is invalid, void, or unenforceable, the provisions of this Agreement not so adjudged shall remain in full force and effect. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision of this Agreement.
9.4 No Implied Waiver of Breach. The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement.
9.5 Successors and Assigns. The provisions of this Agreementshall inure to the benefit of and shall apply to and bind the successors and assigns of the Parties.
9.6 Use of Recycled Products. Consultant shall prepare and submit all reports, written studies, and other printed material on recycled paper to the extent it is available at equal or less cost than virgin paper.
9.7 Conflict of Interest. Consultant may serve other clients, but none whose activities within the corporate limits of the City or whose business, regardless of location, would place Consultant in a “conflict of interest,” as that term is defined in the Political Reform Act, codified at California Government Code Section 81000 et seq.
Consultant shall not employ any the City official in the work performed pursuant to this Agreement. No officer or employee of the City shall have any financial interest in this Agreement that would violate California Government Code Sections 1090 et seq.
Consultant hereby warrants that it is not now, nor has it been in the previous 12 months, an employee, agent, appointee, or official of the City. If Consultant was an employee, agent, appointee, or official of the City in the previous twelve months, Consultant warrants that it did not participate in any manner in the forming of this Agreement.
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Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
Consultant understands that, if this Agreement is made in violation of Government Code § 1090 et seq., the entire Agreement is void and Consultant will not be entitled to any compensation for services performed pursuant to this Agreement, including reimbursement of expenses, and Consultant will be required to reimburse the City for any sums paid to Consultant. Consultant understandsthat, in addition to the foregoing, it may be subject to criminal prosecution for a violation of Government Code § 1090 and, if applicable, will be disqualified from holding public office in the State of California.
As of the date of the Agreement, there are no actual or potential conflicts of interest that Consultant is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If Consultant becomes aware of any potential conflict of interest that arise afterthis disclosure, Consultant will disclose the detailed information in writing to the City in a timely manner.
The fee paid to Consultant increasesthe cost of investment to the City. The increased cost occurs from compensating Consultant for municipal advisory services provided.
Consultant does not act as principal in any of the transaction(s) related to this Agreement.
During the term of the municipal advisory relationship, this agreement will be promptly amended or supplemented to reflect any material changes in or additions to the terms or information within this agreement and the revised writing will be promptly delivered to the City.
9.8 Solicitation. Consultant agrees not to solicit business at any meeting, focus group, or interview related to this Agreement, either orally or through any written materials.
9.9 Contract Administration. This Agreement shall be administered by the City Director of Administrative Services (“Contract Administrator”). All correspondence shall be directed to or through the Contract Administrator or his or her designee.
9.10 Notices. Any written notice to Consultant shall be sent to:
Eric Scriven, Principal
NHA Advisors, LLC
4040 Civic Center Drive, Suite 200
San Rafael, CA 94903
Any written notice to the City shall be sent to:
City Manager
City of El Centro
1275 W. Main Street
El Centro, CA 92243
10.11 Integration. This Agreement, including the Scope of Services attached hereto and incorporated herein as Exhibits A and B represents the entire and integrated agreement
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Packet Pg. 139 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
between the City and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral.
Exhibit A: Scope of Services
Exhibit B: Compensation Schedule
10.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement.
The Parties have executed this Agreement as of the Effective Date.
CITY OF EL CENTRO NHA ADVISORS, LLC
Cedric Ceseña, Interim City Manager Eric Scriven, Principal
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Packet Pg. 140 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
EXHIBIT A
SCOPE OF SERVICES
CONTINUING DISCLOSURE AND CDIAC REPORTING COMPLIANCE SERVICES The City of El Centro and its related entities (the “City”) are required to file periodic disclosure reporting with the Municipal Securities Rulemaking Board (“MSRB”), California Debt and Investment Advisory Commission (“CDIAC”), and in some cases, with the underwriter, bond insurer, trustee, or other parties for the City’s debt obligations. The City desires to appoint NHA Advisors, LLC (“Consultant”) to assist with the compliance of these obligations. The scope of work will generally include, but may not be limited to, the following services:
1) MSRB Continuing Disclosure Compliance (Rule 15c2‐12):
The City has publicly offered bond transactions requiring annual continuing disclosure reports (“Annual Reports”) to be filed on the Electronic Municipal Market Access (“EMMA”) system. Each obligation has distinct disclosure requirements. The primary reporting requirements generally include the filing of:
• Audited financialstatements
• Other financial information and operating data
• Other material information
• Notices of Significant Events
Consultant will provide the following services:
• Prepare Annual Reports
• Supervise and direct the City on issues related to its disclosure obligations • Notify the City of pending due dates
• Assist in the tracking of rating changes and other Significant Events • Prepare Significant Events notices, as necessary
• Post Annual Reports, notices, and other required documentation to EMMA • File a report with the City certifying that each Annual Report has been provided pursuant to this Continuing Disclosure Certificate
• Review continuing disclosure requirements in preliminary official statements and draft bond documents
• Provide ongoing supportto City staff as questions arise regarding its continuing disclosure obligations
Consultant will make its best efforts to monitor rating changes for both the issuer and bond insurer, if applicable, for each outstanding obligation as well as the other Significant Events listed below. To best meet this objective, open lines of communication between the City and Consultant are vital.
The City must notify Consultant immediately upon the occurrence of a Significant Event.
Significant Events generally include:
1) Principal and interest payment delinquencies
2) Non‐payment related defaults
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Packet Pg. 141 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
3) Unscheduled draws on debt service reserves reflecting financial difficulties 4) Unscheduled draws on credit enhancementsreflecting financial difficulties 5) Substitution of credit or liquidity providers, or their failure to perform 6) Adverse tax opinions or events affecting the tax‐exempt status of the security 7) Modificationsto rights ofsecurity holders
8) Bond calls and tender offers
9) Defeasances
10) Release, substitution, orsale of property securing repayment of the securities 11) Rating changes
12) Bankruptcy, insolvency, receivership orsimilar event of the obligated person 13) Consummation of a merger, consolidation, or acquisition 14) Appointment of a successor or additional trustee or the change of name of a trustee 15) Incurrence of a financial obligation affecting security holders 16) Default, event of acceleration, termination event, modification of terms, orsimilar event 2) CDIAC Annual Debt Transparency Reporting (SB 1029):
Effective January 1, 2017, state and local issuers are required to submit an annual debt transparency report for any issue of debt for which they have submitted a Report of Final Sale to CDIAC during the reporting period. The annual debt transparency report is due to CDIAC no later than January 31st of each year (beginning January 31, 2018) for any debt outstanding at any point during the prior fiscal year.
Consultant will work with the City to complete and file these reports with CDIAC prior to January 31st each year.
3) CDIAC Yearly Fiscal Status Reporting (“YFSR”):
a. Marks‐Roos
Any joint powers authority (“Authority”) selling bonds on or after January 1, 1996 that uses the proceeds to acquire one or more local obligations is required to report annually on the fiscal status of the Authority bonds and the local obligations acquired. Reports must be submitted to CDIAC no later than October 30th each year. b. Mello‐Roos
Issuers of community facilities district (“CFD”) bonds after January 1, 1993 are required to report annually on certain information about the bonds. All issuers, regardless of when bonds are sold, are required to report any draw on reserve or default that occurs throughout the calendar year. Reports must be submitted to CDIAC no later than October 30th each year.
Consultant will work with the City to ensure that all reports are completed and filed with CDIAC prior to October 30th each year.
4) Private Placement Debt and Other Loan Reporting:
If the City issues or has issued privately placed debt or other loans that require reporting to the purchaser or other parties, Consultant will assist the City with the disclosure obligations as
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Packet Pg. 142 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
outlined in the governing document (continuing disclosure agreement, indenture, term sheet, lease agreement, etc.).
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Packet Pg. 143 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
EXHIBIT B
COMPENSATION SCHEDULE
For the tasks outlined in the Scope of Services, Consultant will be compensated as follows. 1) MSRB Continuing Disclosure Compliance (Rule 15c2‐12):
For services described in Task 1 of the Scope of Services, Consultant shall be paid a fixed annual fee payable upon successful submission of the Annual Reports. The following table provides a snapshot of the initial fees associated with the City’s current obligations:
Existing
MSRB Continuing Disclosure Reporting Paid By Annual Fee(1) Lease Revenue Bonds, 2021 Series A General Fund $2,000
Lease Revenue Refunding Bonds, 2021 Series B General Fund $1,000(2) Wastewater Revenue Refunding Bonds, 2014 Series A Wastewater Fund $2,750 Wastewater Revenue Refunding Bonds, 2012 Series A Wastewater Fund $1,000(2) Water Revenue Refunding Bonds, 2014 Series A Water Fund $2,750 Tax Allocation Refunding Bonds, Series 2018A Successor Agency $2,750 Revenue Bonds, Series 2011 Successor Agency $1,000(2)
Tax Allocation Bonds, Series 2007B (Taxable) Successor Agency $1,000(2) Total Annual Fee $14,250
1) In the event that the City’s audited financial statements are not available prior to the reporting due date and Consultant is required to file both unaudited and audited reports, Consultant has the option to assess a $500 refiling fee for each obligation that requires a second filing. 2) Reflects a reduced fee for multiple reports with similar credits and disclosure requirements.
As additional debt is issued, new continuing disclosure obligations will be billed at the flat fees shown below, on a case‐by‐case basis, based on the amount of work required for each obligation:
Future
MSRB Continuing Disclosure Reporting Annual Fee
General Obligation Bonds $1,000‐$2,250
Certificates of Participation/Lease $1,250‐$2,500
Utility Revenue Bonds(Water, Sewer, etc.) $1,500‐$3,000 Land Secured Bonds $1,500‐$3,500
Tax Allocation Bonds $1,500‐$3,500
Other $1,000‐$3,500
2) CDIAC Annual Debt Transparency Reporting (SB 1029):
For services described in Task 2 of the Scope of Services, Consultant shall be paid a fixed annual fee of $400 per report, payable upon successful submission of the reports. At present, the City has the following obligations outstanding that require CDIAC Annual Debt Transparency Reporting.
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Packet Pg. 144 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
CDIAC Annual Debt Transparency Reporting Paid By Annual Fee Lease Revenue Bonds, 2021 Series A (Authority Reporting) General Fund $400 Lease Revenue Bonds, 2021 Series A (Obligor Reporting) General Fund $400 Lease Revenue Refunding Bonds, 2021 Series B (Authority Reporting) General Fund $400 Lease Revenue Refunding Bonds, 2021 Series B (Obligor Reporting) General Fund $400 Tax Allocation Refunding Bonds, Series 2018A Successor Agency $400 Total Annual Fee $2,000
1) Reflects a reduced fee for multiple reports with similar credits and disclosure requirements. 3) CDIAC Yearly Fiscal Status Reporting:
a. Marks‐Roos
For services described in Task 3a of the Scope of Services, Consultant shall be paid a fixed annual fee of $400 per report, payable upon successfulsubmission of the reports. At present, the City hasthe following obligations outstanding thatrequire Marks‐Roos CDIAC Yearly Fiscal Status Reporting.
Marks‐Roos CDIAC
Yearly Fiscal Status Reporting Paid By Annual Fee
Lease Revenue Bonds, 2021 Series A (Authority Reporting) General Fund $400 Lease Revenue Bonds, 2021 Series A (Obligor Reporting) General Fund $400 Lease Revenue Refunding Bonds, 2021 Series B (Authority Reporting) General Fund $400 Lease Revenue Refunding Bonds, 2021 Series B (Obligor Reporting) General Fund $400 Tax Allocation Refunding Bonds, Series 2018A Successor Agency $400 Total Annual Fee $2,000
1) Reflects a reduced fee for multiple reports with similar credits and disclosure requirements. b. Mello‐Roos
For services described in Task 3b of the Scope of Services, Consultant shall be paid a fixed annual fee of $750 per report, payable upon successfulsubmission of the reports. At present, the City has no obligations outstanding that require this reporting.
Mello‐Roos CDIAC
Yearly Fiscal Status Reporting Paid By Annual Fee
None N/A $0
Total Annual Fee $ 0
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Packet Pg. 145 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) January , 2023
Municipal Advisor Agreement between
City of El Centro and NHA Advisors, LLC
4) Private Placement Debt and Other Loan Reporting:
For services described in Task 4 of the Scope of Services, Consultant shall be paid a fixed annual fee payable upon successful submission of the report. At present, to Consultant’s knowledge, the City has no obligations outstanding that require this reporting.
Private Placement Debt
and Other Loan Reporting Paid By Annual Fee(1)
None N/A $0
Total Annual Fee $ 0
1) In the event that the purchasing bank requests additional information beyond what is outlined in the scope of work, thisfee will increase commensurate with the additional work required to provide such information.
Future Obligations
In the event that the City issues additional privately placed debt or other loans that require periodic reporting, the annual fee will be commensurate with the amount of work required and the Future MSRB Continuing Disclosure Reporting fee schedule provided in Task 1 (Future MSRB Continuing Disclosure Reporting).
Grand Total Annual Fee ‐ The initial combined annual fee for the services outlined in the Scope of Services will be $18,250*.
Grand Total – All Tasks
Projected
On‐going
Annual Fee*
Task 1: MSRB Continuing Disclosure Compliance $14,250
Task 2: CDIAC Annual Debt Transparency Reporting $2,000 Task 3a: CDIAC Yearly Fiscal Status Reporting (Marks‐Roos) $2,000 Task 3b: CDIAC Yearly Fiscal Status Reporting (Mello‐Roos) $0 Task 4: Private Placement Debt and Other Loan Reporting $0 Grand Total Annual Fee $18,250
* As prior obligations mature or new debt is issued, the Scope of Services and annual budget for services will change in accordance with the fees outlined above.
Out‐of‐Pocket Expenses ‐ Annual expense reimbursements are capped at $1,000 and will be limited to third‐party contractor work.
As noted above, if data purchases are required to secure specific information necessary to complete a particular report as prescribed in the respective continuing disclosure agreement, these data costs will be passed on to the City with no additional markup.
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Packet Pg. 146 Attachment: Agreement - Municipal Advisor with NHA Advisors, LLC. (5827 : Municipal Advisor Agreement with NHA Advisors, LLC) City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: City Attorney's Office
El Centro, CA 92243 Category: Agreement
Prepared By: Norma Wyles
SCHEDULED Department Head: Cedric Cesena
ACTION ITEM (ID # 5819) DOC ID: 5819
Municipal Advisor Agreement with NHA Advisors, LLC for
General and Special Project Services
CITY MANAGER’S RECOMMENDATION:
Approve Municipal Advisor Agreement with NHA Advisors, LLC for general and special project services
FISCAL IMPACT:
Annual cost not to exceed $45,000 for 3-1/2 years (to June 30, 2026). In general, this cost would be paid by the general fund through the Finance Budget. This appropriation and budget item, if approved, will need to be added to the budget by mid-year adjustment.
STRATEGIC PLANNING PROGRAM 2022-2027 RELATION:
N/A
DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
Yes
BACKGROUND:
NHA has served as an independent financial municipal advisor to the City on a variety of recent financing's. In addition to acting in that capacity, NHA Advisor provides general financial support to Finance Directors and Departments. In addition, NHA can and will provide support in carrying out pending Finance Department projects to transition to electronic time reporting and to set up a system for acceptance of electronic payments to the City for utility as well as recreational fees and charges, among others.
This agreement is separate from the proposed agreement with NHA for continuing disclosure for bond issues.
DISCUSSION:
This Agreement provides additional resources to staff as they take on large projects prioritized by the City Council. It is similar to the on-call agreements used by the Engineering Department. Payment is on an hourly basis and will not exceed $45,000 without prior City Manager or City Council approval. The agreement expires on June 30, 2026.
8 Packet Pg. 147
Action Item (ID # 5819) Meeting of January 17, 2023
NHA has a consistent and ongoing relationship with the City (specifically including the Finance Department) and has worked well with staff in the role of independent financial adviser for bond issues. As such NHA already is familiar with the City’s systems and finances.
CONCLUSION:
Recommend approval of the Municipal Advisory Agreement with NHA Advisors, LLC for general financial services
ATTACHMENTS:
• Agreement - General Financial Services (DOCX)
8 Packet Pg. 148
Municipal Advisor Agreement between January __, 2023
City of El Centro and NHA Advisors, LLC Page 1 of 21
MUNICIPAL ADVISOR AGREEMENT
BETWEEN
CITY OF EL CENTRO
AND
NHA ADVISORS, LLCGENERAL FINANCIAL SERVICES
THIS AGREEMENT for consulting services is made by and between the City of El Centro (the “City”) and NHA Advisors, LLC (“Consultant”) (together referred to as the “Parties”) as of January __, 2023 (the “Effective Date”).
SECTION 1 – SERVICES
As the City’s registered municipal advisor, subject to the terms and conditions set forth in this Agreement, Consultant shall provide to the City the services described in the Scope of Services attached as Exhibit A, and incorporated herein, at the time and place and in the manner specified therein. In the event of a conflict in or inconsistency between the terms of this Agreement and Exhibit A, the Agreement shall prevail. As shown in Exhibit A, this Agreement is for general oncall financial support for the Finance Department.
If acting in the capacity of an Independent Registered Municipal Advisor (“IRMA”) with regard to the “IRMA exemption” of the SEC Rule, Consultant will review all third-party recommendations submitted to the City in writing, if requested.
Recommendation. If Consultant makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the City and is within the scope of the engagement, Consultant will determine, based on the information obtained through reasonable diligence of Consultant whether a municipal securities transaction or municipal financial product is suitable for the City. In addition, Consultant will inform the City of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which Consultant reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and
• whether Consultant has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the City’s objectives.
If the City elects a course of action that is independent of or contrary to the advice provided by Consultant, Consultant is not required on that basis to disengage from the City.
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City of El Centro and NHA Advisors, LLC Page 2 of 21
1.1 Term of Services. The term of this Agreement shall begin on the Effective Date and shall end on June 30, 2026, unless the term of the Agreement is otherwise terminated or extended, as provided for in Section 8. The time provided to Consultant to complete the services required by this Agreement shall not affect the City’s right to terminate the Agreement, as referenced in Section 8.
1.2 Standard of Performance. Consultant shall perform all services required pursuant to this Agreement according to the standards observed by a competent practitioner of the profession in which Consultant is engaged.
1.3 Assignment of Personnel. Consultant shall assign only competent personnel to perform services pursuant to this Agreement. In the event the City, in its sole discretion, at any time during the term of this Agreement, desires the reassignment of any such persons, Consultant shall, immediately upon receiving notice from the City of such desire of the City, reassign such person or persons.
1.4 Time. Consultant shall devote such time to the performance of services pursuant to this Agreement as may be reasonably necessary to meet the standard of performance provided in Section 1.1 above and to satisfy Consultant’s obligations hereunder.
SECTION 2 - COMPENSATION
The City hereby agrees to pay Consultant compensation for services outlined in the Scope of Services (Exhibit A) under the Compensation Schedule (Exhibit B).
The City shall pay Consultant for services rendered pursuant to this Agreement at the time and in the manner set forth herein. The payments specified below shall be the only payments from the City to Consultant for services rendered pursuant to this Agreement. Consultant shall submit all invoices to the City in the manner specified herein. Except as specifically authorized by the City in writing, Consultant shall not bill the City for duplicate services performed by more than one person.
Consultant and the City acknowledge and agree that compensation paid by the City to Consultant under this Agreement is based upon Consultant’s estimated costs of providing the services required hereunder, including salaries and benefits of employees and subcontractors of Consultant. Consequently, the Parties further agree that compensation hereunder is intended to include the costs of contributions to any pensions and/or annuities to which Consultant and its employees, agents, and subcontractors may be eligible. The City therefore has no responsibility for such contributions beyond compensation required under this Agreement.
2.1 Invoices. Consultant shall submit invoices, not more often than once a month during the term of this Agreement, based on the cost for services performed and reimbursable costs incurred prior to the invoice date. Invoices shall contain the following information:
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City of El Centro and NHA Advisors, LLC Page 3 of 21
▪ The beginning and ending dates of the billing period. ▪ At the City’s option, for each work item in each task, a copy of the applicable time entries or time sheets shall be submitted showing the name of the person doing the work, the hours spent by each person, a brief description of the work, and each reimbursable expense. ▪ For work performed on an hourly Compensation Schedule, the total number of hours of work performed under the Agreement by Consultant and each employee, agent, and subcontractor of Consultant performing services hereunder.
2.2 Monthly Payment. The City shall make monthly payments, based on invoices received, for services satisfactorily performed, and for authorized reimbursable costs incurred. The City shall have 30 days from the receipt of an invoice that complies with all of the requirements above to pay Consultant.
2.3 Final Payment. The City shall pay the final sum due pursuant to this Agreement within 60 days after completion of the services and submittal to the City of a final invoice if all services required have been satisfactorily performed.
2.4 Total Payment. The City shall pay for the services to be rendered by Consultant pursuant to this Agreement. The City shall not pay any additional sum for any expense or cost whatsoever incurred by Consultant in rendering services pursuant to this Agreement. The City shall make no payment for any extra, further, or additional service pursuant to this Agreement.
In no event shall Consultant submit any invoice for an amount in excess of the maximum amount of compensation provided above either for a task or for the entire Agreement, unless the Agreement is modified prior to the submission of such an invoice by a properly executed change order or amendment.
2.5 Hourly Fees. Fees for work performed by Consultant on an hourly basis shall not exceed the amounts shown on the compensation schedule attached hereto as Exhibit B.
2.6 Reimbursable Expenses. Reimbursable expenses are specified in Exhibit B.
Expenses will typically include third-party data collection or services not provided by the City. Reimbursable expenses are in addition to the total amount of compensation provided under this Agreement that shall not be exceeded.
2.7 Payment of Taxes. Consultant is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes.
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City of El Centro and NHA Advisors, LLC Page 4 of 21
2.8 Payment upon Termination. In the event the City or Consultant terminates this Agreement pursuant to Section 8, the City shall compensate Consultant for all outstanding costs and reimbursable expenses incurred for work satisfactorily completed as of the date of written notice of termination. Consultant shall maintain adequate logs and timesheets to verify costs incurred to that date.
2.9 Authorization to Perform Services. Consultant is not authorized to perform any services or incur any costs whatsoever under the terms of this Agreement until receipt of authorization from the Contract Administrator.
SECTION 3 - FACILITIES AND EQUIPMENT
Except as set forth herein, Consultant shall, at its sole cost and expense, provide all facilities and equipment that may be necessary to perform the services required by this Agreement. The City shall make available to Consultant only the facilities and equipment listed in this section, and only under the terms and conditions set forth herein.
The City shall furnish physical facilities such as desks, filing cabinets, and conference space, as may be reasonably necessary for Consultant’s use while consulting with the City employees and reviewing records and the information in possession of the City. The location, quantity, and time of furnishing those facilities shall be in the sole discretion of the City. In no event shall the City be obligated to furnish any facility that may involve incurring any direct expense, including but not limited to computer, long-distance telephone or other communication charges, vehicles, and reproduction facilities.
SECTION 4 - INSURANCE REQUIREMENTS
Before beginning any work under this Agreement, Consultant, at its own cost and expense, unless otherwise specified below, shall procure the types and amounts of insurance listed below against claims for injuries to persons or damages to property that may arise from or in connection with the performance of the work hereunder by Consultant and its agents, representatives, employees, and subcontractors. Consistent with the following provisions, Consultant shall provide proof satisfactory to the City of such insurance that meets the requirements of this section and under forms of insurance satisfactory in all respects, and that such insurance is in effect prior to beginning work to the City. Consultant shall maintain the insurance policies required by this section throughout the term of this Agreement. The cost of such insurance shall be included in Consultant’s bid. Consultant shall not allow any subcontractor to commence work on any subcontract until Consultant has obtained all insurance required herein for the subcontractor(s) and provided evidence that such insurance is in effect to the City. Verification of the required insurance shall be submitted and made part of this Agreement prior to execution.
Consultant shall maintain all required insurance listed herein for the duration of this Agreement.
4.1 Workers’ Compensation. Consultant shall, at its sole cost and expense, maintain Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance for any and all persons employed directly or indirectly by Consultant. The Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance
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City of El Centro and NHA Advisors, LLC Page 5 of 21
shall be provided with limits of not less than $1,000,000 per accident. In the alternative, Consultant may rely on a self-insurance program to meet those requirements, but only if the program of self-insurance complies fully with the provisions of the California Labor Code. Determination of whether a self-insurance program meets the standards of the Labor Code shall be solely in the discretion of the Contract Administrator. The insurer, if insurance is provided, or Consultant, if a program of self-insurance is provided, shall waive all rights of subrogation against the City and its officers, officials, employees, and volunteers for loss arising from work performed under this Agreement.
4.2 Commercial General and Automobile Liability Insurance.
4.2.1 General Requirements. Consultant, at its own cost and expense, shall maintain commercial general and automobile liability insurance for the term of this Agreement in an amount not less than $1,000,000 per occurrence, combined single limit coverage for risks associated with the work contemplated by this Agreement. If Commercial General Liability Insurance or an Automobile Liability form or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the work to be performed under this Agreement or the general aggregate limit shall be at least twice the required occurrence limit. Such coverage shall include but shall not be limited to, protection against claims arising from bodily and personal injury, including death resulting therefrom, and damage to property resulting from activities contemplated under this Agreement, including the use of owned and nonowned automobiles.
4.2.2 Minimum Scope of Coverage. Commercial general coverage shall be at least as broad as Insurance Services Office Commercial General Liability occurrence form CG 0001 (most recent edition) covering comprehensive General Liability on an “occurrence” basis. Automobile coverage shall be at least as broad as Insurance Services Office Automobile Liability form CA 0001 (most recent edition), Code 1 (any auto). No endorsement shall be attached limiting the coverage.
4.2.3 Additional Requirements. Each of the following shall be included in the insurance coverage or added as a certified endorsement to the policy:
a) The Insurance shall cover on an occurrence or an accident basis, and not on a claims-made basis.
b) The City, its officers, officials, employees, and volunteers are to be covered as additional insured as respects: liability arising out of work or operations performed by or on behalf of Consultant; or automobiles owned, leased, hired, or borrowed by Consultant.
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c) For any claims related to this Agreement or the work hereunder, Consultant’s insurance covered shall be primary insurance as respects the City, its officers, officials, employees, and volunteers.
Any insurance or self-insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of Consultant’s insurance and shall not contribute with it.
d) Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled by either party, except after 30 days’ prior written notice has been provided to the City.
4.3 Professional Liability Insurance.
4.3.1 General Requirements. Consultant, at its own cost and expense, shall maintain for the period covered by this Agreement professional liability insurance for licensed professionals performing work pursuant to this Agreement in an amount not less than $2,000,000 covering the licensed professionals’ errors and omissions. Any deductible or self-insured retention shall not exceed $250,000 per claim.
4.3.2 Claims-Made Limitations. The following provisions shall apply if the professional liability coverage is written on a claims-made form:
a) The retroactive date of the policy must be shown and must be before the date of the Agreement.
b) Insurance must be maintained, and evidence of insurance must be provided for at least five years after completion of the Agreement or the work, so long as commercially available at reasonable rates. c) If coverage is canceled or not renewed and it is not replaced with another claims-made policy form with a retroactive date that precedes the date of this Agreement, Consultant must purchase an extended period coverage for a minimum of five years after completion of work under this Agreement.
d) A copy of the claim reporting requirements must be submitted to the City for review prior to the commencement of any work under this Agreement.
4.4 All Policies Requirements.
4.4.1 Acceptability of Insurers. All insurance required by this section is to be placed with insurers with a Best’s rating of no less than A:VII.
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4.4.2 Verification of Coverage. Prior to beginning any work under this Agreement, Consultant shall furnish the City with complete copies of all policies delivered to Consultant by the insurer, including complete copies of all endorsements attached to those policies. All copies of policies and endorsements shall show the signature of a person authorized by that insurer to bind coverage on its behalf. If the City does not receive the required insurance documents prior to Consultant beginning work, it shall not waive Consultant’s obligation to provide them. The City reserves the right to require complete copies of all required insurance policies at any time.
4.4.3 Deductibles and Self-Insured Retentions. Consultant shall disclose to and obtain the written approval of the City for the self-insured retentions and deductibles before beginning any of the services or work called for by any term of this Agreement. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, employees, and volunteers; or Consultant shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration and defense expenses.
4.4.4 Wasting Policies. No policy required by this Section 4 shall include a “wasting” policy limit (i.e., limit that is eroded by the cost of defense).
4.4.5 Waiver of Subrogation. Consultant hereby agrees to waive subrogation which any insurer or contractor may require from vendor by virtue of the payment of any loss. Consultant agrees to obtain any endorsements that may be necessary to affect this waiver of subrogation.
The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the entity for all work performed by the contractor, its employees, agents, and subcontractors.
4.4.6 Subcontractors. Consultant shall include all subcontractors as insureds under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all the requirements stated herein.
4.4.7 Primary/non-contributing: Coverage provided by Consultant shall be primary and any insurance or self-insurance procured or maintained by City shall not be required to contribute with it. None of the coverages require here will be in compliance with these requirements is they include any limiting endorsement of any kind that has not first been approved by the City.
4.4.8 City’s rights of enforcement. In the event any police of insurance required under this Agreement does not comply with these requirements or is canceled and not replaced, City has the right, but
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not the duty, to obtain insurance it deems necessary; City shall be reimbursed by Consultant or may withhold such amounts from funds due to Consultant, or may cancel the agreement.
4.4.9 Non-estoppel: Consultant acknowledges and agrees that any actual or alleged failure on the part of the city to inform Consultant of noncompliance imposes no additional obligations on the City nor does it waive City’s rights under this Agreement.
4.4.10 Requirements not limiting. If the Consultant maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for those higher limits. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. The City reserves the right to change the accounts and types of insurance required by giving the Consultant 90 days prior written notice of such change. If such change results in substantial additional cost, the City and Consultant may negotiate the payment of that cost.
4.4.11 Notice of Cancellation. Consultant shall require that its insurance agent or broker provide City with a 30 day prior notice of cancellation (except for nonpayment for which a ten day notice is required) or nonrenewal of coverage for each required coverage.
4.4.12 Additional insured status. General liability policies shall be endorsed to provide that City, its officers, agents, employees and volunteers shall be additional insured under such policies.
4.4.13 Notice of Claims: Consultant shall give City prompt and timely notice of any claims or suits that arise out of or result from Consultant’s performance under this Agreement or that may involve coverage under any of the required policies.
4.4.14 Separation of insureds: A severability of interests provision must apply for all additional insureds ensuring that Consultant’s insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of liability. The policies shall not contain any cross-liability exclusions.
4.4.15 4.5 Remedies. In addition to any other remedies the City may have if Consultant fails to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, the City may, at its sole option exercise any of the following remedies, which are alternatives to other remedies the City may have and are not the exclusive remedy for Consultant’s breach:
▪ obtain such insurance and deduct and retain the amount of the premiums for such insurance from any sums due under the Agreement; ▪ order Consultant to stop work under this Agreement or withhold any payment that becomes due to Consultant hereunder, or both stop work
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and withhold any payment, until Consultant demonstrates compliance with the requirements hereof; and/or
▪ terminate this Agreement.
SECTION 5 – CONSULTANT’S RESPONSIBILITIES AND INDEMNIFICATION Consultant is registered as a Municipal Advisor with the SEC and Municipal Securities Rulemaking Board (“MSRB”). As such, Consultant has a fiduciary duty to the City and must provide both a Duty of Care and a Duty of Loyalty that entail the following.
Duty of Care:
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the City with informed advice;
c) make a reasonable inquiry as to the facts that are relevant to the City’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the City; and
d) undertake a reasonable investigation to determine that Consultant is not forming any recommendation on materially inaccurate or incomplete information; Consultant must have a reasonable basis for:
i. any advice provided to or on behalf of the City;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the City, any other party involved in the municipal securities transaction or municipal financial product, or investors in the City securities; and
iii. any information provided to the City or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty:
Consultant must deal honestly and with the utmost good faith with the City and act in the City’s best interests without regard to the financial or other interests of Consultant. Consultant will eliminate or provide full and fair disclosure (included herein) to the City about each material conflict of interest (as applicable). Consultant will not engage in municipal advisory activities with the City as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the City’s best interests.
Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those noted below, that Consultant is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If Consultant becomes aware of any material potential conflict of interest that arises after this disclosure, Consultant will disclose the detailed information in writing to the City in a timely manner.
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The following are potential conflicts of interest to be considered. • Fees under this Project are based on hourly fees of Consultant’s personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreed-upon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for Consultant to recommend alternatives that would result in more hours worked. This conflict of interest will not impair Consultant’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to the City.
• The fee paid to Consultant increases the cost of investment to the City. The increased cost occurs from compensating Consultant for municipal advisory services provided. • Consultant serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another Consultant client. For example, Consultant serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the City. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, Consultant could potentially face a conflict of interest arising from these competing client interests. Consultant fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the City. • Gerald Craig Hill, the Managing Principal of NHA Advisors is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA Advisors’ clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA Advisors utilizes the services of HdL Coren & Cone for its clients. NHA Advisors is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.
• Consultant does not have any affiliate that provides any advice, service, or product to or on behalf of the City that is directly or indirectly related to the municipal advisory activities to be performed by Consultant.
• Consultant has not made any payments directly or indirectly to obtain or retain Consultant’s municipal advisory business.
• Consultant has not received any payments from third parties to enlist Consultant’s recommendation to the City of its services, any municipal securities transaction, or any municipal finance product.
• Consultant has not engaged in any fee-splitting arrangements involving Consultant and any provider of investments or services to the City.
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• Consultant does not have any legal or disciplinary event that is material to the City’s evaluation of the municipal advisory or the integrity of its management or advisory personnel.
• Consultant does not act as principal in any of the transaction(s) related to this Project. • During the term of the municipal advisory relationship, this disclosure will be promptly amended or supplemented to reflect any material changes in or additions to the terms or information within this disclosure and the revised writing will be promptly delivered to the City.
Pursuant to MSRB Rule G-10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:
• Consultant is currently registered as a Municipal Advisor with the SEC and the MSRB. • Within the MSRB website at www.msrb.org, City may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities.
Recommendations
If Consultant makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the City and is within the scope of the engagement, Consultant will determine, based on the information obtained through reasonable diligence of Consultant whether a municipal securities transaction or municipal financial product is suitable for the City. In addition, Consultant will inform the City of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which Consultant reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the City; and • whether Consultant has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the City’s objectives.
If the City elects a course of action that is independent of or contrary to the advice provided by Consultant, Consultant is not required on that basis to disengage from the City.
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Record Retention
Effective July 1, 2014, pursuant to the Securities and Exchange Commission (SEC) record retention regulations, Consultant is required to maintain in writing, all communication and created documents between Consultant and the City for five (5) years.
Indemnification
Consultant shall indemnify, defend with counsel acceptable to the City, and hold harmless the City and its officers, officials, employees, agents and volunteers from and against any and all liability, loss, damage, claims, expenses, and costs (including without limitation, attorney’s fees and costs and fees of litigation) (collectively, “Liability”) of every nature arising out of or in connection with Consultant’s performance of the Services or its failure to comply with any of its obligations contained in this Agreement, except such Liability caused by the sole negligence or willful misconduct of the City.
Consultant’s obligation to defend and indemnify shall not be excused because of Consultant’s inability to evaluate Liability or because Consultant evaluates Liability and determines that Consultant is not liable to the claimant. Consultant must respond within 30 days, to the tender of any claim for defense and indemnity by the City, unless this time has been extended by the City. If Consultant fails to accept or reject a tender of defense and indemnity within 30 days, in addition to any other remedy authorized by law, so much of the money due Consultant under and by virtue of this Agreement as shall reasonably be considered necessary by the City, may be retained by the City until disposition has been made of the claim or suit for damages, or until Consultant accepts or rejects the tender of defense, whichever occurs first.
With respect to third party claims against Consultant, Consultant waives any and all rights of any type to express or implied indemnity against the Indemnitees.
Notwithstanding the forgoing, to the extent this Agreement is a “construction contract” as defined by California Civil Code Section 2782, as may be amended from time to time, such duties of Consultant to indemnify shall not apply when to do so would be prohibited by California Civil Code Section 2782.
In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of the City, Consultant shall indemnify, defend, and hold harmless the City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of the City.
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SECTION 6 - STATUS OF CONSULTANT
6.1 Independent Contractor. At all times during the term of this Agreement, Consultant shall be an independent contractor and shall not be an employee of the City. The City shall have the right to control Consultant only insofar as the results of Consultant’s services rendered pursuant to this Agreement and assignment of personnel pursuant to Subparagraph 1.3; however, otherwise the City shall not have the right to control how Consultant accomplishes services rendered pursuant to this Agreement. Notwithstanding any other City, state, or federal policy, rule, regulation, law, or ordinance to the contrary, Consultant and any of its employees, agents, and subcontractors providing services under this Agreement shall not qualify for or become entitled to, and hereby agree to waive any and all claims to, any compensation, benefit, or any incident of employment by the City, including but not limited to eligibility to enroll in the California Public Employees Retirement System (PERS) as an employee of the City and entitlement to any contribution to be paid by the City for employer contributions and/or employee contributions for PERS benefits.
6.2 Consultant Not an Agent. Except as the City may specify in writing, Consultant shall have no authority, express or implied, to act on behalf of the City in any capacity whatsoever as an agent. Consultant shall have no authority, express or implied, pursuant to this Agreement to bind the City to any obligation whatsoever.
SECTION 7 - LEGAL REQUIREMENTS
7.1 Governing Law. The laws of the State of California shall govern this Agreement.
7.2 Compliance with Applicable Laws. Consultant and any subcontractors shall comply with all laws applicable to the performance of the work hereunder.
7.3 Other Governmental Regulations. To the extent that this Agreement may be funded by fiscal assistance from another governmental entity, Consultant and any subcontractors shall comply with all applicable rules and regulations to which the City is bound by the terms of such fiscal assistance program.
7.4 Licenses and Permits. Consultant represents and warrants to the City that Consultant and its employees, agents, and any subcontractors have all licenses, permits, qualifications, and approvals of whatsoever nature that are legally required to practice their respective professions. Consultant represents and warrants to the City that Consultant and its employees, agents, any subcontractors shall, at their sole cost and expense, keep in effect during the term of this Agreement any licenses, permits, and approvals that are legally required to practice their respective professions. In addition to the foregoing, Consultant and any subcontractors shall obtain and maintain during the term of this Agreement valid Business Licenses from the City.
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7.5 Legal Events and Disciplinary History. Consultant does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations, and civil litigation. The City may electronically access Consultant’s most recent Form MA and each most recent Form MA-I filed with the Commission at the following website:
www.sec.gov/edgar/searchedgar/companysearch.html
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-I filed with the SEC.
7.6 Nondiscrimination and Equal Opportunity. Consultant shall not discriminate, based on a person’s race, religion, color, national origin, age, physical or mental handicap or disability, medical condition, marital status, sex, or sexual orientation, against any employee, applicant for employment, subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant for any services or programs provided by Consultant under this Agreement. Consultant shall comply with all applicable federal, state, and local laws, policies, rules, and requirements related to equal opportunity and nondiscrimination in employment, contracting, and the provision of any services that are the subject of this Agreement, including but not limited to the satisfaction of any positive obligations required of Consultant thereby.
Consultant shall include the provisions of this Subsection in any subcontract approved by the Contract Administrator or this Agreement.
SECTION 8 - TERMINATION AND MODIFICATION
8.1 Termination. The City may cancel this Agreement at any time and without cause upon written notification to Consultant.
Consultant may cancel this Agreement upon 45 days’ written notice to the City and shall include in such notice the reasons for cancellation.
In the event of termination, Consultant shall be entitled to compensation for services performed to the effective date of termination; the City, however, may condition payment of such compensation upon Consultant delivering to the City any or all documents, photographs, computer software, video and audio tapes, and other materials provided to Consultant or prepared by or for Consultant or the City in connection with this Agreement.
8.2 Extension. The City may, in its sole and exclusive discretion, extend the end date of this Agreement beyond that provided for in Subsection 1.1. Any such extension shall require a written amendment to this Agreement, as provided for herein.
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Consultant understands and agrees that, if the City grants such an extension, the City shall have no obligation to provide Consultant with compensation beyond the maximum amount provided for in this Agreement. Similarly, unless authorized by the Contract Administrator, the City shall have no obligation to reimburse Consultant for any otherwise reimbursable expenses incurred during the extension period.
8.3 Amendments. The Parties may amend this Agreement only by a writing signed by all the Parties.
8.4 Assignment and Subcontracting. The City and Consultant recognize and agree that this Agreement contemplates personal performance by Consultant and is based upon a determination of Consultant’s unique personal competence, experience, and specialized personal knowledge. Moreover, a substantial inducement to the City for entering into this Agreement was and is the professional reputation and competence of Consultant. Consultant may not assign this Agreement or any interest therein without the prior written approval of the Contract Administrator. Consultant shall not subcontract any portion of the performance contemplated and provided for herein, other than to the subcontractors noted in the proposal, without prior written approval of the Contract Administrator.
8.5 Survival. All obligations arising prior to the termination of this Agreement and all provisions of this Agreement allocating liability between the City and Consultant shall survive the termination of this Agreement.
8.6 Options upon Breach by Consultant. If Consultant materially breaches any of the terms of this Agreement, the City’s remedies shall include, but not be limited to, the following:
8.6.1 Immediately terminate the Agreement
8.6.2 Retain the plans, specifications, drawings, reports, design documents, and any other work product prepared by Consultant pursuant to this Agreement
8.6.3 Retain a different consultant to complete the work described in Exhibit A not finished by Consultant
8.6.4 Charge Consultant the difference between the cost to complete the work described in Exhibit A that is unfinished at the time of breach and the amount that the City would have paid Consultant pursuant to Section 2 if Consultant had completed the work
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SECTION 9 - MISCELLANEOUS PROVISIONS
9.1 Attorneys’ Fees. If a party to this Agreement brings any action, including an action for declaratory relief, to enforce or interpret the provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose.
9.2 Venue. In the event that either party brings any action against the other under this Agreement, the Parties agree that trial of such action shall be vested exclusively in the state courts of California in the county in which the City is located.
9.3 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement is invalid, void, or unenforceable, the provisions of this Agreement not so adjudged shall remain in full force and effect. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision of this Agreement.
9.4 No Implied Waiver of Breach. The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement.
9.5 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and shall apply to and bind the successors and assigns of the Parties.
9.6 Use of Recycled Products. Consultantshall prepare and submit all reports, written studies, and other printed material on recycled paper to the extent it is available at equal or less cost than virgin paper.
9.7 Conflict of Interest. Consultant may serve other clients, but none whose activities within the corporate limits of the City or whose business, regardless of location, would place Consultant in a “conflict of interest,” as that term is defined in the Political Reform Act, codified at California Government Code Section 81000 et seq.
Consultant shall not employ any the City official in the work performed pursuant to this Agreement. No officer or employee of the City shall have any financial interest in this Agreement that would violate California Government Code Sections 1090 et seq.
Consultant hereby warrants that it is not now, nor has it been in the previous 12 months, an employee, agent, appointee, or official of the City. If Consultant was an employee, agent, appointee, or official of the City in the previous twelve months, Consultant warrants that it did not participate in any manner in the forming of this Agreement. Consultant understands that, if this Agreement is made in violation of Government Code § 1090 et seq., the entire Agreement is
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void and Consultant will not be entitled to any compensation for services performed pursuant to this Agreement, including reimbursement of expenses, and Consultant will be required to reimburse the City for any sums paid to Consultant. Consultant understands that, in addition to the foregoing, it may be subject to criminal prosecution for a violation of Government Code § 1090 and, if applicable, will be disqualified from holding public office in the State of California.
As of the date of the Agreement, there are no actual or potential conflicts of interest that Consultant is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If Consultant becomes aware of any potential conflict of interest that arise after this disclosure, Consultant will disclose the detailed information in writing to the City in a timely manner.
The fee paid to Consultant increases the cost of investment to the City. The increased cost occurs from compensating Consultant for municipal advisory services provided.
Consultant does not act as principal in any of the transaction(s) related to this Agreement.
During the term of the municipal advisory relationship, this agreement will be promptly amended or supplemented to reflect any material changes in or additions to the terms or information within this agreement and the revised writing will be promptly delivered to the City.
9.8 Solicitation. Consultant agrees not to solicit business at any meeting, focus group, or interview related to this Agreement, either orally or through any written materials.
9.9 Contract Administration. This Agreement shall be administered by the City Director of Administrative Services (“Contract Administrator”). All correspondence shall be directed to or through the Contract Administrator or his or her designee.
9.10 Notices. Any written notice to Consultant shall be sent to:
Eric Scriven, Principal
NHA Advisors, LLC
4040 Civic Center Drive, Suite 200
San Rafael, CA 94903
Any written notice to the City shall be sent to:
Interim City Manager
City of El Centro
1275 W. Main Street
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El Centro, CA 92243
10.11 Integration. This Agreement, including the Scope of Services attached hereto and incorporated herein as Exhibits A and B represents the entire and integrated agreement between the City and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral.
Exhibit A: Scope of Services
Exhibit B: Compensation Schedule
10.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement.
The Parties have executed this Agreement as of the Effective Date.
CITY OF EL CENTRO NHA ADVISORS, LLC
____________________________ ______________________________ Cedric Ceseña, Interim City Manager Eric Scriven, Principal
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EXHIBIT A
SCOPE OF SERVICES
FINANCIAL CONSULTING AND MUNICIPAL ADVISORY SERVICES
The scope of work will generally include, but will not be limited to, the following services:
General Financial Assistance
• Work with City staff to review and provide advice on operational budgets • Develop financial models for funding capital needs
• Assist in appropriate disclosure for annual financial reporting • Review and respond to general questions related to public finance • Assist staff with reports or information items related to financing strategies or opportunities
• Respond to general inquiries from staff
Special Projects
• Work with City staff to develop an approach and timeline for the conversion of paper time reporting to electronic time reporting
• Work with City staff to develop an approach and timeline for credit card and electronic payment of utility and other bills to the City • Assist in identifying consultants qualified for such special projects Development Finance
• Review proposed development plans for public infrastructure requirement or other possible financeable components
• Develop initial funding model and tax impact of potential bond financing • Work with City staff and property owner to understand financial impact of project scoping on future property tax collections
• Develop non-capital (services) funding vehicle if requested by the City
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• Work with City staff, consultants and property owner to develop funding agreement
Utility Financing
• Review the City’s existing bond obligations
• Develop financial model addressing coverage requirements and future parity capacity
• Calculate feasibility of refinancing any outstanding obligations • Develop financing options
General Fund Financing
• Review the City’s existing general fund obligations
• Calculate feasibility of refinancing any outstanding obligations • Develop financing options
• Budget and cash flow review and analysis
Presentation to City Council, Staff or Other Stakeholders (as requested) • Develop presentation materials or memos detailing financing information • Present information in any format as determined by City staff
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EXHIBIT B
COMPENSATION SCHEDULE
Budget
For work described in the Scope of Services, Consultant will be compensated based on time and materials required at the hourly rate schedule shown below. The annual (per Fiscal Year), not-toexceed budget for these services, without further approval from the City, shall be $45,000.
Staff
Allocation
Hourly
Rate
Principal $325
Director / Senior Vice President $300
Vice President $275
Assist. Vice President / Sr. Associate $250
Associate $225
Senior Analyst $200
Analyst $175
Administrative $ 75
Expenses (Out-of-Pocket)
All expenses will be billed directly at cost to the City. Expenses will be limited to those necessary for completion of the project.
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Packet Pg. 169 Attachment: Agreement - General Financial Services (5819 : Municipal Advisor Agreement with NHA Advisor, LLC for General and Special City Council of the City of El Centro Meeting: 01/17/23 11:30 AM 1275 Main Street Department: City Manager's Office
El Centro, CA 92243 Category: Public Hearing
Prepared By: Norma Wyles
SCHEDULED Department Head: Cedric Cesena
ACTION ITEM (ID # 5832) DOC ID: 5832
Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police Station Project)
CITY MANAGER’S RECOMMENDATION:
1) The City Council approve:
Resolution No. 23- , RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL
CENTRO AUTHORIZING AND APPROVING THE ISSUANCE OF LEASE REVENUE BONDS (POLICE STATION PROJECT), 2023 SERIES A, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $49,500,000; APPROVING THE FORM OF
PRELIMINARY OFFICIAL STATEMENT AND THE EXECUTION AND DELIVERY OF A
FINAL OFFICIAL STATEMENT, A SITE AND FACILITY LEASE, A LEASE AGREEMENT,
A CONTINUING DISCLOSURE AGREEMENT AND A BOND PURCHASE AGREEMENT,
AND AUTHORIZING ACTIONS AND EXECUTION OF DOCUMENTS RELATED THERETO; AND
FISCAL IMPACT:
Based on conservative assumptions on current market rates, a General Fund backed lease financing (sized to reflect available Measure P revenues) that raises approximately $40 million for a new police station facility will cost approximately $3.3 million annually in lease payments through October 1, 2047. The final financing cost will be determined when the bonds are sold and will be subject to changing market conditions. The operation and maintenance costs of the new facility will be the same or slightly lower due to increased energy efficiency.
STRATEGIC PLANNING PROGRAM 2022-2027 RELATION:
Goal #1 - Financial & Governance Stability & Sustainability.
Goal #3 - Community Health, Safety, & Welfare.
DUE DILIGENCE CHECK FOR CONTRACTORS/CONSULTANTS: DID THE
DEPARTMENT VERIFY CURRENT EL CENTRO BUSINESS LICENSE,
CONTRACTORS LICENSE, REFERENCE CHECKS, INSURANCE, ETC:
Yes. NHA Advisors and Norton Rose Fulbright US LLP each will obtain business licenses as required.
BACKGROUND:
The City’s residents approved a one-half percent (1/2%) local transactions and use tax, "Measure P, in November 2016. This local tax is a “general tax” as opposed to a specific tax; therefore, the revenues collected are not restricted and may be used for any City governmental purpose. Ballot language for Measure P indicated that 9 Packet Pg. 170
Action Item (ID # 5832) Meeting of January 17, 2023
the funds would be allocated toward maintaining City services and facilities, including police, fire protection, library, parks and recreation, senior programs, and street maintenance and upgrades. In October 2017, City Council formed four Measure P Working Groups - Public Works, Parks & Recreation, IT/ADA, and Community Enhancement - to review and recommend use of Measure P funds. The City has a need for new police department facilities to replace old facilities that are no longer fit for purpose.
The Public Safety Task Force and Community Enhancement Task Force ranked use of Measure P money and identified the police facility as a priority. The current building was built in the 1950's and is not in good repair. The new building will be more energy efficient but is twice the size so there will not be savings and some operational and janitorial costs will increase.
DISCUSSION:
City staff has been working with its independent municipal advisor, NHA Advisors, to analyze and evaluate the capacity to finance this 2023 Police Headquarters Project ($40 million project budget) sized using a portion of the Measure P monies through Measure P’s expiration date of June 30, 2047, to accomplish the goals outlined in the Measure P ballot language.
NHA Advisors and the financing team have conducted their own due diligence to ascertain a preferred Plan of Finance that meets the objectives established by the City Council: Fund the Police Headquarters Project AND help maintain the City’s financial sustainability and resiliency.
Bond Structure - Per a discussion with the City’s Bond Counsel, Norton Rose Fulbright US LLP, the legal structure for the bond financing will be a lease revenue bond structure. Under such structure, the City’s General Fund revenues provide repayment for the financing, and physical assets are required to serve as the “Leased Asset” to support the financing. This financing structure is similar to what the City executed in 2021 to finance the Library Project. Under a lease revenue financing structure, a City cannot legally begin making debt payments until it has beneficial use and possession of the facilities that will serve as the leased asset for the financing. There is no security interest given in the City property where the station is located.
Given that the leased assets are the new facilities being constructed, the City cannot legally make debt service payments during the construction period unless an asset can be used during this construction period, absent funding of interest by the City which adds cost to the financing.
In an effort to minimize funding of interest, the Aquatic Center has been identified as an asset of suitable quality and value to serve as a partial substitute asset during the construction period of the Police Headquarters. Once the Police Headquarters 9 Packet Pg. 171
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receives a temporary certificate of occupancy, then the Aquatic Center may be removed after “pro forma” paperwork and certifications are concluded so that only the Police Headquarters itself will serve as the Leased Asset.
Finally, it is expected that the 2023 Bonds will be supported by a level annual lease payment structure that begins amortizing principal immediately and has a final maturity of October 1, 2047.
Financing Documents and Schedule:
Being presented for approval are the following documents:
Site and Facility Lease: This is an agreement between the City and the Authority providing the mechanism from which the Authority may then lease the identified asset back to the City in exchange for the lease payments sufficient to pay debt service on the 2023 Bonds.
Lease Agreement: This agreement provides for the leasing of the identified asset back from the Authority to the City in exchange for semi-annual lease payments commensurate with the debt service on the 2023 Bonds. The City’s General Fund will make the lease payments over the term of the Lease Agreement.
Bond Purchase Agreement: Pursuant to the Bond Purchase Agreement (“BPA”), the Underwriter (Ramirez & Co., Inc.) will agree to buy the 2023 Bonds at specified prices and interest rates, subject to satisfaction of certain requirements, such as the City’s execution and delivery of the indentures and delivery of closing certificates and opinions. The BPA will be presented to the authorized officers of the City for approval and execution on the pricing date after the Underwriter has completed the offering to the investors and the pricing of the 2023 Bonds. The Resolution specifies the maximum underwriter’s discount and other financing parameters that must be met before moving forward on the transaction.
Preliminary Official Statement: A preliminary official statement (“POS”) has been prepared to provide material information to investors regarding the terms and security of the 2023 Bonds. The POS contains information about the City’s General Fund, including budget performance and information about the City’s reserves and financial policies, as well as audited financial statements. The POS also includes descriptions of the legal and financial aspects of the 2023 Bonds, as well as a summary of the various related legal documents. Certain information which will be determined upon the pricing of the 2023 Bonds (such as the final principal amount, the interest rates and the redemption dates are either omitted or noted as “preliminary, subject to change” in the POS. The Underwriter will use the POS to market the 2023 Bonds to potential investors. Once the 2023 Bonds have been priced, the final pricing information will be inserted into the POS, thereby converting it to an Official Statement. The Underwriter will then distribute the Official Statement to the individuals and institutions that placed orders to buy the 2023 Bonds from the Underwriter.
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Continuing Disclosure Agreement: Under the Continuing Disclosure Agreement, the City will agree to provide an annual report containing certain information relevant to the security of the 2023 Bonds, to be filed on the EMMA system (the internet-based information repository maintained by the Municipal Securities Rule Making Board for municipal bonds issued in the United States) to make such information available to the investors. The City will also agree to disclose and make filings upon the occurrence of enumerated events (such as a rating change on the 2023 Bonds).
If City Council and Authority Board elect to approve the two resolutions, City staff will work with the financing team to immediately ready the 2023 Bond transaction for a public sale. Below is a summary of the financing schedule:
Date Activity
1/17/23 City Council and Authority Board Approve Financing Resolutions 1/20/23 Release Preliminary Official Statement to Underwriter to begin marketing of 2023 Bonds to Investors
1/31/23 2023 Bond Order Period, Verbal Award and Execution of Bond Purchase Agreement
2/9-10/23 Close Financing
The City Council resolution sets forth certain parameters upon any sale of the Bonds.
These parameters are: (1) the par amount of the bonds cannot exceed $49,500,000, (2) the underwriter’s discount cannot exceed 1.00% of the par amount of the Bonds.
CONCLUSION:
Measure P funds are a highly strategic asset intended to fund the City facilities, infrastructure and services/maintenance to maintain and enhance all City stakeholder' s interests. The Plan of Finance to accomplish the objectives outlined by City Council and the voters who approved Measure P in 2016 will provide the means to accomplish the objectives.
ATTACHMENTS:
• City Resolution - El Centro Police Station Project (DOC) • Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (DOCX) • Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (DOCX) • Preliminary Official Statement - El Centro - 2023 Police Station Project (DOCX) • Continuing Disclosure Agreement - El Centro 2023 Lease Revenue Bonds - Police Station Project (DOCX) • BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (DOCX) 9 Packet Pg. 173
RESOLUTION NO. 23-
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CENTRO
AUTHORIZING AND APPROVING THE ISSUANCE OF LEASE REVENUE BONDS (POLICE STATION PROJECT), 2023 SERIES A, IN THE
AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $49,500,000;
APPROVING THE FORM OF PRELIMINARY OFFICIAL STATEMENT AND
THE EXECUTION AND DELIVERY OF A FINAL OFFICIAL STATEMENT,
A SITE AND FACILITY LEASE, A LEASE AGREEMENT, A CONTINUING
DISCLOSURE AGREEMENT AND A BOND PURCHASE AGREEMENT,
AND AUTHORIZING ACTIONS AND EXECUTION OF DOCUMENTS
RELATED THERETO
WHEREAS, the El Centro Financing Authority (the “Authority”) has been formed pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 1996 (the “Agreement”), by and between the City of El Centro (the “City”) and the Successor Agency to the El Centro Community Redevelopment Agency, and is authorized under the Agreement and under the laws of the State of California (the “State”) to finance and refinance the acquisition and construction of public capital improvements for any of its members; and WHEREAS, the City desires to finance the acquisition, construction and improvement of new police department facilities in the City (the “Police Station Project”); and WHEREAS, it has been proposed that the Authority assist the City in providing funds to finance the Police Station Project by entering into an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the Authority and a banking corporation or national banking association named therein, as trustee and providing for the issuance and delivery of the Authority’s Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “Bonds”); and WHEREAS, the City has duly noticed and held a public hearing pursuant to Sections 6586.5 and 54953 of the Government Code California of the State; and WHEREAS, Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) (“SB 450”) requires that the governing body of a public body prior to authorizing the issuance of bonds with a term of greater than 13 months, obtain good faith estimates of the following information in a meeting open to the public: (a) the true interest cost of the bonds, (b) the sum of all fees and charges paid to third parties with respect to the bonds, (c) the amount of proceeds of the bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the bonds, and (d) the sum total of all debt service payments on the bonds calculated to the final maturity of the bonds plus the fees and charges paid to third parties not paid with the proceeds of the bonds;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EL CENTRO, CALIFORNIA DOES HEREBY RESOLVE AS FOLLOWS:
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Packet Pg. 174 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police Section 1. Approval of Bonds. The City Council hereby approves the issuance of the Authority’s Lease Revenue Bonds, 2023 Series A (Police Station Project), in the aggregate principal amount not to exceed $49,500,000.
Section 2. Finding of Significant Public Benefits. The City Council hereby finds that (i) the public capital improvements constituting the Police Station Project are to be located within the boundaries of the City and (ii) there are significant public benefits arising from the Authority’s issuance of the Bonds to finance such public capital improvements as contemplated by Section 6586 of the Government Code of the State.
Section 3. Approval of the Site and Facility Lease. The City Council hereby approves the Site and Facility Lease in substantially the form on file with the City Clerk of the City and presented to the City Council at this meeting. The Mayor, the City Manager, the Interim City Manager, or the Interim Finance Director, their individual designees (each, a “Responsible Officer”), are each hereby authorized to execute the Site and Facility Lease in substantially such form, with such revisions, amendments and completions as shall be approved by a Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 4. Approval of the Lease Agreement. The City Council hereby approves the Lease Agreement in substantially the form on file with the City Clerk of the City and presented to the City Council at this meeting. Any Responsible Officer is hereby authorized to execute the Lease Agreement in substantially such form, with such revisions, amendments and completions as shall be approved by a Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 5. Approval of the Preliminary Official Statement and the Official Statement. The City Council hereby approves the Preliminary Official Statement relating to the Bonds, in substantially the form on file with the City Clerk of the City and presented to the City Council at this meeting, with such revisions, amendments and completions as shall be approved by a Responsible Officer, with the advice of Bond Counsel and Disclosure Counsel, to make the Preliminary Official Statement final as of its date, except for the omission of certain information, as permitted by Section 240.15c2-12(b) of Title 17 of the Code of Federal Regulations (“Rule 15c2-12”), and any certificate relating to the finality of the Official Statement under Rule 15c2-
12. A Responsible Officer is authorized and directed to execute and deliver a final Official Statement, with such additions and changes as may be approved by Bond Counsel and Disclosure Counsel and the Responsible Officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 6. Approval of the Continuing Disclosure Agreement. The City Council hereby approves the Continuing Disclosure Agreement in substantially the form on file with the City Clerk of the City and presented to the City Council at this meeting. Any Responsible Officer is hereby authorized to execute the Continuing Disclosure Agreement in substantially such form, with such revisions, amendments and completions as shall be approved by a Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof.
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Packet Pg. 175 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police Section 7. Approval of the Bond Purchase Agreement. The City Council hereby approves the Bond Purchase Agreement in substantially the form on file with the City Clerk of the City and presented to the City Council at this meeting. Any Responsible Officer is hereby authorized to execute the Bond Purchase Agreement in substantially such form, with such revisions, amendments and completions as shall be approved by a Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that such additions, deletions or changes in the Bond Purchase Agreement shall provide for an Underwriter’s discount or fee (excluding any original issue discount) not to exceed 1.00% and a true interest cost with respect to the Bonds not greater than 6.00%.
Section 8. Good Faith Cost Estimates. In accordance with SB 450, good faith estimates of the following are set forth on Exhibit A attached hereto: (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds.
Section 9. Official Actions. The Responsible Officers, the City Clerk and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all other actions, including the publication of any notices necessary or desirable in connection with the sale of the Bonds, procurement of municipal bond insurance, if any, and reserve fund surety bond, if any, and execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, deem necessary or advisable to consummate the lawful issuance and sale of the Bonds and the consummation of the transactions as described herein.
Section 10. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption.
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Packet Pg. 176 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police PASSED AND ADOPTED at a regular meeting of the City Council of the City of El Centro, California held on the 17th day of January 2023.
CITY OF EL CENTRO
_________________________________
Martha Cardenas-Singh, Mayor
ATTEST:
_____________________________
Norma Wyles, City Clerk
APPROVED AS TO FORM:
Office of the City Attorney
_____________________________
Elizabeth L. Martyn, City Attorney
STATE OF CALIFORNIA )
COUNTY OF IMPERIAL )
CITY OF EL CENTRO )
I, Norma Wyles, City Clerk of the City of El Centro, California do hereby certify that the foregoing Resolution No. 23- was duly and regularly adopted at a regular meeting of the City Council of the City of El Centro, California, held on the 17th of January 2023, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
By
Norma Wyles, City Clerk
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Packet Pg. 177 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police
EXHIBIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by NHA Advisors, LLC, the City’s Municipal Advisor (the “Municipal Advisor”).
Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $45,710,000.00 (the “Estimated Principal Amounts”).
True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the respective Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.6197822%.
Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $777,100.
Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any capitalized interest on the Bonds paid or funded with proceeds of the Bonds, is $40,003,790.00.
Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay lease payments that will pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the respective proceeds of the Bonds, calculated to the final maturity of the Bonds, is $74,226,366.67.
The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates on January 11, 2023. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of
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Packet Pg. 178 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the respective Estimated Principal Amounts, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on various factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.
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Packet Pg. 179 Attachment: City Resolution - El Centro Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 Series A (Police 134264217.2
NRF Draft – 1/12/22
SITE AND FACILITY LEASE
Dated as of February 1, 2023
by and between
CITY OF EL CENTRO
and
EL CENTRO FINANCING AUTHORITY
Relating to the $[Par Amount]
El Centro Financing Authority
Lease Revenue Bonds, 2023 Series A
(Police Station Project)
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Packet Pg. 180 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease
TABLE OF CONTENTS
Page
i
SECTION 1. DEFINITIONS................................................................................................. 1 SECTION 2. SITE LEASE.................................................................................................... 1 SECTION 3. TERM .............................................................................................................. 2 SECTION 4. RENTAL.......................................................................................................... 2 SECTION 5. TITLE .............................................................................................................. 2 SECTION 6. DEFAULT ....................................................................................................... 2 SECTION 7. EMINENT DOMAIN ...................................................................................... 3 SECTION 8. RIGHT OF ENTRY......................................................................................... 3 SECTION 9. TERMINATION.............................................................................................. 3 SECTION 10. QUIET ENJOYMENT BY THE AUTHORITY............................................. 3 SECTION 11. ASSIGNMENTS AND SUBLEASES ............................................................ 3 SECTION 12. WAIVER OF PERSONAL LIABILITY......................................................... 4 SECTION 13. TAXES............................................................................................................. 4 SECTION 14. GOVERNING LAW........................................................................................ 4 SECTION 15. NOTICES......................................................................................................... 4 SECTION 16. VALIDITY AND SEVERABILITY ............................................................... 5 SECTION 17. PURPOSE OF THE LEASED PROPERTY ................................................... 5 SECTION 18. WAIVER OF DEFAULT ................................................................................ 5 SECTION 19. SECTION HEADINGS ................................................................................... 5 SECTION 20. AMENDMENTS ............................................................................................. 6 SECTION 21. EXECUTION................................................................................................... 6 EXHIBIT A — DESCRIPTION OF THE LEASED PROPERTY
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Packet Pg. 181 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2
SITE AND FACILITY LEASE
This SITE AND FACILITY LEASE, dated as of February 1, 2023 (this “Site Lease”), is made by and between the CITY OF EL CENTRO, a charter city duly organized and existing under the Constitution and laws of the State of California (the “City”), as lessor, and the EL CENTRO FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and existing under the laws of the State of California (the “Authority”), as lessee.
RECITALS:
WHEREAS, the City is leasing the property more particularly described in Exhibit A attached hereto (the “Leased Property”) to the Authority; and WHEREAS, the Authority has determined to issue its $[Par Amount] Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “Bonds”) pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”); and
WHEREAS, the Authority, concurrently with the execution of this Site Lease, will lease the Leased Property to the City pursuant to a Lease Agreement, dated as of February 1, 2023 (the “Lease”), by and between the City and the Authority, in consideration for base rental payments equal to the principal and interest coming due on the Bonds; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Site Lease do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Site Lease;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Indenture or the Lease, as applicable.
SECTION 2. SITE LEASE
The City hereby leases the Leased Property to the Authority and the Authority hereby leases the Leased Property from the City, on the terms and conditions hereinafter set forth.
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Packet Pg. 182 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 2
SECTION 3. TERM
The term of this Site Lease shall commence on ________, 2023. This Site Lease shall constitute a lease of the City’s interest in the Leased Property.
The term of this Site Lease shall expire on the earliest of (i) the Expiration Date; (ii) the date the last base rental payment is made under the provisions of the Lease (i.e. October 1, 20__); or (iii) the date of discharge of the Indenture pursuant to Section 10.03 thereof.
Notwithstanding the foregoing, the term of this Lease shall automatically be extended for a period of ten (10) years, if, on the Expiration Date, the Indenture has not been fully discharged, and shall terminate on the date when the Indenture has been fully discharged.
SECTION 4. RENTAL
The Authority agrees to pay to the Trustee, on the Closing Date, the proceeds of the Bonds, as advance rental for the use and right to possession of the Leased Property for the term of this Site Lease. The rental shall be applied by the Trustee as provided in the Indenture.
SECTION 5. TITLE
Throughout the term of this Site Lease, title to the Leased Property shall remain in the City.
SECTION 6. DEFAULT
(a) If the Authority shall fail to keep, observe or perform any term, covenant or condition contained herein to be kept or performed by the Authority, or (b) if (1) the Authority’s interest in this Site Lease or any part thereof is assigned or transferred without the written consent of the City, either voluntarily or by operation of law or otherwise, except as provided in Section 11 hereof, or (2) any proceeding under the United States Bankruptcy Code or any federal or state bankruptcy, insolvency or similar law or any law providing for the appointment of a receiver, liquidator, trustee or similar official of the Authority or of all or substantially all of its assets is instituted by or with the consent of the Authority, or is instituted without its consent and is not permanently stayed or dismissed within sixty (60) days, or if the Authority offers to the Authority’s creditors to effect a composition or extension of time to pay the Authority’s debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for readjustment of the Authority’s debts, or if the Authority shall make a general assignment or any assignment for the benefit of the Authority’s creditors, then the Authority shall be deemed to be in default hereunder and it shall be lawful for the City to exercise any and all rights and remedies available pursuant to law; provided however, that: (i) no merger of this Site Lease and of the Lease shall be deemed to occur as a result thereof; and (ii) so long as any Bonds remain outstanding the City shall have no power to terminate this Site Lease by reason of any default on the part of the Authority if such termination would prejudice the exercise of the remedies provided in Section 10 (captioned “DEFAULT”) of the Lease.
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Packet Pg. 183 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 3
Neither the City nor the Authority shall in any event be in default in the performance of any of its obligations hereunder or imposed by law unless and until the City or the Authority (as the case may be) shall have failed to perform such obligations within sixty (60) days after notice by the Authority or the City to the nonperforming party properly specifying wherein such party has failed to perform any such obligation.
SECTION 7. EMINENT DOMAIN
If the whole or any part of the Leased Property shall be taken under the power of eminent domain, the interest of the Authority shall be recognized and is hereby determined to be the amount of the unpaid principal components of base rental payments due under the Lease, and all accrued interest thereon, and the amount of the unpaid Additional Rental Payments due under the Lease, and the balance of the award, if any, shall be paid to the City.
SECTION 8. RIGHT OF ENTRY
The City and its assignees shall have the right to enter the Leased Property during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the City’s or the Authority’s rights or obligations under this Site Lease and (c) for all other lawful purposes.
SECTION 9. TERMINATION
The Authority agrees, upon the termination of this Site Lease, to quit and surrender the Leased Property in the same good order and condition as the same were in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and the Authority and the City agree that any permanent improvements and structures existing upon the Leased Property at the time of the termination of this Site Lease shall remain thereon and title thereto shall be vested in the City.
SECTION 10. QUIET ENJOYMENT BY THE AUTHORITY
The Authority shall at all times during the term of this Site Lease peaceably and quietly have, hold and enjoy the Leased Property without suit, trouble or hindrance from the City, subject to the Authority’s compliance with the terms and provisions hereof and of the Lease.
SECTION 11. ASSIGNMENTS AND SUBLEASES
The Authority shall not assign, mortgage, hypothecate or otherwise encumber this Site Lease or any rights hereunder or the leasehold created hereby by trust agreement, indenture or deed of trust or otherwise or sublet the Leased Property without the written consent of the City, except as provided by the Lease and as security for the Bonds.
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Packet Pg. 184 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 4
SECTION 12. WAIVER OF PERSONAL LIABILITY
All liabilities hereunder on the part of the Authority shall be solely liabilities of the Authority as a separate legal entity, and no member, officer or employee of the Authority shall at any time or under any circumstances be individually or personally liable hereunder for anything done or omitted to be done by the Authority hereunder.
SECTION 13. TAXES
The City agrees and covenants to pay, any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Leased Property (including both land and improvements thereon).
SECTION 14. GOVERNING LAW
This Site Lease shall be governed by and construed in accordance with the laws of the State of California.
SECTION 15. NOTICES
All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered or certified mail, return receipt requested, postage pre-paid, and,
if to the City:
City of El Centro
1275 West Main Street
El Centro, California 92243
Attention: City Manager
if to the Authority:
El Centro Financing Authority
c/of City of El Centro
1275 West Main Street
El Centro, California 92243
Attention: Executive Director
or to such other addresses as the respective parties may from time to time designate by notice in writing.
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Packet Pg. 185 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 5
SECTION 16. VALIDITY AND SEVERABILITY
If any one or more of the terms, provisions, covenants or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law.
If for any reason this Site Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the City or by the Authority, or if for any reason it is held by such a court that any of the covenants and conditions of the Authority hereunder is unenforceable for the full term hereof, then and in such event this Site Lease is and shall be deemed to be a lease from year to year and all of the rental and other terms, provisions and conditions of this Site Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect.
SECTION 17. THE LEASED PROPERTY
The City represents, warrants and covenants that it has good and indefeasible marketable fee simple to the real property and all building, property and improvements comprising the Lease Property. The City covenants and agrees to hold and maintain clean and marketable title to all of the Leased Property during the term of this Site Lease. If necessary to maintain clear and marketable title to the leased properties, the City shall take all actions necessary, including eminent domain or condemnation proceedings, to ensure that title to the Leased Property is clear and marketable.
The Authority covenants that during the term of this Site Lease, it shall use the Leased Property for the purposes described in the Lease and for such other purposes as may be incidental thereto.
SECTION 18. WAIVER OF DEFAULT
Failure of the City to take advantage of any default on the part of the Authority shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this Site Lease be construed to waive or to lessen the right of the City to insist upon performance by the Authority of any term, covenant or condition hereof, or to exercise any rights given the City on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Site Lease.
SECTION 19. SECTION HEADINGS
All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease.
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Packet Pg. 186 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 6
SECTION 20. AMENDMENTS
This Site Lease may be amended in writing as may be mutually agreed by the Authority and the City with the prior written consent of the Insurer.
SECTION 21. EXECUTION
This Site Lease may be executed in any number of counterparts, each of which shall be deemed to an original, but all together shall constitute but one and the same Site Lease. It is also agreed that separate counterparts of this Site Lease may separately be executed by the City and the Authority, all with the same force and effect as though the same counterpart had been executed by both the City and the Authority.
[Remainder of page intentionally left blank.]
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Packet Pg. 187 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2 S-1
IN WITNESS WHEREOF, the City and the Authority have caused this Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
EL CENTRO FINANCING AUTHORITY
By __________________________________
Executive Director
ATTEST:
By __________________________________
Secretary
CITY OF EL CENTRO
By __________________________________
City Manager
ATTEST:
By __________________________________
City Clerk
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Packet Pg. 188 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2
A NOTARY PUBLIC OR OTHER OFFICER COMPLETING THIS CERTIFICATE
VERIFIES ONLY THE IDENTITY OF THE INDIVIDUAL WHO SIGNED THE
DOCUMENT TO WHICH THIS CERTIFICATE IS ATTACHED, AND NOT THE TRUTHFULNESS, ACCURACY, OR VALIDITY OF THAT DOCUMENT.
STATE OF CALIFORNIA )
) ss:
COUNTY OF IMPERIAL )
On ______________________________ before me,__________________________(insert name of the officer), Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
_________________________________ [Seal]
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Packet Pg. 189 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2
A NOTARY PUBLIC OR OTHER OFFICER COMPLETING THIS CERTIFICATE
VERIFIES ONLY THE IDENTITY OF THE INDIVIDUAL WHO SIGNED THE
DOCUMENT TO WHICH THIS CERTIFICATE IS ATTACHED, AND NOT THE TRUTHFULNESS, ACCURACY, OR VALIDITY OF THAT DOCUMENT.
STATE OF CALIFORNIA )
) ss:
COUNTY OF IMPERIAL )
On ______________________________ before me,__________________________(insert name of the officer), Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
_________________________________ [Seal]
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Packet Pg. 190 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2
EXHIBIT A
DESCRIPTION OF THE LEASED PROPERTY
Police Station Site
PARCEL 1:
THAT PORTION OF LOT 3, IN BLOCK 11, OF EL CENTRO ADDITION NO. 3, IN THE CITY
OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO MAP NO. 239, ON FILE IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTH LINE OF SAID LOT, 150 FEET WEST OF THE SOUTHEAST CORNER THEREOF; THENCE NORTH PARALLEL WITH THE EAST LINE OF SAID LOT, 144 FEET; THENCE WEST PARALLEL WITH THE SOUTH LINE OF SAID LOT, TO THE EAST LINE OF THE 80 FOOT STRIP CONVEYED TO THE CITY OF EL CENTRO FOR STREET PURPOSES BY DEED DATED OCTOBER 30, 1950, AND RECORDED IN BOOK 798, PAGE 64 OF OFFICIAL RECORDS; THENCE SOUTH ALONG SAID EAST LINE TO THE SOUTH LINE OF SAID LOT; THENCE EAST ALONG SAID SOUTH LINE TO THE POINT OF BEGINNING.
EXCEPTING ALL MINERALS, INCLUDING AND WITHOUT LIMITATION, ALL THE OIL,
GAS AND OTHER HYDROCARBON SUBSTANCES BUT WITHOUT ANY RIGHTS TO USE THE SURFACE OR THAT PORTION OF SAID LAND LYING WITHIN 500 FEET OF THE SURFACE, AS RESERVED BY TEXACO, INC., A DELAWARE CORPORATION, IN THE DEED RECORDED APRIL 13, 1973 AS DOCUMENT NO. 38.
PARCEL 2:
THAT PORTION OF LOT 3, IN BLOCK 11, EL CENTRO ADDITION NO. 3, IN THE CITY
OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO MAP NO. 239, ON FILE IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT, THENCE WESTERLY ALONG MAIN STREET 150 FEET; THENCE NORTHERLY PARALLEL WITH THE EASTERLY LINE OF SAID BLOCK, 144 FEET; THENCE WESTERLY PARALLEL WITH
THE SOUTHERLY LINE OF SAID BLOCK, WHICH IS ALSO THE NORTHERLY LINE OF
MAIN STREET, TO THE NORTHERLY PROLONGATION OF THE EASTERLY LINE OF THAT PORTION OF 12TH STREET WHICH EXTENDS SOUTHERLY FROM MAIN STREET; THENCE NORTHERLY ALONG SAID NORTHERLY PROLONGATION OF SAID EASTERLY LINE OF SAID PORTION OF 12TH STREET TO THE NORTHERLY LINE OF SAID LOT 3, WHICH IS IN THE SOUTHERLY LINE OF BROADWAY; THENCE EASTERLY ALONG BROADWAY TO THE NORTHEAST CORNER OF SAID BLOCK; THENCE SOUTHERLY ALONG 11TH STREET TO THE PLACE OF BEGINNING.
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Packet Pg. 191 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264217.2
Aquatic Center
THOSE PORTIONS OF LOT 44 IN SECTION 31, TOWNSHIP 15 SOUTH, RANGE 14 EAST AND LOT 15 IN SECTION 32, TOWNSHIP 15 SOUTH, RANGE 14 EAST, SAN
BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT OF THE
SURVEY OF SAID LAND, RETURNED TO THE GENERAL LAND OFFICE BY THE SURVEYOR-GENERAL; TOGETHER WITH ANY PORTION LYING WITHIN EL CENTRO, ACCORDING TO MAP THEREOF NO. 953 FILED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, A COPY OF SAID MAP BEING ON FILE IN BOOK 1, PAGE 19 OF OFFICIAL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF
IMPERIAL COUNTY, ALL BEING WITHIN THE CITY OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, BOUNDED AS FOLLOWS:
ON THE NORTH AND NORTHEAST BY THE SOUTHERLY AND SOUTHWESTERLY LINE OF THE HIGHWAY KNOWN AS ROAD IMP-26-ECN, AS DESCRIBED IN THAT CERTAIN UNRECORDED CITY OF EL CENTRO RESOLUTION NO. 860 DATED OCTOBER 14, 1943; ON THE SOUTH BY THE NORTHERN LINE OF RAILROAD AVENUE (NOW KNOWN AS PARK AVENUE); AND ON THE WEST BY THE EAST LINE OF NORTH
SIXTH STREET AS DISCLOSED BY MAP ON FILE IN THE OFFICE OF THE COUNTY ASSESSOR OF IMPERIAL COUNTY.
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Packet Pg. 192 Attachment: Site and Facility Lease - El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2
NRF Draft – 1/12/22
LEASE AGREEMENT
Dated as of February 1, 2023
by and between
EL CENTRO FINANCING AUTHORITY
and
CITY OF EL CENTRO
Relating to
$[Par Amount]
El Centro Financing Authority
Lease Revenue Bonds, 2023 Series A
(Police Station Project)
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Packet Pg. 193 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease
TABLE OF CONTENTS
Page
134264233.2 i
SECTION 1. DEFINITIONS................................................................................................. 2 SECTION 2. TERM .............................................................................................................. 3 SECTION 3. RENTAL.......................................................................................................... 3 SECTION 4. USE OF PROCEEDS ...................................................................................... 5 SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS.................. 5 SECTION 6. CHANGES TO THE LEASED PROPERTY.................................................. 6 SECTION 7. TAX COVENANTS ........................................................................................ 6 SECTION 8. SUBSTITUTION, ADDITION AND RELEASE OF PROPERTY................ 9 SECTION 9. INSURANCE................................................................................................. 11 SECTION 10. DAMAGE, DESTRUCTION AND CONDEMNATION;
APPLICATION OF NET PROCEEDS......................................................... 12 SECTION 11. DEFAULT ..................................................................................................... 14 SECTION 12. PREPAYMENT AND CREDITS.................................................................. 15 SECTION 13. MECHANICS’ LIENS .................................................................................. 16 SECTION 14. QUIET ENJOYMENT................................................................................... 16 SECTION 15. INDEMNIFICATION.................................................................................... 16 SECTION 16. ASSIGNMENT.............................................................................................. 17 SECTION 17. ABATEMENT OF RENTAL........................................................................ 17 SECTION 18. CONTINUING DISCLOSURE..................................................................... 18 SECTION 19. WAIVER........................................................................................................ 18 SECTION 20. NET LEASE .................................................................................................. 18 SECTION 21. AMENDMENTS. .......................................................................................... 18 SECTION 22. ESSENTIALITY............................................................................................ 19 SECTION 23. GOVERNING LAW...................................................................................... 19 SECTION 24. NOTICES....................................................................................................... 19 SECTION 25. VALIDITY AND SEVERABILITY ............................................................. 19 SECTION 26. SECTION HEADINGS ................................................................................. 20 SECTION 27. NO MERGER................................................................................................ 20 SECTION 28. EXECUTION................................................................................................. 20 EXHIBIT A — DESCRIPTION OF THE LEASED PROPERTY
EXHIBIT B — BASE RENTAL PAYMENT SCHEDULE
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Packet Pg. 194 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2
LEASE AGREEMENT
This Lease Agreement, dated as of February 1, 2023 (this “Lease”), is made by and between the EL CENTRO FINANCING AUTHORITY, a joint powers authority duly organized and existing under the Constitution and the laws of the State of California (the “Authority”), as lessor, and the CITY OF EL CENTRO, a charter city duly organized and existing under the laws of the State of California (the “City” or “Lessee”), as lessee.
RECITALS:
WHEREAS, the City of El Centro, California (the “City”) and the successor agency to the former Redevelopment Agency of the City of El Centro, have previously entered into a Joint Exercise of Powers Agreement, dated as of July 1, 1996, establishing the El Centro Financing Authority (the “Authority”) for the purpose of, among other things, issuing its bonds to be used to provide financing and refinancing of obligations of the City; and WHEREAS, the Authority has determined to issue its Lease Revenue Bonds, 2023 Series A in the aggregate principal amount of $[Par Amount] (the “Bonds”) pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) for the purposes of (i) funding all or a portion of the Project, (ii) funding a debt service reserve for the Bonds, and (iii) paying the related costs of issuing the Bonds; and
WHEREAS, in connection with the issuance of the Bonds, the City and the Authority have entered into a Site and Facility Lease, dated as of February 1, 2023 (the “Site Lease”), whereby the Authority has agreed to lease the Leased Property described in Exhibit A, consisting of the Police Station Project site and the Aquatic Center in the City; and WHEREAS, the Authority, pursuant to this Lease, will sublease the Leased Property described in Exhibit A to the City, in consideration for base rental payments to be made by the City pursuant to this Lease, in accordance with the base rental schedule in Exhibit B, that corresponds in amount to the principal and interest coming due with respect to the Bonds; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Lease Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Lease;
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
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Packet Pg. 195 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 2
SECTION 1. DEFINITIONS
Terms used herein and not otherwise defined herein but defined in the Indenture shall have the meanings ascribed to them in the Indenture. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease, have the meanings herein specified, the following definitions to be equally applicable to both the singular and plural forms of any of the terms herein defined:
“Additional Rental Payments” means Additional Rental Payments due under Section 3(b) hereof.
“Base Rental Payments” means Base Rental Payments to be made by the City hereunder in accordance with the base rental schedule attached hereto as Exhibit B in connection with the Bonds.
“Expiration Date” means October 1, 20__.
“Insurance Consultant” means an individual or firm retained by the City as an independent insurance consultant, experienced in the field of risk management. “Interest Component” means the interest component of any Base Rental Payments as set forth in the exhibit to this Lease relating to such Base Rental Payments. “Lease” means this Lease Agreement.
“Leased Property” means the Leased Property of the City, as more particularly described in Exhibit A.
“Net Proceeds” means proceeds of any casualty or title insurance or condemnation awards, paid with respect to the Leased Property remaining after payment therefrom of all expenses in the collection thereof.
“Permitted Encumbrances” means, with respect to the Leased Property, as of any particular time, (i) the Site Lease; (ii) this Lease, (iii) the Indenture, the Assignment Agreement and the Trustee’s and the Authority’s interests in the Leased Property, (iv) liens for taxes and assessments not then delinquent, (v) utility, access and other easements and rights of way, restrictions and exceptions that as certified in a Certificate of the City will not interfere with or impair the use intended to be made of the Leased Property; (vi) encumbrances upon any additions and improvements to the Leased Property as permitted in this Lease and which do not materially impair the use intended to be made of the portions of the Leased Property other than such additions and improvements; (vii) any sublease or use permitted by this Lease, (viii) covenants, conditions or restrictions or liens of record relating to the Leased Property and existing on the Closing Date; and (xiv) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the Leased Property and as do not materially impair the use intended to be made of property affected thereby. “Principal Component” means the principal component of any Base Rental Payments as set forth in the exhibit to this Lease relating to such Base Rental Payments.
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Packet Pg. 196 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 3
SECTION 2. TERM
The Authority hereby leases to the City and the City hereby leases from the Authority, on the terms and conditions hereinafter set forth, the Leased Property. The term of this Lease shall commence on __________, 2023.
The term of the leasehold interest created hereby shall expire on the earliest of (i) the Expiration Date; (ii) the date the last Base Rental Payment is made under the provisions hereof; or (iii) the date of discharge of all of the Bonds pursuant to Section 10.03 of the Indenture.
Notwithstanding the foregoing, the term of this Lease shall automatically be extended for a period of ten (10) years, if, on the Expiration Date, the Bonds have not been fully discharged, and shall terminate on the date when the Bonds have been fully discharged.
SECTION 3. RENTAL
Subject to the provisions of Sections 11 and 16 hereof, the City agrees to pay to the Authority, its successors or assigns, as rental for the use and possession of the Leased Property, the following amounts at the following times:
(a) Base Rental Payments; Additional Rental Payments. The City shall pay the Base Rental Payments to the Trustee, as assignee of the Authority, as hereinafter provided, in accordance with the Base Rental Payment Schedule attached hereto as Exhibit B, less any amounts credited against the Base Rental Payments pursuant to Section 3.04 of the Indenture. The City shall pay to the Trustee the Base Rental Payments coming due fifteen (15) Business Days prior to the next succeeding April 1 and October 1, respectively, as set forth in Exhibit B and such payments shall constitute payment in arrears in consideration for the City’s use and possession of the Leased Property for the six-month period preceding the due date of such Base Rental Payments. (b) Additional Rental Payments. The City shall also pay, as “Additional Rental Payments” hereunder, in addition to the Base Rental Payments, to the Trustee, as assignee of the Authority, as hereinafter provided, such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of this Lease or the assignment hereof, the Indenture, or the Authority’s or the Trustee’s interest in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture. Such Additional Rental Payments shall be billed to the City by the Authority or the Trustee from time to time.
Amounts so billed shall be paid by the City within sixty (60) days after receipt of the bill by the City.
(c) Fair Rental Value. Such payments of Base Rental Payments and Additional Rental Payments for each rental payment period shall constitute the total rental for such rental
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Packet Pg. 197 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 4
payment period, and shall be paid by the City in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Property during each such period for which said rental is to be paid. The City represents and covenants that the useful life of the Leased Property is not shorter than the final maturity of the Bonds. The parties to the Lease specifically acknowledge that the annual fair rental value of the Leased Property is in excess of the maximum annual Base Rental Payments. In making such determination, consideration has been given to other obligations of the parties under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. The determination of fair rental value of the Leased Property pursuant to this paragraph shall not be deemed to be controlling in connection with a determination of fair value of the Leased Property by the parties hereto for any other purpose.
(d) Payment of Base Rental Payments. Each installment of Base Rental Payments payable hereunder shall be paid in lawful money of the United States of America to the order of the Trustee at the corporate trust office of the Trustee in Los Angeles, California, or such other place as the Trustee shall designate. The Base Rental Payments shall be made on a pari passu basis with each other. Notwithstanding any dispute between the City and the Authority, the City shall make all Base Rental Payments when due, without deduction or offset of any kind, and shall not withhold any Base Rental Payments pending the final resolution of any such dispute. In the event of a determination that the City was not liable for said Base Rental Payments or any portion thereof, said Base Rental Payments or excess of payments, as the case may be, shall, at the option of the City, be credited against subsequent Base Rental Payments due hereunder or be refunded at the time of such determination.
(e) Increases in Aggregate Base Rental Payments. The City covenants that it shall not permit an increase in the Base Rental Payments without first obtaining an opinion of Bond Counsel to the effect that the incurring of such increased Base Rental Payments will not impair the validity and enforceability of this Lease.
(f) Covenant to Budget and Appropriate. The City covenants to take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due hereunder in its annual budget and to make the necessary annual appropriations for all such Base Rental Payments and Additional Rental Payments, subject only to abatement as provided in Section 16 hereof. The City will furnish to the Authority and the Trustee annually, on or before October 1, a certificate stating that it has complied with the covenant set forth in this paragraph.
The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City.
The obligation of the City to make Base Rental Payments or Additional Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
Neither the Bonds nor the obligation of the City to make Base Rental Payments or Additional
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Packet Pg. 198 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 5
Rental Payments constitutes an indebtedness of the City, the State or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
SECTION 4. USE OF PROCEEDS
The parties hereto agree that the proceeds of the Bonds will be used to provide funds to: (i) finance the acquisition, construction and improvement of a new library facility in the City (the “Police Station Project”), as described herein, (ii) fund a debt service reserve for the Bonds, and (iii) pay the related costs of issuing the Bonds.
SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS During such time as the City or any assignee or sublessee thereof is in possession of the Leased Property, all maintenance and repair, ordinary or extraordinary, of the Leased Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of (a) all utility services supplied to the Leased Property, (b) the cost of operation of the Leased Property, and (c) the costs of maintenance of and repair to the Leased Property resulting from ordinary wear and tear or want of care on the part of the City. The City shall at the City’s sole cost and expense keep and maintain the Leased Property clean and in a safe and good condition and repair. The Authority shall have no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Property or any part thereof, and the parties hereto affirm that the Authority has made no representations or warranties to the City respecting the condition of the Leased Property.
The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Property. The Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Property.
The City waives the right to make repairs at the Authority’s expense under Subsection 1 of Section 1932 and Section 1942 of the California Civil Code, or any other such law, statute, or ordinance now or hereafter in effect.
The parties hereto contemplate that the Leased Property will be used for public purposes by the City and, therefore, that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. If the use, possession or acquisition by the Authority or the City of the Leased Property is found to be subject to taxation in any form, the City will pay during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as this Lease is in effect.
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Packet Pg. 199 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 6
SECTION 6. CHANGES TO THE LEASED PROPERTY
The City shall have the right during the term of this Lease to acquire and construct improvements or to attach fixtures, structures or signs to the Leased Property if such improvements, fixtures, structures or signs are necessary or beneficial for the use of the Leased Property by the City; provided, however, that no such acquisition or construction shall result in a material reduction in the value of the Leased Property, reduce the fair rental value thereof or substantially alter the nature of the Leased Property.
Upon termination of this Lease, the City may remove any fixture, structure or sign added by the City, but such removal shall be accomplished so as to leave the Leased Property, except for ordinary wear and tear and damage by casualty, in substantially the same condition as it was in before the fixture, structure or sign was attached.
SECTION 7. TAX COVENANTS
(a) Special Definitions. When used in this Section, the following terms have the following meanings:
“Code” means the Internal Revenue Code of 1986.
“Computation Date” has the meaning set forth in section 1.148-1(b) of the Tax Regulations.
“Gross Proceeds” means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any replacement proceeds as defined in section 1.148-1(c) of the Tax Regulations, of the Bonds. “Investment” has the meaning set forth in section 1.148-1(b) of the Tax Regulations.
“Nonpurpose Investment” means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and that is not acquired to carry out the governmental purposes of that Series of Bonds. “Rebate Amount” has the meaning set forth in section 1.148-1(b) of the Tax Regulations.
“Tax Regulations” means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code, or section 103 of the 1954 Code, as applicable.
“Yield” of any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations; and of any issue of governmental obligations has the meaning set forth in section
1.148-4 of the Tax Regulations.
(b) Not to Cause Interest to Become Taxable. The City covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other
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amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to Section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives a written opinion of Bond Counsel to the effect that failure to comply with such covenant will not adversely affect such exclusion of the interest on any Bond from the gross income of the owner thereof for federal income tax purposes, the City shall comply with each of the specific covenants in this Section. (c) Private Use or Private Payments. Except as would not cause any Bond to become a “private activity bond” within the meaning of section 141 of the Code and the Tax Regulations, the City shall take all actions necessary to assure that the City at all times prior to the final cancellation of the last of the Bonds to be retired:
(1) exclusively owns, operates and possesses all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross Proceeds (including through any contractual arrangement with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) does not directly or indirectly impose or accept any charge or other payment by any person or entity (other than a state or local government) who is treated as using any Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds.
(d) No Private Loan. Except as would not cause any Bond to become a “private activity bond” within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the City shall not use or permit the use of Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be “loaned” to a person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (iii) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except as would not cause the Bonds to become “arbitrage bonds” within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the City shall not (and shall not permit any person to), at any time prior to the final cancellation of the last Bond to be retired, directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment acquired with Gross
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Proceeds, whether then held or previously disposed of, would materially exceed the Yield of the Bonds within the meaning of said section 148.
(f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Tax Regulations and rulings thereunder, the City shall take or omit to take (and shall not permit any person to take or omit to take) any action that would cause any Bond to be “federally guaranteed” within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder.
(g) Information Report. The City shall timely file any information required by section 149(e) of the Code with respect to Bonds with the Secretary of the Treasury on Form 8038- G or such other form and in such place as the Secretary may prescribe. (h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Tax Regulations:
(1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Bond is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of Bonds with its other monies, provided that it separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate, the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Tax Regulations and rulings thereunder. The City shall maintain a copy of the calculation with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. The Trustee may rely conclusively upon the City’s determinations, calculations and certifications. The Trustee shall have no responsibility to independently make any calculation or determination or to review the City’s calculations hereunder.
(3) In order to assure the excludability pursuant to section 103(a) of the Code of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of the Final Computation Date as defined in section 1.148-3(e)(2) of the Tax Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the City at the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall be accompanied by Form 8038-T prepared by the City or such other forms and information as is or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder for execution and filing by the City.
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(4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148 3(h) of the Regulations. (i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the City shall not and shall not permit any person to, at any time prior to the final cancellation of the last of the Bonds to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to paragraph (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm’s length and had the Yields on the Bonds not been relevant to either party.
(j) Bonds Not Hedge Bonds. The City represents that none of the Bonds is or will become a “hedge bond” within the meaning of section 149(g) of the Code. As of the date of issuance of the Bonds the City reasonably expects that at least 85% of the spendable proceeds of the Bonds will be expended within the three-year period commencing on such date of issuance, and (B) no more than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more. (k) Elections. The City hereby directs and authorizes any City Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such Representative (after consultation with Bond Counsel) deems necessary or appropriate in connection with the Bonds, in the Tax Certificate or similar or other appropriate certificate, form or document.
(l) Closing Certificate. The City agrees to execute and deliver in connection with the issuance of the Bonds a Tax Certificate, or similar document containing additional representations and covenants pertaining to the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, which representations and covenants are incorporated as though expressly set forth herein.
The City shall at all times do and perform all acts and things permitted by law and this Lease which are necessary or desirable in order to assure that interest paid on the Bonds (or any of them) will be excluded from gross income for federal income tax purposes and shall take no action that would result in such interest not being so excluded. Without limiting the generality of the foregoing, the City agrees to comply with the provisions of the Tax Certificate. This covenant shall survive payment in full or defeasance of the Bonds.
SECTION 8. SUBSTITUTION, ADDITION AND RELEASE OF PROPERTY The parties to the Lease specifically acknowledge that the annual fair rental value of the Leased Property is in excess of the maximum annual Base Rental Payments. The City shall have, so long as this Lease is in effect, and is hereby granted, the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for any portion of the Leased
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Property (the “Former Property”), add to or release any identifiable real property and/or improvements currently constituting the Leased Property (in such case, Substitute Property shall mean the Former Property less any portion released pursuant to this Section); provided, that the City shall satisfy all of the following requirements, which are conditions precedent to such substitution:
(a) No default under Section 10 hereof or Event of Default shall have occurred and be continuing;
(b) The City shall file with the Authority and the Trustee, and cause to be recorded in the office of the County Recorder, sufficient memorialization of amendments to this Lease and the Site Lease which replaces Exhibit A hereto and Exhibit A to the Site Lease with a description of such Substitute Property which deletes therefrom the description of the Former Property;
(c) The City shall obtain an extended California Land Title Association (“CLTA”) policy of title insurance insuring the City’s fee or leasehold estate in such Substitute Property, the City’s leasehold estate hereunder, and the Authority’s leasehold estate under the Site Lease in such Substitute Property, subject only to Permitted Encumbrances, in an amount not less than the aggregate principal amount of the Outstanding Bonds; provided, however, that this requirement shall not apply to Substitute Property that consists only of Former Property less any released portion;
(d) The City shall provide a Certificate of the City to the Authority and to the Trustee that such Substitute Property constitutes property which the City is permitted to lease under the laws of the State of California;
(e) The substitution of the Substitute Property shall not cause the City to violate any of its covenants, representations and warranties made herein; (f) The City shall file with the Authority and the Trustee a Certificate of the City or other evidence which establishes that the annual fair rental value of the Substitute Property after substitution or release will be at least equal to 100% of the maximum amount of the Base Rental Payments becoming due in the then current fiscal year or in any subsequent fiscal year and the useful economic life of the Substitute Property shall be at least equal to the maximum remaining term of this Lease; and
(g) The City shall furnish to the Trustee an opinion of Bond Counsel addressed to the Trustee, the City and the Authority to the effect that the substitution or release is permitted under this Lease.
Upon the satisfaction of all such conditions precedent, and upon the City delivering to the Authority and the Trustee a Certificate of the City certifying that the conditions set forth in subsections (a), (c) and (e) of this Section have been satisfied, the Term of this Lease shall thereupon end as to the Leased Property and shall thereupon commence as to the Substitute Property, and all references to the Leased Property shall apply with full force and effect to the Substitute Property. The City shall not be entitled to any reduction, diminution, extension or other
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modification of the Base Rental Payments whatsoever as a result of any substitution or removal hereunder.
SECTION 9. INSURANCE
(a) The City shall secure and maintain or cause to be secured and maintained at all times with insurers of recognized responsibility, or through a program of self-insurance to the extent specifically permitted in this Section 9, all coverage on the Leased Property on which improvements are constructed as required by this Section 9.
Such insurance shall consist of:
(1) Comprehensive general liability coverage against claims for damages including death, personal injury, bodily injury or property damage arising from operations involving the Leased Property. Such insurance shall afford protection with a combined single limit of not less than $1,000,000 per occurrence with respect to bodily injury, death or property damage liability, or such greater amount as may from time to time be recommended by the City’s risk management officer or an independent insurance consultant retained by the City for that purpose, subject to a deductible clause of not to exceed $500,000. The City’s obligations under this clause (1) may be satisfied by selfinsurance; (2) The City shall maintain or cause to be maintained, throughout the term of this Lease, casualty insurance against loss or damage to any or all of the Leased Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, and against loss of Leased Property by theft. Such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The insurance required by this paragraph shall be in an amount not less than the principal amount of the Outstanding Bonds. The City’s obligations under this clause (2) may be satisfied by self-insurance;
(3) Workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State to insure employers against liability for compensation under the Labor Code of the State, or any act enacted as an amendment or supplement thereto or in lieu thereof, such workers’ compensation insurance to cover all persons employed by the City in connection with the Leased Property and to cover full liability for compensation under any such act; provided, however, that the City’s obligations under this clause (3) may be satisfied by self-insurance; and (4) Rental interruption insurance in an amount not less than the maximum remaining scheduled Base Rental Payments in any twenty-four (24) month period, by an insurance provider rated at least “A” by A.M. Best & Company, to insure against loss of use of the Leased Property caused by perils covered by the insurance required in Section 9(a)(1). Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City and must list the Authority and the Trustee as additional insured parties. Such insurance shall be in place as of the
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Closing Date. The net proceeds of such insurance shall be paid to the Trustee and credited toward the payment of the Base Rental Payments in the order in which such Lease Payments come due and payable.
All policies or certificates issued by the respective insurers for insurance, with the exception of workers’ compensation insurance, shall provide that such policies or certificates shall not be canceled or materially changed without at least 30 days’ prior written notice to the Authority and the Trustee. Certificates of comprehensive general liability and workers’ compensation insurance shall be furnished by applicable insurers to the City, and, at least ten days prior to the expiration dates of such policies, if any, evidence of renewals shall be deposited with the Trustee.
If the City elects to provide self-insurance pursuant to clauses (1), (2) and/or (3) above, the City shall annually cause to be delivered to the Trustee, upon request, a certificate of an Insurance Consultant certifying to the adequacy of the City’s reserves for such insurance.
All policies or certificates of insurance provided for herein shall name the City as a named insured and the Trustee as an additional insured. All proceeds of insurance maintained under clauses (1) and (3) shall be deposited with the City and under clause (2) shall be deposited with the Trustee.
Notwithstanding the generality of the foregoing, the City shall not be required to maintain or cause to be maintained more insurance than is specifically referred to above or any policies of insurance other than standard policies of insurance with standard deductibles offered by reputable insurers at a reasonable cost on the open market. (b) Form of Policies. The City shall deliver to the Trustee on or before the Closing Date and each anniversary of the Closing Date a Certificate of the City that all insurance required under this Lease is in full force and effect. If the City obtains insurance through a pooled insurance program of governmental entities, an annual statement or memorandum of coverage delivered to the Authority and the Trustee will satisfy the requirements of this subsection. The Trustee and the Authority shall not be responsible for the sufficiency of any insurance herein required or payment of premium and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the City. (c) Advances. If the City shall fail to perform any of its obligations under this Section, then the Authority or the Trustee may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money on behalf of the City, and the City shall be obligated to repay all such advances as soon as possible.
SECTION 10. DAMAGE, DESTRUCTION AND CONDEMNATION;
APPLICATION OF NET PROCEEDS
If prior to the termination of the term hereof (a) the Leased Property is destroyed (in whole or in part) or is damaged by fire of other casualty, or (b) title to, or the temporary use of, any portion of the Leased Property or the estate of the Authority or the City in the Leased Property or any portion shall be taken under the exercise of the power of eminent domain by any governmental body or by any person or firm or corporation acting under governmental authority, then the City and the Authority shall, as expeditiously as possible, continuously and diligently
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prosecute or cause to be prosecuted the repair or replacement thereof, unless the City elects not to repair or replace the Leased Property or portion thereof, in accordance with the provisions of this Section 9. If Net Proceeds are insufficient to repair or replace the Leased Property or portion thereof, the City shall, to the extent permitted by law, use its best efforts to fund any deficiency from any legally available funds.
If there is an abatement of rental payments pursuant to Section 16 hereof as a result of such casualty or event, and the City elects pursuant to Section 11(a) hereof to apply such insurance proceeds and such other sums as are deposited by the City pursuant to such Section to the prepayment of Base Rental Payments rather than replacing or repairing the destroyed or damaged portion of the Leased Property, then this Lease shall terminate with respect to the destroyed or damaged portion of the Leased Property as of the later of the date of such election by the City or the date the amount required by Section 11(a) hereof is received by the Trustee.
The provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code, including any amendments thereto and any other law which may hereinafter be in force during the term of this Lease which authorizes the termination of this Lease upon the partial or complete destruction of the Leased Property, are hereby waived by the City.
The City hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Bonds remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the Leased Property. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the Leased Property, the value of the Leased Property shall not be less than the greater of (i) if Outstanding Bonds are then subject to redemption, the principal and interest due on the Outstanding Bonds through the date of their redemption, or (ii) if such Outstanding Bonds are not then subject to redemption, the amount necessary to defease such Outstanding Bonds to the first available redemption date in accordance with the Indenture.
The City shall deposit any proceeds received from insurance and condemnation awards with respect to the destruction or partial destruction of Leased Property with the Trustee for deposit into the: (a) 2023 Insurance and Condemnation Fund if the City elects to repair the Leased Property or (b) the Lease Revenue Fund if the City elects to redeem the Outstanding Bonds.
The City shall have forty-five (45) days from the date of any such destruction or partial destruction to determine whether to repair the Leased Property or use insurance and condemnation award proceeds received to redeem such bonds. To the extent that the City determines not to repair the Leased Property and cannot use insurance and condemnation award proceeds to redeem such bonds, the City shall and hereby covenants to substitute property for such Leased Property of equivalent or greater value in accordance with the provisions of Section 7 hereof. If the City determines to repair the Leased Property, disbursements by the Trustee shall only be made upon presentation of a requisition in a form substantially similar to Exhibit C of the Indenture. If the City determines to cause the redemption of less than the full amount of the Outstanding Bonds, such redemption shall only be made to the extent the remaining fair rental value of the Leased Property is sufficient to support the remaining Base Rental Payments supporting debt service on the Outstanding Bonds.
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SECTION 11. DEFAULT
(a) Each of the following events constitutes an Event of Default hereunder:
(1) Failure by the City to pay any Base Rental Payment or other payment (including Additional Rental Payments) required to be paid hereunder at the time specified herein.
(2) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder, other than as referred to in the preceding subsection (1), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority. However, if the City notifies the Authority that in its reasonable opinion the failure stated in the notice can be corrected, but not within such thirty (30) day period, the failure will not constitute an Event of Default if the City commences to cure the failure within such thirty (30) day period and thereafter diligently and in good faith cures such failure in a reasonable period of time; provided, that such cure period shall not extend beyond sixty (60) days.
(3) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted.
(b) If default shall be made by the City in the observance or performance of any agreement, condition, covenant or term contained herein required to be observed or performed by it (including, without limitation, the payment of any Base Rental Payments or Additional Rental Payments due hereunder), subject to the provisions of subsection (a)(2) of this Section, the Authority may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Authority may have) recover rent and other monetary charges as they become due hereunder without terminating the City’s right to possession of the Leased Property, regardless of whether or not the City has abandoned the Leased Property, and the Authority shall have the right and the City hereby irrevocably appoints the Authority as its agent and attorney in fact for such purpose to attempt to sublet or re-let the Leased Property at such rent, upon such conditions and for such term, and to do all other acts to maintain or preserve the Leased Property, including the removal of persons therefrom or taking possession thereof or the removal of property therefrom to a storage facility located elsewhere in the City, as the Authority deems desirable or necessary, and the City hereby waives any and all claims for any damages that may result to the Leased Property thereby except for such damages caused by the gross negligence or intentional misconduct of the person taking such actions; provided, that no such actions shall be deemed to terminate the Lease and the City shall continue to remain liable for any deficiency that may arise out of such re-letting, taking into account expenses incurred by the Authority due to such re-letting, payable at the same time and manner as provided for Base Rental Payments in Section 3(a). In the
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event the Leased Property is re-let, the City shall cooperate with the Authority to provide reasonable parking access for the Leased Property.
The Authority expressly waives the right to receive any amount from the City pursuant to Section 1951.2(a)(3) of the California Civil Code. (c) Upon the occurrence and during the continuance of any Event of Default, the Authority may exercise each and every one of the following remedies:
(1) Proceedings at Law or In Equity. If an Event of Default occurs and continues hereunder, the Authority may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due hereunder or to enforce any other of its rights hereunder. (2) Remedies under the Site Lease. If an Event of Default occurs and continues hereunder, the Authority may exercise its rights under the Site Lease.
SECTION 12. PREPAYMENT AND CREDITS
(a) Prepayment From Net Proceeds.
(1) The City may prepay, from Net Proceeds of insurance or a condemnation award received by it pursuant to Section 9, the Principal Component of Base Rental Payments then unpaid (and corresponding Interest Component), in whole or in part on any date, pursuant to Section 9 hereof, at a prepayment price equal to the sum of the Principal Component prepaid plus accrued interest thereon to the date of prepayment. (2) Prepayments made pursuant to this subsection (a) shall be allocated pro rata among the Principal Components of Base Rental Payments relating to the Bonds. (b) Optional Prepayment.
The City may at its option prepay from any source of available moneys for redemption of Bonds pursuant to Section 2.03(b) of the Indenture, all or any part (in an integral multiple of $5,000) of the Principal Component of Base Rental Payments (and corresponding Interest Component), so that the aggregate annual amounts of Principal Component of Base Rental Payments which shall be payable after such prepayment shall each be an integral multiple of $5,000, at a prepayment price equal to the principal amount to be redeemed, plus accrued but unpaid interest to the prepayment date, without premium.
Before making any prepayment pursuant to this Section, the City shall give written notice to the Trustee specifying the date on which the prepayment will be made, which date shall be not less than forty-five (45) days from the date such notice is given unless the Trustee agrees to a shorter period.
The Authority and the City hereby agree that any prepayment in part under this Section and the redemption of any Bonds by the Authority pursuant to Section 2.03(b) of the Indenture shall be credited towards the City’s obligations hereunder at the option of the City in
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any manner determined in writing delivered to the Trustee by the City. A prepayment made pursuant to this Section shall not cause a defeasance of any Bonds unless the requirements of Section 10.03 of the Indenture are satisfied.
In the event of prepayment in full of the Principal Component of all Base Rental Payments, such that this Lease shall be terminated by its terms as provided in Section 2, all amounts then on deposit under the Indenture which are to be credited to the City’s obligations to make Base Rental Payments shall be credited towards the amounts then required to be so prepaid.
SECTION 13. MECHANICS’ LIENS
In the event the City shall at any time during the term of this Lease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Property, the City shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the City in, upon or about the Leased Property and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Property or the Authority’s interest therein, and will cause any such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall forthwith pay and discharge said judgment.
SECTION 14. QUIET ENJOYMENT
The parties hereto mutually covenant that the City, so long as it keeps and performs the covenants and agreements herein contained, shall at all times during the term of this Lease peaceably and quietly have, hold and enjoy the Leased Property without suit, trouble or hindrance from the Authority.
SECTION 15. INDEMNIFICATION
The City shall, to the full extent then permitted by law, indemnify, defend, protect and hold harmless the Authority, the Trustee and their members, officers, directors, agents and employees from and against any and all liabilities, obligations, losses, claims and damages whatsoever, regardless of the cause thereof (except for claims arising out of willful misconduct or negligence on the part of the Authority or the Trustee or their respective members, officers, directors or employees), and expenses in connection therewith, including, without limitation, reasonable counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of this Lease and the Indenture, the payment of the costs of acquiring the Leased Property or any accident in connection with the operation, use, condition or possession of the Leased Property or any portion thereof resulting in damage to property or injury to or death to any person. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all rent obligations hereunder, the removal or resignation of the Trustee or the termination hereof for any reason. The City agrees not to withhold or abate any portion of the payments required pursuant hereto by reason of any defects, malfunctions,
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breakdowns or infirmities of the Leased Property. The Authority and the City mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either party’s learning thereof.
SECTION 16. ASSIGNMENT
The parties understand that this Lease and the rights of the Authority hereunder, with certain exceptions, will be assigned to the Trustee as provided in the Indenture and the Assignment Agreement, to which assignments the City hereby consents.
Neither this Lease nor any interest of the City hereunder shall be mortgaged, pledged, assigned or transferred by the City by voluntary act or by operation of law or otherwise; provided, subject to the provisions of Section 18 hereof, that the Leased Property may be subleased in whole or in part by the City, but only subject to the following conditions, which are hereby made conditions precedent to any such sublease:
(a) This Lease and the obligation of the City to make all base rental payments and Additional Rental Payments hereunder shall remain the primary obligation of the City; (b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) No such sublease by the City shall cause the Leased Property to be used for a primary purpose other than a governmental or proprietary function authorized under the provisions of the Constitution and laws of the State of California, as evidenced by a Certificate of the City that is delivered to the Trustee; and
(d) Any sublease of the Leased Property by the City shall explicitly provide that such sublease is subject to all rights of the Authority under this Lease.
SECTION 17. ABATEMENT OF RENTAL
The obligation of the City to pay Base Rental Payments and Additional Rental Payments shall be abated during any period in which by reason of any damage, destruction, condemnation or title defect there is substantial interference with the use by the City of the Leased Property or any portion thereof. Such abatement shall be in an amount such that the resulting Base Rental Payments in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or title defect does not substantially interfere with the City’s use and right of possession, as evidenced by a Certificate of the City. Such abatement shall continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation, taking or title defect and, with respect to damage to or destruction of the Leased Property, ending with the substantial completion of the work of repair or replacement of the Leased Property, or the portion thereof so damaged or destroyed, and the term of this Lease shall be extended as provided in Section 2 hereof. Notwithstanding the foregoing, to the extent that moneys are available for the payment of base rental payments in any of the funds and accounts established under the Indenture, such base rental payments shall not be abated but shall be payable by the City as a special obligation payable solely from such funds and accounts.
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Packet Pg. 211 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 18
SECTION 18. CONTINUING DISCLOSURE
The City will comply with the continuing disclosure requirements applicable to it promulgated under U.S. Securities and Exchange Commission Rule 15c2-12 and will also comply with its obligations under the Continuing Disclosure Agreement, dated as of February 1, 2023, by and between the City and the Trustee related to the Bonds that are subject to Rule 15c2-12; provided, however, that the sole remedy hereunder in the event of any failure of the City to comply with this covenant shall be an action to compel performance and the City’s failure to comply with any continuing disclosure requirement shall not be deemed a default or an Event of Default.
SECTION 19. WAIVER
Failure of the Authority to take advantage of any default on the part of the City shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may be established between the parties in the course of administering this Lease be construed to waive or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Lease.
SECTION 20. NET LEASE
Subject to the provisions of Section 16 (“Abatement of Rental”), this Lease shall be deemed and construed to be a “Triple-Net-Lease” and the City hereby agrees that rental provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, taxes, fees, insurance premiums, rebate payments, Leased Property costs, reserve deposits, charges or setoffs whatsoever.
SECTION 21. AMENDMENTS.
This Lease may be amended in writing as may be mutually agreed by the Authority and the City; provided, that no such amendment which materially adversely affects the rights of the Owners shall be effective unless it shall have been consented to by the Owners of more than a majority in aggregate principal amount of the affected Bonds then Outstanding, and provided further, that no such amendment shall (a) extend the payment date of any Base Rental Payment, without the prior written consent of the Owner of each Bond so affected, or (b) reduce the percentage of the Outstanding Bonds the consent of the Owners of which is required for the execution of any amendment hereof.
This Lease and the rights and obligations of the Authority and the City hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution by the Authority and the City without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes:
(a) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed herein and other agreements, conditions,
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Packet Pg. 212 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 19
covenants and terms thereafter to be observed or performed by the Authority or the City, or to surrender any right or power reserved herein to or conferred herein on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners; (b) to make such provisions for the purpose of curing any ambiguity of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority or the City may deem desirable or necessary and not inconsistent herewith, and which shall not materially adversely affect the interests of the Owners;
(c) to effect a Substitution or Removal;
(d) to increase the amount of Base Rental Payment payable hereunder for the purpose of allowing the Authority to add any real property to be acquired and leased hereunder; or (e) for any other purpose which shall not materially adversely affect the interests of the Owners.
SECTION 22. ESSENTIALITY
The City covenants and agrees that the Leased Property is essential to the City’s exercise of its governmental functions.
SECTION 23. GOVERNING LAW
This Lease shall be governed by and construed in accordance with the laws of the State of California.
SECTION 24. NOTICES
All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be made as provided in the Indenture.
SECTION 25. VALIDITY AND SEVERABILITY
If for any reason this Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the City, or if for any reason it is held by such a court that any of the covenants of the City hereunder, including the covenant to pay rentals hereunder, is unenforceable for the full term hereof, then and in such event this Lease is and shall be deemed to be a lease from year to year under which the rentals are to be paid by the City semiannually in consideration of the right of the City to possess, occupy and use the Leased Property, and all of the rental and other terms, provisions and conditions of this Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect.
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Packet Pg. 213 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 20
SECTION 26. SECTION HEADINGS
All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Lease.
SECTION 27. NO MERGER
If both the Authority’s and the City’s estate under this or any other lease relating to the Leased Property or any portion thereof shall at any time or for any reason become vested in one owner, this Lease and the estate created hereby shall not be destroyed or terminated by the doctrine of merger unless the City so elects as evidenced by recording a written declaration so stating, and unless and until the City so elects, the City shall continue to have and enjoy all of its rights and privileges as to the separate estates.
SECTION 28. EXECUTION
It is agreed that separate counterparts of this Lease may separately be executed by the Authority and the City, all with the same force and effect as though the same counterpart had been executed by both the Authority and the City.
[Remainder of page intentionally left blank.]
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Packet Pg. 214 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 S-1
IN WITNESS WHEREOF, the Authority and the City have caused this Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
EL CENTRO FINANCING AUTHORITY
By __________________________________
Executive Director
ATTEST:
By __________________________________
Secretary
CITY OF EL CENTRO
By __________________________________
City Manager
ATTEST:
By __________________________________
City Clerk
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Packet Pg. 215 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2
A NOTARY PUBLIC OR OTHER OFFICER COMPLETING THIS CERTIFICATE
VERIFIES ONLY THE IDENTITY OF THE INDIVIDUAL WHO SIGNED THE
DOCUMENT TO WHICH THIS CERTIFICATE IS ATTACHED, AND NOT THE TRUTHFULNESS, ACCURACY, OR VALIDITY OF THAT DOCUMENT.
STATE OF CALIFORNIA )
) ss:
COUNTY OF IMPERIAL )
On ______________________________ before me,__________________________(insert name of the officer), Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
_________________________________ [Seal]
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Packet Pg. 216 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2
A NOTARY PUBLIC OR OTHER OFFICER COMPLETING THIS CERTIFICATE
VERIFIES ONLY THE IDENTITY OF THE INDIVIDUAL WHO SIGNED THE
DOCUMENT TO WHICH THIS CERTIFICATE IS ATTACHED, AND NOT THE TRUTHFULNESS, ACCURACY, OR VALIDITY OF THAT DOCUMENT.
STATE OF CALIFORNIA )
) ss:
COUNTY OF IMPERIAL )
On ______________________________ before me, __________________________(insert name of the officer), Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
_________________________________ [Seal]
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Packet Pg. 217 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 A-1
EXHIBIT A
DESCRIPTION OF THE LEASED PROPERTY
Police Station Site
PARCEL 1:
THAT PORTION OF LOT 3, IN BLOCK 11, OF EL CENTRO ADDITION NO. 3, IN THE CITY
OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO MAP NO. 239, ON FILE IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTH LINE OF SAID LOT, 150 FEET WEST OF THE SOUTHEAST CORNER THEREOF; THENCE NORTH PARALLEL WITH THE EAST LINE OF SAID LOT, 144 FEET; THENCE WEST PARALLEL WITH THE SOUTH LINE OF SAID LOT, TO THE EAST LINE OF THE 80 FOOT STRIP CONVEYED TO THE CITY OF EL CENTRO FOR STREET PURPOSES BY DEED DATED OCTOBER 30, 1950, AND RECORDED IN BOOK 798, PAGE 64 OF OFFICIAL RECORDS; THENCE SOUTH ALONG SAID EAST LINE TO THE SOUTH LINE OF SAID LOT; THENCE EAST ALONG SAID SOUTH LINE TO THE POINT OF BEGINNING.
EXCEPTING ALL MINERALS, INCLUDING AND WITHOUT LIMITATION, ALL THE OIL,
GAS AND OTHER HYDROCARBON SUBSTANCES BUT WITHOUT ANY RIGHTS TO USE THE SURFACE OR THAT PORTION OF SAID LAND LYING WITHIN 500 FEET OF THE SURFACE, AS RESERVED BY TEXACO, INC., A DELAWARE CORPORATION, IN THE DEED RECORDED APRIL 13, 1973 AS DOCUMENT NO. 38.
PARCEL 2:
THAT PORTION OF LOT 3, IN BLOCK 11, EL CENTRO ADDITION NO. 3, IN THE CITY
OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO MAP NO. 239, ON FILE IN THE OFFICE OF THE COUNTY RECORDER OF IMPERIAL COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT, THENCE WESTERLY ALONG MAIN STREET 150 FEET; THENCE NORTHERLY PARALLEL WITH THE EASTERLY LINE OF SAID BLOCK, 144 FEET; THENCE WESTERLY PARALLEL WITH
THE SOUTHERLY LINE OF SAID BLOCK, WHICH IS ALSO THE NORTHERLY LINE OF
MAIN STREET, TO THE NORTHERLY PROLONGATION OF THE EASTERLY LINE OF THAT PORTION OF 12TH STREET WHICH EXTENDS SOUTHERLY FROM MAIN STREET; THENCE NORTHERLY ALONG SAID NORTHERLY PROLONGATION OF SAID EASTERLY LINE OF SAID PORTION OF 12TH STREET TO THE NORTHERLY LINE OF SAID LOT 3, WHICH IS IN THE SOUTHERLY LINE OF BROADWAY; THENCE EASTERLY ALONG BROADWAY TO THE NORTHEAST CORNER OF SAID BLOCK; THENCE SOUTHERLY ALONG 11TH STREET TO THE PLACE OF BEGINNING.
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Packet Pg. 218 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 A-2
Aquatic Center
THOSE PORTIONS OF LOT 44 IN SECTION 31, TOWNSHIP 15 SOUTH, RANGE 14 EAST AND LOT 15 IN SECTION 32, TOWNSHIP 15 SOUTH, RANGE 14 EAST, SAN
BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT OF THE
SURVEY OF SAID LAND, RETURNED TO THE GENERAL LAND OFFICE BY THE SURVEYOR-GENERAL; TOGETHER WITH ANY PORTION LYING WITHIN EL CENTRO, ACCORDING TO MAP THEREOF NO. 953 FILED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, A COPY OF SAID MAP BEING ON FILE IN BOOK 1, PAGE 19 OF OFFICIAL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF
IMPERIAL COUNTY, ALL BEING WITHIN THE CITY OF EL CENTRO, COUNTY OF IMPERIAL, STATE OF CALIFORNIA, BOUNDED AS FOLLOWS:
ON THE NORTH AND NORTHEAST BY THE SOUTHERLY AND SOUTHWESTERLY LINE OF THE HIGHWAY KNOWN AS ROAD IMP-26-ECN, AS DESCRIBED IN THAT CERTAIN UNRECORDED CITY OF EL CENTRO RESOLUTION NO. 860 DATED OCTOBER 14, 1943; ON THE SOUTH BY THE NORTHERN LINE OF RAILROAD AVENUE (NOW KNOWN AS PARK AVENUE); AND ON THE WEST BY THE EAST LINE OF NORTH
SIXTH STREET AS DISCLOSED BY MAP ON FILE IN THE OFFICE OF THE COUNTY ASSESSOR OF IMPERIAL COUNTY.
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Packet Pg. 219 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264233.2 B-1
EXHIBIT B
BASE RENTAL PAYMENT SCHEDULE
Period Ending Principal Interest Total by Date
________________________________
(1) Base Rental Payments are made fifteen (15) Business Days prior to each Interest Payment Date.
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Packet Pg. 220 Attachment: Lease Agreement - City of El Centro 2023 Lease Revenue Bonds (Police Station Project) (5832 : Approval of Issuance of Lease 134264133.3
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstance shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
NRF DRAFT – 1/12/22
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY __, 2023
NEW ISSUE BOOK-ENTRY-ONLY RATING:
S&P “__”
(See “RATING” herein.)
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel, under existing statutes, regulations, rulings and court decisions, and subject to the matters described in “TAX MATTERS” herein, interest on the 2023A Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals. It is also the opinion of Bond Counsel that under existing law interest on the 2023A Bonds is exempt from personal income taxes of the State of California. See “TAX MATTERS” herein. $[Par Amount]*
EL CENTRO FINANCING AUTHORITY
LEASE REVENUE BONDS, 2023 SERIES A
(POLICE STATION PROJECT)
Dated: Date of Delivery Due: October 1, as shown on the inside cover The El Centro Financing Authority (the “Authority”) is issuing its $[Par Amount]* Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “2023A Bonds”) to provide funds to: (i) finance the acquisition, construction and improvement of a new police station (the “Police Station Project”) in the City of El Centro (the “City”), as described herein, (ii) fund a debt service reserve for the 2023A Bonds, (iii) [fund a portion of interest for the 2023A Bonds,] and (iv) pay the related costs of issuing the 2023A Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein.
Interest on the 2023A Bonds is payable on April 1 and October 1 of each year (each an “Interest Payment Date”), commencing October 1, 2023. The 2023A Bonds are being issued as fully registered bonds and, when executed and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2023A Bonds, if issued, will be issued in denominations of $5,000 or any integral multiple thereof.
DTC will act as securities depository of the 2023A Bonds. Individual purchases of 2023A Bonds will be made in bookentry form only. Payments of principal of and interest on the 2023A Bonds are to be made to purchasers by DTC through DTC Participants. Purchasers will not receive physical delivery of the 2023A Bonds purchased by them. See APPENDIX F – “BOOK-ENTRY SYSTEM.”
The 2023A Bonds are subject to extraordinary, mandatory and optional redemption prior to their stated maturities, as described herein. See “DESCRIPTION OF THE 2023A BONDS – Redemption” herein.
The 2023A Bonds are special limited obligations of the Authority secured by and payable from Revenues pledged to the 2023A Bonds under the Indenture, as hereinafter described. Such Revenues primarily consist of Base Rental Payments to be made by the City to the Authority under the Lease, as hereinafter described. Pursuant to the Lease, the City will lease certain property described herein (the “Leased Property”) from the Authority. The City is required under the Lease to make Base Rental Payments each year in consideration for the use of the Leased Property, as described herein, from any source of legally available funds, in an amount sufficient to pay the annual principal of and interest on the 2023A Bonds. The City’s obligation to make Base Rental Payments is subject to abatement in the event of substantial interference with the use and possession of all or a part of the Leased Property supporting the 2023A Bonds, as described herein. See “RISK FACTORS – Abatement” herein. The City has covenanted in the Lease to take such action as may be necessary to include and maintain all Base Rental Payments in its budget and to make the necessary appropriations therefor, subject to such abatement.
The full faith and credit of the Authority is not pledged for the payment of the principal of or interest or premium (if any) on the 2023A Bonds. The obligation of the City to make Base Rental Payments or Additional Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the 2023A Bonds nor the obligation of the City to make Base Rental Payments or Additional Rental Payments constitutes an indebtedness of the City, the State of California or any of its political subdivisions (other than the Authority) within the meaning of any constitutional or statutory debt limitation or restriction.
This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
* Preliminary, subject to change.
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Packet Pg. 221 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
The 2023A Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approving opinion of Norton Rose Fulbright US LLP, Los Angeles, California, as Bond Counsel to the Authority. Certain legal matters will be passed on by Norton Rose Fulbright US LLP, Los Angeles, California, as Disclosure Counsel for the Authority and the City, for the Authority and the City by the City Attorney, and for the Underwriter by its counsel Kutak Rock LLP, Irvine, California. It is anticipated that the 2023A Bonds will be available for delivery through the facilities of DTC on or about February __, 2023.
Samuel A. Ramirez & Co., Inc.
Dated: January __, 2023
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Packet Pg. 222 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
MATURITY SCHEDULE
$[Par Amount]*
El Centro Financing Authority
Lease Revenue Bonds, 2023 Series A
(Police Station Project)
(Base CUSIP No.† 28282R)
Maturity Date
(October 1)
Principal
Amount
Interest
Rate Yield Price CUSIP†
$_______ ___% Term Bonds due October 1, 20__, Yield: ___%; Price: ___% CUSIP†: _________
$_______ ___% Term Bonds due October 1, 20__, Yield: ___%; Price: ___% CUSIP†: _________
* Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Ratings on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers have been assigned by an independent company not affiliated with the City, the Authority, the Underwriter or the Municipal Advisor and are included solely for the convenience of investors. None of the City, the Authority, the Underwriter or the Municipal Advisor is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the 2023A Bonds or as included herein.
The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2023A Bonds as a result of various subsequent actions including, but not limited to, refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2023A Bonds.
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Packet Pg. 223 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
CITY OF EL CENTRO
EL CENTRO FINANCING AUTHORITY
CITY COUNCIL/BOARD OF DIRECTORS
Martha Cardenas-Singh, Mayor/Chairperson
Sylvia Marroquin, Mayor Pro Tem/Authority Member
Sonia Carter, Councilmember/Authority Member
Edgard Garcia, Councilmember/Authority Member
Tomas Oliva, Councilmember/Authority Member
____________________
CITY OFFICIALS
Cedric Cesena, Interim City Manager/Interim Authority Executive Director Karla Chaparro, Interim Director of Finance
Norma Wyles, CMC, City Clerk
Elizabeth L. Martyn, City Attorney/Authority Counsel
____________________
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Norton Rose Fulbright US LLP
Los Angeles, California
Municipal Advisor
NHA Advisors, LLC
San Rafael, California
Trustee
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Dissemination Agent
NHA Advisors, LLC
San Rafael, California
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Packet Pg. 224 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
No dealer, broker, salesperson or other person has been authorized by the El Centro Financing Authority (the “Authority”), the City of El Centro, California (the “City”) or the Underwriter to give any information or to make any representations, other than as contained in this Official Statement, and if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the City or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 2023A Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the 2023A Bonds.
Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of fact.
The information set forth herein has been furnished by the Authority and the City and includes information from sources that are believed to be reliable. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the City, or other matters described herein since the date hereof.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement, including any supplement or amendment hereto, is intended to be deposited with the Municipal Securities Rulemaking Board through the Electronic Municipal Marketplace Access (“EMMA”) website. Unless otherwise expressly stated, references to Internet websites in this Official Statement are shown for reference and convenience only, and none of their content (including any content on the City’s website) is incorporated in this Official Statement by reference. The City and the Authority make no representation regarding the accuracy or completeness of the information presented on such websites.
IN CONNECTION WITH THE OFFERING OF THE 2023A BONDS, THE UNDERWRITER
MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2023A BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
___________________________________
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS IN
THIS OFFICIAL STATEMENT
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “project,” “expect,” “anticipate,” “intend,” “believe,” “estimate,” “budget” or other similar words.
The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise noted, neither the City nor the Authority plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.
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Packet Pg. 225 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
iii
INTRODUCTION .......................................................................................................................................1 Purpose of the 2023A Bonds ..........................................................................................................1 Security for the 2023A Bonds.........................................................................................................1 2023A Reserve Fund.......................................................................................................................2 The City ..........................................................................................................................................2 The Project......................................................................................................................................3 Continuing Disclosure ....................................................................................................................3 DESCRIPTION OF THE 2023A BONDS ..................................................................................................3 Redemption.....................................................................................................................................3 Selection of Bonds for Redemption................................................................................................4 Notice of Redemption.....................................................................................................................4 Partial Redemption of Bonds..........................................................................................................5 Effect of Redemption......................................................................................................................5 Book-Entry System.........................................................................................................................5 SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS ...............................................6 2023A Bonds ..................................................................................................................................6 Additional Rental Payments ...........................................................................................................6 Covenant to Budget and Appropriate .............................................................................................6 Limited Obligations........................................................................................................................6 2023A Reserve Fund.......................................................................................................................7 Abatement of Base Rental Payments..............................................................................................7 Maintenance, Utilities, Taxes and Assessments .............................................................................7 Insurance Coverages.......................................................................................................................8 Substitution and Release of Property..............................................................................................9 PLAN OF FINANCE.................................................................................................................................10 General..........................................................................................................................................10 The Police Station Project.............................................................................................................10 LEASED PROPERTY...............................................................................................................................10 ESTIMATED SOURCES AND USES OF FUNDS .................................................................................11 DEBT SERVICE REQUIREMENTS........................................................................................................12 THE AUTHORITY ...................................................................................................................................12 THE CITY .................................................................................................................................................13 General..........................................................................................................................................13 Audited Financial Statements.......................................................................................................13 General Fund Revenue Sources....................................................................................................16 Measure P Sales Tax.....................................................................................................................17 Management Discussion ...............................................................................................................18 Certain City Policies and Practices...............................................................................................18 City Budget...................................................................................................................................19 Appropriations Limit ....................................................................................................................21 Assessed Valuation.......................................................................................................................22 Direct and Overlapping Debt........................................................................................................23 Long-Term Obligations ................................................................................................................25 Labor Contracts.............................................................................................................................25 Pension Plans................................................................................................................................26
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Packet Pg. 226 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
Other Post-Employment Benefits.................................................................................................29 STATE OF CALIFORNIA BUDGET INFORMATION..........................................................................29 State Budget..................................................................................................................................29 Future State Budgets.....................................................................................................................30 RISK FACTORS .......................................................................................................................................31 Base Rental Payments Are Not Debt; 2023A Bonds are Limited Obligations.............................31 Additional General Fund Obligations...........................................................................................31 Abatement.....................................................................................................................................31 Risk of Uninsured Loss.................................................................................................................32 City General Fund.........................................................................................................................32 Public Health Emergencies...........................................................................................................33 Bankruptcy....................................................................................................................................33 State Finances...............................................................................................................................35 No Liability of Authority to the Owners.......................................................................................35 No Limitation on Incurring Additional Obligations.....................................................................35 Natural Disasters...........................................................................................................................36 Hazardous Substances...................................................................................................................36 Future Initiatives...........................................................................................................................37 Limitations on Remedies ..............................................................................................................37 Remedies on Default.....................................................................................................................38 Substitution of Property ................................................................................................................38 Secondary Market Risk.................................................................................................................38 LIMITATIONS ON REVENUES AND APPROPRIATIONS.................................................................38 Property Tax Limitations – Article XIIIA, XIIIB, XIIIC (Proposition 218) ................................38 Article XIIIA Implementing Legislation ......................................................................................39 Challenges to Article XIIIA..........................................................................................................39 Statutory Revenue Limitations – Proposition 62 ..........................................................................40 Proposition 1A..............................................................................................................................41 Proposition 22...............................................................................................................................41 Proposition 26...............................................................................................................................41 Unitary Property ...........................................................................................................................42 EL CENTRO REGIONAL MEDICAL CENTER.....................................................................................42 TAX MATTERS........................................................................................................................................43 General..........................................................................................................................................43 Tax Accounting Treatment of Discount and Premium on Certain 2023A Bonds ........................45 LITIGATION.............................................................................................................................................46 FINANCIAL STATEMENTS...................................................................................................................46 MUNICIPAL ADVISOR...........................................................................................................................46 RATINGS ..................................................................................................................................................46 UNDERWRITING ....................................................................................................................................47 CONTINUING DISCLOSURE.................................................................................................................47 APPROVAL OF LEGAL PROCEEDINGS..............................................................................................47 EXECUTION AND DELIVERY..............................................................................................................48
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APPENDIX A – SUPPLEMENTAL INFORMATION – THE CITY OF EL CENTRO AND IMPERIAL COUNTY .............................................................................................A-1 APPENDIX B – AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR THE FISCAL YEAR ENDED JUNE 30, 2021...............................................B-1 APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS...........................................................................................C-1 APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ...................................D-1 APPENDIX E – FORM OF OPINION OF BOND COUNSEL ......................................................... E-1 APPENDIX F – BOOK-ENTRY SYSTEM ........................................................................................F-1
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Packet Pg. 228 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
1 OFFICIAL STATEMENT
$[PAR AMOUNT]*
EL CENTRO FINANCING AUTHORITY
LEASE REVENUE BONDS, 2023 SERIES A
(POLICE STATION PROJECT)
INTRODUCTION
This Official Statement, which includes the cover page, the inside cover page and attached appendices, provides certain information in connection with the sale and delivery of the $[Par Amount]* El Centro Financing Authority Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “2023A Bonds”). Capitalized terms used and not otherwise defined herein shall have the meanings given in the Indenture or the Lease (each as hereinafter defined) or in APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS.”
Purpose of the 2023A Bonds
The 2023A Bonds are being issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the “Bond Law”). The 2023A Bonds are being issued pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the El Centro Financing Authority (the “Authority”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).
The Authority is issuing the 2023A Bonds, to provide funds to: (i) finance the acquisition, construction and improvement of a new police station (the “Police Station Project”) in the City of El Centro (the “City”), as described herein, (ii) fund a debt service reserve for the 2023A Bonds, (iii) [fund a portion of interest for the 2023A Bonds,] and (iv) pay the related costs of issuing the 2023A Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS.”
Security for the 2023A Bonds
The 2023A Bonds shall be secured by a first lien on and pledge (which shall be effected in the manner and to the extent provided in the Indenture) of all of the Revenues, including all of the moneys in the 2023 Interest Account, the 2023 Principal Account and the 2023 Reserve Fund, including all amounts derived from the investment of such moneys. “Revenues” means (i) all Base Rental Payments payable by the City of El Centro, California (the “City”) pursuant to the Lease (defined below) (including prepayments), (ii) any proceeds of Bonds deposited with the Trustee and all moneys on deposit in the funds and accounts established under the Indenture, except the Rebate Fund, (iii) investment income with respect to such moneys held by the Trustee, and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS.”
Pursuant to a Site and Facility Lease, dated as of February 1, 2023 (the “Site Lease”), by and between the City and the Authority, the Authority will lease from the City certain real property and improvements, constituting the Aquatic Center and the real property for the Police Station Project (collectively, the “Leased Property”). Pursuant to the Lease Agreement, dated as of February 1, 2023 (the
*
Preliminary, subject to change.
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2 “Lease”), by and between the Authority and the City, the Authority will sublease the Leased Property to the City. See “LEASED PROPERTY.”
Pursuant to the Lease, the City will pay to the Trustee, as the assignee of the Authority, base rental payments (collectively, the “Base Rental Payments”) in amounts equal to scheduled debt service on the 2023A Bonds, as set forth in the base rental payment schedule for the 2023A Bonds.
The obligation of the City to make Base Rental Payments or Additional Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the 2023A Bonds nor the obligation of the City to make Base Rental Payments or Additional Rental Payments constitutes an indebtedness of the City, the State or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. Pursuant to the Lease, the City has covenanted to take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease in its annual budget and to make the necessary annual appropriations for all such Base Rental Payments and Additional Rental Payments required to be made under the Lease, subject only to abatement as provided therein. See “RISK FACTORS – Base Rental Payments Are Not Debt; 2023A Bonds are Limited Obligations” and “– Abatement.” See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS.”
2023A Reserve Fund
Pursuant to the Indenture, a 2023 Reserve Fund will be established for the 2023A Bonds and funded at the 2023A Reserve Requirement. “2023A Reserve Requirement” means, as of each calculation date, an amount equal to the least of (i) Maximum Annual Debt Service on all Outstanding 2023A Bonds, (ii) 10% of the initial principal amount of the 2023A Bonds (or, if the 2023A Bonds are sold with more than 2% net original issue discount or more than 2% net original issue premium, 10% of the issue price of the 2023A Bonds), or (iii) 125% of the average Annual Debt Service as of the date of issuance of the 2023A Bonds.
See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS – 2023A Reserve Fund.” The City
The City is the regional center for government, healthcare, retail activity and jobs in the County.
The City is located approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. The City lies 13 miles north of the City of Mexicali with a population of approximately 1 million, the capital of the State of Baja California, Mexico, and its strategic border location makes it a prime link between the interior of Mexico and the major markets along the West Coast of the United States.
The City encompasses approximately 11 square miles and straddles the busy Interstate 8, the major interstate highway linking southern California to its eastern neighbors. As of January 1, 2022, the City had a population of 44,508. For additional information regarding the City and surrounding area, see APPENDIX A – “SUPPLEMENTAL INFORMATION – THE CITY OF EL CENTRO AND IMPERIAL COUNTY.” The outbreak of COVID-19, a respiratory disease caused by new strains of coronavirus, has been characterized as a pandemic (the “Pandemic”) by the World Health Organization and significantly affected many parts of the world, including the United States, California, the County of Imperial (the “County”) and the City. The Pandemic negatively affected travel and commerce. No assurance can be provided that future strains of COVID-19 or other health emergencies will not adversely impact operations and finances of the City. See “RISK FACTORS – COVID–19 Pandemic.”
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3 The Police Station Project
A portion of the proceeds of the 2023A Bonds will be applied to construction two buildings, that together will form the new police station in the City. For details regarding the Police Station Project, see “PLAN OF FINANCE – The Police Station Project.”
Continuing Disclosure
The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the 2023A Bonds and as such, the Authority will not provide any such information.
The City has agreed to provide, with respect to the 2023A Bonds, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (the “EMMA System”), certain annual financial information and operating data relating to the City and, in a timely manner, notice of certain enumerated events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12, as amended (the “Rule 15c2-12”) adopted by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended.
See “CONTINUING DISCLOSURE” and APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT” for a description of the annual reports and notices of enumerated events to be provided by the City.
DESCRIPTION OF THE 2023A BONDS
The 2023A Bonds will be dated their date of delivery and issued in the aggregate principal amount and bear interest at the rates and mature on the dates set forth on the inside cover page of this Official Statement. Interest on the 2023A Bonds will be payable semiannually on April 1 and October 1 of each year, commencing October 1, 2023 (each an “Interest Payment Date”). Each 2023A Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is executed after the fifteenth calendar day of the month immediately preceding an Interest Payment Date, in which case interest will bear from such Interest Payment Date, or (ii) it is authenticated on or before September 15, 2023, in which event interest will accrue from the date of initial delivery of the 2023A Bonds. If, at the date of authentication of any 2023A Bond, interest thereon is in default, such 2023A Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on such outstanding 2023A Bond, or if no interest has been paid, from the date of initial delivery of the 2023A Bonds. Interest on the 2023A Bonds will be computed on the basis of a 360-day year of twelve 30- day months.
Redemption*
Optional Redemption of Bonds. The 2023A Bonds maturing on or after October 1, 20__ shall be subject to redemption prior to their respective maturity dates as a whole or in part on any date on or after October 1, 20__, in any order deemed reasonable by the Authority, and by lot within a maturity, from prepayments of Base Rental Payments made at the option of the City pursuant to the Lease, at a redemption price equal to the principal amount of the 2023A Bonds to be redeemed, plus accrued but unpaid interest to the date fixed for redemption, without premium.
Mandatory Sinking Account Redemption of 2023A Bonds. The 2023A Term Bond maturing on October 1, 20__ is subject to mandatory redemption, in part by lot, from sinking account payments set forth in the following schedule commencing on October 1 in each year to and including October 1, 20__ at a
*
Preliminary, subject to change.
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4 redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption.
Redemption Date
(October 1)
Principal Amount
To be Redeemed
*
_________________
*
Maturity.
The 2023A Term Bond maturing on October 1, 20__ is subject to mandatory redemption, in part by lot, from sinking account payments set forth in the following schedule commencing on October 1 in each year to and including October 1, 20__ at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption.
Redemption Date
(October 1)
Principal Amount
To be Redeemed
*
_________________
*
Maturity.
If some but not all of a 2023A Term Bond has been redeemed pursuant to extraordinary or optional redemptions, the total amount of sinking account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of such 2023A Term Bond so redeemed by reducing each such future sinking account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. In the event of any reductions in the amount of sinking account payments due as a result of some but not all of the 2023A Bonds being redeemed pursuant to extraordinary or optional redemptions, the Authority shall provide the Trustee with a revised schedule reflecting such reductions.
Extraordinary Redemption. The 2023A Bonds are subject to redemption prior to their respective maturity dates, upon notice as provided in the Indenture, as a whole or in part on any date, from prepayments of Base Rental Payments made by the City pursuant to the Lease from funds received by the City due to a taking of the Leased Property or any portion thereof under the power of eminent domain or from insurance proceeds received by the City due to damage to or destruction of the Leased Property or any portion thereof, under the circumstances and upon the conditions and terms prescribed herein and in the Lease. Redemption of 2023A Bonds shall be made at a redemption price equal to the sum of the principal of the 2023A Bonds to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium.
Selection of Bonds for Redemption
Whenever provision is made in the Indenture for the redemption of less than all of the 2023A Bonds, the Trustee shall select the 2023A Bonds to be redeemed from all 2023A Bonds not previously called for redemption, in such maturities as the Authority shall designate (and by lot within any maturity).
For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 portions and such portions shall be treated as separate 2023A Bonds, which may be separately redeemed.
Notice of Redemption
The Trustee on behalf and at the expense of the Authority shall send (by first class mail or other means acceptable to the recipient thereof) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the
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5 Securities Depositories and to one or more Information Services, at least twenty (20) but not more than sixty (60) days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the date of the notice, the redemption date, the redemption place and the redemption price and shall designate the CUSIP numbers, the 2023A Bond numbers and the maturity or maturities (except in the event of redemption of all of the 2023A Bonds) of the 2023A Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Neither the Authority nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee shall be liable for any inaccuracy in such numbers.
Any notice given pursuant to the Indenture may be conditional and/or rescinded by written notice given to the Trustee by the Authority and the Trustee shall provide notice of such rescission as soon thereafter as practicable in the same manner, and to the same recipients, as notice of such redemption was given pursuant to the Indenture.
Partial Redemption of Bonds
If only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new 2023A Bond or Bonds, interest rate and maturity date, in aggregate principal amount equal to the unredeemed portion of the 2023A Bond being redeemed.
Effect of Redemption
From and after the date fixed for redemption, if funds available for the payment of the principal of, premium, if any, and interest on the 2023A Bonds so called for redemption shall have been duly provided, such Bonds so called shall cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest shall accrue thereon from and after the redemption date. All 2023A Bonds redeemed pursuant to the Indenture shall be canceled by the Trustee. All moneys held by or on behalf of the Trustee for the payment of principal of or interest or premium on Bonds, whether at redemption or maturity, shall be held in trust for the account of the Owners thereof and the Trustee shall not be required to pay Owners any interest on, or be liable to Owners for any interest earned on, moneys so held.
Book-Entry System
The 2023A Bonds are being issued as fully registered bonds and, when executed and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2023A Bonds will be issued in denominations of $5,000 or any integral multiple thereof. Individual purchases of 2023A Bonds will be made in book-entry form only. Payments of principal of and interest on the 2023A Bonds are to be made to purchasers by DTC through DTC Participants.
Purchasers will not receive physical delivery of the 2023A Bonds purchased by them. See APPENDIX F – “BOOK –ENTRY SYSTEM.”
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6 SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS
2023A Bonds
General. The 2023A Bonds will be secured by a first lien on and pledge of the Revenues, which consist substantially of the Base Rental Payments payable by the City pursuant to the Lease. The Base Rental Payments will be paid by the City in an amount sufficient to pay the principal of and interest on the 2023A Bonds on each Interest Payment Date. On or before the fifteenth (15) Business Day preceding each Interest Payment Date, the City is required to pay to the Trustee the Base Rental Payments coming due on the next succeeding Interest Payment Date, respectively, from any legally available sources.
Pursuant to an Assignment Agreement, dated as of February 1, 2023 (the “Assignment Agreement”), by and between the Authority and the Trustee, relating to the 2023A Bonds, the Authority has and will assign, as further security for its obligations to make timely payment of principal of and interest on the 2023A Bonds to the Trustee for the benefit of the Owners certain of the Authority’s rights under the Lease and Site Lease, including the right to receive all Base Rental Payments.
Additional Rental Payments
Under the Lease, in addition to Base Rental Payments, the City has agreed to pay Additional Rental Payments in such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the 2023A Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of the Lease or the assignment thereof, the Indenture, or the Authority’s or the Trustee’s interest in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the 2023A Bonds or of the Indenture. Such Additional Rental Payments shall be billed to the City by the Authority or the Trustee from time to time.
Amounts so billed shall be paid by the City within sixty (60) days after receipt of the bill by the City.
Covenant to Budget and Appropriate
The City has covenanted in the Lease to take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease in its budget and to make the necessary annual appropriations for all such Base Rental Payments and Additional Rental Payments, subject only to abatement as provided in the Lease.
The City will furnish to the Authority and the Trustee annually a certificate stating that it has complied with this covenant, as set forth in the Lease. The covenants on the part of the City contained in the Lease shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease agreed to be carried out and performed by the City.
Limited Obligations
The full faith and credit of the Authority is not pledged for the payment of the principal of or interest or premium (if any) on the 2023A Bonds. The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the Authority or any of its income or receipts, except the Revenues and such other moneys and securities as provided in the Indenture. The obligation of
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7 the City to make Base Rental Payments or Additional Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the 2023A Bonds nor the obligation of the City to make Base Rental Payments or Additional Rental Payments constitutes an indebtedness of the City, the State of California or any of its political subdivisions (other than the Authority) within the meaning of any constitutional or statutory debt limitation or restriction. 2023A Reserve Fund
Under the Indenture, a 2023A Reserve Fund is established for the 2023A Bonds that will be funded at the 2023A Reserve Requirement. See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS – THE INDENTURE.”
Abatement of Base Rental Payments
General. The obligation of the City to pay Base Rental Payments and Additional Rental Payments is subject to abatement during any period in which by reason of any damage, destruction, condemnation or title defect there is substantial interference with the use by the City of the Leased Property or any portion thereof. See “RISK FACTORS – Abatement.” Such abatement shall be in an amount such that the resulting Base Rental Payments in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or title defect does not substantially interfere with the City’s use and right of possession, as evidenced by a Certificate of the City. Such abatement shall continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation, taking or title defect and, with respect to damage to or destruction of the Leased Property, ending with the substantial completion of the work of repair or replacement of the Leased Property, or the portion thereof so damaged or destroyed.
An abatement will continue for the period commencing with the date on which the Leased Property is not available for use and occupancy and ending with the date on which the Leased Property is available for use and occupancy by the City. The term of the Lease will be extended by the period during which Base Rental Payments or Additional Rental Payments is abated, except that the term may in no event be extended beyond ten years following the stated term thereof.
COVID-19 Pandemic. The spread of COVID-19 resulted in the imposition of restrictions on gatherings, widespread temporary closings of businesses and schools (including within the City) and implementation from time to time of safer-at-home orders for citizens to remain at home, except for certain essential purposes. These restrictions limited public access to certain City-owned facilities from time to time that include the Leased Property. Any similar restrictions in the future are not expected to cause Base Rental Payments or Additional Rental Payments to be abated under the Lease.
Maintenance, Utilities, Taxes and Assessments
During such time as the City or any assignee or sublessee thereof is in possession of the Leased Property, all maintenance and repair, ordinary or extraordinary, of the Leased Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of (a) all utility services supplied to the Leased Property, (b) the cost of operation of the Leased Property, and (c) the costs of maintenance of and repair to the Leased Property resulting from ordinary wear and tear or want of care on the part of the City. The City shall at the City’s sole cost and expense keep and maintain the Leased Property clean and in a safe and good condition and repair. The Authority shall have no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Property or any part thereof, and the parties hereto affirm that the Authority has made no representations or warranties to the City respecting the condition of the Leased Property. The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Property. The
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8 Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Property. The City waives the right to make repairs at the Authority’s expense under Subsection 1 of Section 1932 and Section 1942 of the California Civil Code, or any other such law, statute, or ordinance now or hereafter in effect.
The Leased Property will be used for public purposes by the City and, therefore, the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. If the use, possession or acquisition by the Authority or the City of the Leased Property is found to be subject to taxation in any form, the City will pay during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as the Lease is in effect.
Insurance Coverages
Pursuant to the Lease, the City shall secure and maintain or cause to be secured and maintained at all times with insurers of recognized responsibility, or through a program of self-insurance to the extent specifically permitted in the Lease, all coverage on the Leased Property on which improvements are constructed required by the Lease. Such insurance shall consist of (i) comprehensive general liability coverage against claims for damages including death, personal injury, bodily injury or property damage arising from operations involving the Leased Property. Such insurance shall afford protection with a combined single limit of not less than $1,000,000 per occurrence with respect to bodily injury, death or property damage liability, or such greater amount as may from time to time be recommended by the City’s risk management officer or an independent insurance consultant retained by the City for that purpose, subject to a deductible clause of not to exceed $500,000. The City’s obligations under this clause (i) may be satisfied by self-insurance; (ii) casualty insurance, throughout the term of the Lease, against loss or damage to any or all of the Leased Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, and against loss of Leased Property by theft. Such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The insurance required by this paragraph shall be in an amount not less than the principal amount of the Outstanding Bonds. The City’s obligations under this clause (ii) may be satisfied by self-insurance; (iii) workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State to insure employers against liability for compensation under the Labor Code of the State, or any act enacted as an amendment or supplement thereto or in lieu thereof, such workers’ compensation insurance to cover all persons employed by the City in connection with the Leased Property and to cover full liability for compensation under any such act; provided, however, that the City’s obligations under this clause (iii) may be satisfied by self-insurance.
Rental interruption insurance will also be maintained in an amount not less than the maximum remaining scheduled Base Rental Payments in any twenty-four (24) month period, by an insurance provider rated at least “A” by A.M. Best & Company, to insure against loss of use of the Leased Property caused by perils covered by the comprehensive general liability coverage insurance). Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City and must list the Authority and the Trustee as additional insured parties. The net proceeds of such insurance shall be paid to the Trustee and credited toward the payment of the Base Rental Payments in the order in which such Base Rental Payments come due and payable.
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9 All policies or certificates issued by the respective insurers for insurance, with the exception of workers’ compensation insurance, shall provide that such policies or certificates shall not be canceled or materially changed without at least 30 days’ prior written notice to the Authority and the Trustee.
Certificates of comprehensive general liability and workers’ compensation insurance shall be furnished by applicable insurers to the City, and, at least ten days prior to the expiration dates of such policies, if any, evidence of renewals shall be deposited with the Trustee. If the City elects to provide self-insurance pursuant to clauses (i), (ii) and/or (iii) above, the City shall annually cause to be delivered to the Trustee, upon request, a certificate of an Insurance Consultant certifying to the adequacy of the City’s reserves for such insurance. All policies or certificates of insurance provided for in the Lease shall name the City as a named insured and the Trustee as an additional insured. All proceeds of insurance maintained under clauses (i) and (ii) shall be deposited with the City and under clause (2) shall be deposited with the Trustee.
Notwithstanding the generality of the foregoing, the City shall not be required to maintain or cause to be maintained more insurance than is specifically referred to above or any policies of insurance other than standard policies of insurance with standard deductibles offered by reputable insurers at a reasonable cost on the open market.
Substitution and Release of Property
Pursuant to the Lease, the City and the Authority specifically acknowledge that the annual fair rental value of the Leased Property is in excess of the maximum annual Base Rental Payments. The City shall have, so long as the Lease is in effect, and is granted under the Lease, the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for any portion of the Leased Property (the “Former Property”) or release any identifiable real property and/or improvements currently constituting the Leased Property (in such case, Substitute Property shall mean the Former Property less any portion released pursuant to the Lease); provided, that the City must satisfy all of the following requirements, which are conditions precedent to such substitution:
(a) No default under the Lease or Event of Default shall have occurred and be continuing;
(b) The City shall file with the Authority and the Trustee, and cause to be recorded in the office of the County Recorder, sufficient memorialization of amendments to the Lease and the Site Lease which replaces Exhibit A to the Lease and Exhibit A to the Site Lease with a description of such Substitute Property which deletes therefrom the description of the Former Property; (c) The City shall obtain an extended California Land Title Association (“CLTA”) policy of title insurance insuring the City’s fee or leasehold estate in such Substitute Property, the City’s leasehold estate under the Lease, and the Authority’s leasehold estate under the Site Lease in such Substitute Property, subject only to Permitted Encumbrances, in an amount not less than the aggregate principal amount of the Outstanding Bonds; provided, however, that this requirement shall not apply to Substitute Property that consists only of Former Property less any released portion; (d) The City shall provide a Certificate of the City to the Authority and to the Trustee that such Substitute Property constitutes property which the City is permitted to lease under the laws of the State of California;
(e) The substitution of the Substitute Property shall not cause the City to violate any of its covenants, representations and warranties made herein; (f) The City shall file with the Authority and the Trustee a Certificate of the City or other evidence which establishes that the annual fair rental value of the Substitute Property after substitution or release will be at least equal to 100% of the maximum amount of the Base Rental Payments becoming
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10 due in the then current fiscal year or in any subsequent fiscal year and the useful economic life of the Substitute Property shall be at least equal to the maximum remaining term of the Lease; and (g) The City shall furnish to the Trustee an opinion of Bond Counsel addressed to the Trustee, the City and the Authority to the effect that the substitution or release is permitted under the Lease.
Upon the satisfaction of all such conditions precedent, and upon the City delivering to the Authority and the Trustee a Certificate of the City certifying that the conditions set forth in subsections (a), (c) and (e) outlined above have been satisfied, the Term of the Lease shall thereupon end as to the Leased Property and shall thereupon commence as to the Substitute Property, and all references to the Leased Property shall apply with full force and effect to the Substitute Property. The City shall not be entitled to any reduction, diminution, extension or other modification of the Base Rental Payments whatsoever as a result of any substitution or removal under the Lease.
PLAN OF FINANCE
General
The Authority is issuing the 2023A Bonds, to provide funds to: (i) finance the acquisition, construction and improvement of the Police Station Project, (ii) fund a debt service reserve for the 2023A Bonds, (iii) [fund a portion of interest for the 2023A Bonds,] and (iv) pay the related costs of issuing the 2023A Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS.” The Police Station Project
The Police Station Project consists of two buildings of Type II-B, slab on grade construction with masonry walls and concrete over metal deck on the second floors and roofs. The interior systems are made of structural steel. Type II-B construction is the most common type of non-combustible construction used in commercial buildings. Buildings constructed of non-combustible materials, however, have no fire resistance. Both buildings will contain sprinkler systems.
The main building is 32,671 square feet and will include a public lobby, a community meeting/multipurpose space, offices for administration, investigators and records and patrol related functions including: lockers, fitness, report writing areas, etc. The second support building is 11,806 square feet and will house property and evidence, k-9, the fingerprint laboratory and various police support and storage functions on its ground floor. The upper floor may house an indoor police firearms range, depending on the overall cost of the project. The development will also contain approximately 128 parking spaces on grade. The City has 100% of the design drawings completed for the Police Station Project, the site is fully entitled and has satisfied all environmental requirements.
A portion of the proceeds of the 2023A Bonds will fund interest on a portion of the 2023A Bonds through _______, 20__.
LEASED PROPERTY
General. The Leased Property consists of the site for the Police Station Project and the City’s Aquatic Center, located at 540 Park Avenue, El Centro CA. The Aquatic Center, which opened in 2019, contains an instructional/warm-up pool, an 8 lane competition pool with scoreboard and touch pads, recreational pool, and a lazy river on an approximately 3.5 acre site. In addition, the Aquatic Center contains staff offices, locker rooms, restrooms, concession stand and an event area.
Once the Police Station Project is completed and the City has beneficial use and occupancy of the site and building, it is expected that the Aquatic Center will be released from the lien under the Lease and no longer serve as a component of the Leased Property. At the time of the release of the Aquatic Center,
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11 the City will certify to the Trustee that sufficient value remains in the Leased Property to support the then outstanding principal amount of the 2023A Bonds.
Substitution and Release of Property. The City may substitute other real property for any portion of the Leased Property described above, or release any identifiable real property and/or improvements currently constituting the Leased Property, provided the City satisfies the provisions of the Lease. See “SECURITY AND SOURCES OF PAYMENT OF THE 2023A BONDS – Substitution and Release of Property.”
No Remedy of Foreclosure. The City has not granted any security interest in the Leased Property for the benefit of the owners of the 2023A Bonds, and there is no deed of trust or mortgage or remedy of foreclosure on the Leased Property upon the occurrence of an Event of Default under the Indenture or the Lease.
ESTIMATED SOURCES AND USES OF FUNDS
The following table shows the estimated sources and uses of funds:
Sources:
Par amount of the 2023A Bonds $
[Net] Original Issue Premium/Discount
Total Sources $
Uses:
2023 Project Fund $
2023 Reserve Fund
2023 Interest Account(1)
2023 Costs of Issuance Fund(2)
Total Uses $
_____________
(1)
Interest funded through _________, 20__.
(2)
Costs of issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Municipal Advisor, Trustee, printing expenses, rating fee, underwriter’s discount and other miscellaneous costs. [Remainder of page intentionally left blank.]
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12 DEBT SERVICE REQUIREMENTS
The following table sets forth the debt service requirements for the 2023A Bonds, assuming no optional or extraordinary redemptions.
Principal
Payment Date Principal Interest Total
10/1/2023
10/1/2024
10/1/2025
10/1/2026
10/1/2027
10/1/2028
10/1/2029
10/1/2030
10/1/2031
10/1/2032
10/1/2033
10/1/2034
10/1/2035
10/1/2036
10/1/2037
10/1/2038
10/1/2039
10/1/2040
10/1/2041
10/1/2042
10/1/2043
10/1/2044
10/1/2045
10/1/2046
10/1/2047
Total
THE AUTHORITY
The Authority is a joint powers authority, organized under a Joint Exercise of Powers Agreement, dated July 1, 1996 (the “Joint Powers Agreement”), by and between the Redevelopment Agency of the City of El Centro and the City. The Joint Powers Agreement was entered into pursuant to the provisions of the Act. The Authority is governed by a five-member Board of Directors that comprises the members of the City Council. The Authority has no separate staff, but operates using City staff members.
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13 THE CITY
General
The City was incorporated under the Laws of the State of California in 1908. On November 3, 2009 voters approved Measure G adopting a City Charter. Under the provisions of the City Charter, the City has authority over its own municipal affairs including, but not limited to, certain bidding and contracting procedures, regulation of parks, libraries and other facilities, certain fees; municipal zoning, and municipal utilities.
The City operates under a Council-Manager form of Government. The City Council consists of five members elected at large by the residents of the City. Council terms are four years, elected in November of even-numbered years. Each December, the City Council selects the Mayor from among its members for a one-year term.
The Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney, and the City Clerk. The City Manager or Interim City Manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, and for appointing the heads of the various departments. The City provides a full range of services, including police and fire protection; the construction and maintenance of streets and other infrastructure; recreational activities; and water and sewer services. Solid Waste collection and disposal is contracted out by the City.
The El Centro Regional Medical Center (the “Medical Center”) provides medical services within the City. The Medical Center is a municipal hospital, separate agency and enterprise operation of the City.
The Medical Center’s finances are reported within the Proprietary Funds of the City’s financial statements.
Currently the Authority has Hospital Revenue Refunding Bonds (El Centro Regional Medical Center Project) Series 2018 (the “Medical Center Bonds”) outstanding for the Medical Center in the aggregate principal amount of $123,825,000. The Medical Center is currently experiencing financial and operational difficulties. See “EL CENTRO REGIONAL MEDICAL CENTER.”
The Medical Center Bonds are supported by installment purchase payments that constitute special limited obligations of the City, secured solely by all revenues, income, receipts and money received in any period by the Medical Center (other than donor-restricted gifts, grants, bequests, donations, contributions, and tax revenues). Neither the faith and credit nor the taxing power of the City is pledged to the repayment of the Medical Center Bonds. The Medical Center Bonds do not constitute a debt of the City, the Authority or of the State of California or of any political subdivision thereof.
See APPENDIX A – “SUPPLEMENTAL INFORMATION – THE CITY OF EL CENTRO AND IMPERIAL COUNTY” and APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR THE FISCAL YEAR ENDED JUNE 30, 2021.”
Audited Financial Statements
The following table sets forth the City’s General Fund assets, liabilities and fund balances based upon audited financial statements for Fiscal Years ended June 30, 2017 through June 30, 2021 and unaudited estimated numbers for the Fiscal Year ended June 30, 2022. City management’s discussion of financial performance for the fiscal year ended June 30, 2021 is presented in the City’s audited financial statements for the fiscal year ended June 30, 2021 attached hereto as APPENDIX B.
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14 TABLE 1
CITY OF EL CENTRO
GENERAL FUND BALANCE SHEET
FOR FISCAL YEARS ENDED JUNE 30, 2017 THROUGH JUNE 30, 2022 2017 2018 2019 2020 2021 2022*
Assets
Cash and investments $15,754,082 $19,165,217 $23,460,208 $21,267,085 $26,831,056 $35,175,772 Receivables:
Accounts 250,796 258,883 160,890 13,317 115 -
Taxes 2,987,672 2,636,927 2,884,244 2,442,013 4,321,737 3,869,982 Interest 19,325 19,325 112,766 19,325 19,417 19,417
Grants - - - - 68,902 113,500
Notes - - - - 382,600 837,990
Leases - - - - - 455,390
Other 562,761 477,956 633,431 699,487 1,310,776 749,626 Due from other funds 2,024,050 2,051,4 17 2,301,410 2,596,184 2,509,767 2,067,114 Restricted Assets:
Cash and investments - 1,500,000 1,500,000 1,500,000 1,850,641 3,892,006 Cash and Investments with
Fiscal Agent - - - - 141,225 141,223
Total Assets $21,598,686 $26,109,725 $31,052,949 $28,537,411 $37,436,236 $47,322,020 Liabilities, Deferred Inflows of
Resources and Fund Balances
Liabilities:
Accounts payable $ 871,356 $ 1,745,387 $ 5,152,639 $ 1,155,616 $ 1,376,106 $ 2,006,030 Salaries/Benefits Payable 668,346 729,255 725,250 758,109 188,968 754,634 Unearned Revenue 816,710 189,436 87,158 13,205 - -
Deposits 1,000,998 917,998 906,931 920,445 1,048,247 1,200,367 Total Liabilities $ 3,357,410 $ 3,582,076 $ 6,871,978 $ 2,847,375 $ 2,613,321 $ 3,961,031 Deferred Inflows of Resources:
Lease Revenue - - - - - $449,161
Total Deferred Inflows of
Resources - - - - - $449,161
Fund Balances:
Restricted - $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,850,641 $ 4,033,229 Assigned $ 4,675,830 5,019,337 1,569,069 1,588,408 88,954 89,161 Unassigned 13,565,446 16,008,312 21,111,902 22,601,628 32,883,320 38,789,438 Total Fund Balances $18,241,276 $22,527,649 $24,180,971 $25,690,036 $34,822,915 $42,911,828 Total Liabilities, Deferred Inflows
of Resources and Fund Balances $21,598,686 $26, 109,725 $31,052,949 $28,537,411 $37,436,236 $47,322,020 ____________________
Source: City of El Centro Audited Financial Statements. * Unaudited.
The following table summarizes the revenues, expenditures, and changes in fund balance for the City’s General Fund for the Fiscal Years ended June 30, 2017 through June 30, 2022. This information has been derived from the audited financial statements of the City for the fiscal years shown and estimates for the fiscal year ending June 30, 2022. This information should be read in conjunction with APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR FISCAL YEAR ENDED JUNE 30, 2021.”
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15 TABLE 2
CITY OF EL CENTRO
GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN GENERAL FUND BALANCE FOR FISCAL YEARS ENDED JUNE 30, 2017 THROUGH JUNE 30, 2022 2017 2018 2019 2020 2021
Unaudited
2022
Revenues
Taxes $18,475,499 $23,946,816 $25,284,478 $24,650,046 $27,950,120 $31,376,087 Licenses and permits 270,740 423,868 266,735 299,970 324,355 441,200 Intergovernmental 5,465,535 5,679,992 6,234,930 6,738,296 6,866,079 7,480,152 Charges for services 665,156 848,953 727,046 714,401 933,924 1,000,693 Fines and forfeitures 91,105 76,671 66,376 47,633 37,300 34,508 Interest 118,339 - 1,118,789 340,253 498,236 95,613
Other 1,165,245 1,108,095 1,271,997 1,241,267 1,298,040 1,210,783 Total Revenues $26,251,619 $32,084,395 $34,970,351 $34,031,866 $37,908,054 $41,639,036 Expenditures
Current:
General government $ 3,280,437 $ 4,007,539 $ 3,675,448 $ 3,428,969 $ 3,538,826 $3,929,636 Public safety 15,967,456 16,016,794 15,879,598 16,562,864 16,363,141 14,770,364 Public works 1,265,255 1,334,529 1,439,809 1,389,688 1,418,547 1,497,177 Parks and recreation 3,164,069 3,181,183 3,375,179 3,352,874 3,582,223 7,707,453 Community development 1,774,100 1,809,277 1,786,103 1,975,223 2,259,860 1,981,524 Capital Outlay 917,627 2,155,606 8,192,328 6,897,395 2,641,078 4,206,361 Total Expenditures $26,368,944 $28,504,928 $34,348,465 $33,607,013 $29,803,675 $34,092,515 Excess (Deficiency) of Revenues
over (under) Expenditures ($ 117,325) $ 3,579,467 $ 621,886 $ 424,853 $ 8,104,379 $7,546,521 Other Financing Sources (Uses)
Transfers in $ 855,140 $ 2,421,273 $ 3,075,436 $ 2,584,212 $ 1,028,500 $3,630,142 Transfers out (65,000) (1,714,368) (2,044,000) (1,500,000) - (3,087,750) Total Other Financing Sources (Uses) $ 790,140 $ 706,905 $ 1,031,436 $ 1,084,212 $ 1,028,500 $542,392 Net Change in Fund Balances $ 672,815 $ 4,286,372 $ 1,653,322 $ 1,509,065 $ 9,132,879 $8,088,913 Fund balances – Beginning of Fiscal Year $17,568,461 $18,241,277 $22,527,649 $24,180,971 $25,690,036 $34,822,915 Fund Balances at End of Year $18,241,276 $22,527,649 $24,180,971 $25,690,036 $34,822,915 $42,911,828 ____________________
Source: City of El Centro.
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16 General Fund Revenue Sources
The table below provides the amount of General Fund revenues that each source represents for the fiscal years shown. The City cannot predict the ultimate impacts on such revenues going forward as a result of the COVID-19 pandemic and potential related economic consequences; however, such impacts may be material and adverse. See “RISK FACTORS – COVID-19 Pandemic.” Table 3
City of El Centro
General Fund Tax Revenues
Revenue Source
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
% of
General
Fund
Revenues(1)
Projected
Actual
FY 2023
% of
General
Fund
Revenues(1)
Sales Tax $18,064,757 $20,854,389 $23,862,100 57% $23,446,000 59% Property Tax 3,977,671 4,088,991 4,197,853 10 4,273,760 11 Motor Vehicle in Lieu 4,551,788 4,753,060 4,918,467 12 5,075,000 13 Transient Occupancy Taxes 1,807,981 2,151,327 2,423,575 6 2,210,000 6 Charges for Services 714,401 933,924 1,000,693 2 934,540 2 Other 4,915,268 5,126,363 5,236,348 13 3,743,900 9
Totals $34,031,866 $37,908,054 $41,639,036 $39,683,200
_____________________
Source: City of El Centro.
(1) Rounded.
Sales Taxes. A sales tax is imposed on the privilege of consuming personal property in California.
California does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide (of which 1% is paid to the City). The State’s actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution. In addition, many of California’s cities, counties, and communities have special taxing jurisdiction to impose a transaction (sales) or use tax.
These so-called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. These district taxes can vary up to 1%, and more than one district tax may be in effect for a particular location. Sales taxes represent the largest revenue source for the City’s General Fund.
E-commerce. During the past ten years, E-commerce retail sales have increased rapidly. In June 2018, the United States Supreme Court published its landmark decision in South Dakota v. Wayfair (the “Wayfair Decision”), holding that sales to a customer in a particular state alone are sufficient to create a nexus for purposes of determining whether a seller is required to collect sales taxes of the applicable state.
Prior to the Wayfair Decision, courts had interpreted the dormant Commerce Clause of the United States Constitution to require that a company have a physical nexus in a state for the seller to be liable for the collection of that state’s sales tax. Physical nexus is defined as having either property or payroll in the state, including a resident employee working from home or inventory stored in that state. Thus, prior to the Wayfair Decision, states had much more limited means to collect sales tax revenue from E-commerce.
Following the Wayfair Decision, the State of California enacted Assembly Bill No. 147 on April 25, 2019, pursuant to which CDTFA has developed policies and procedures to govern the administration, collection and allocation of sales and use taxes for E-commerce retail sales. Among the factors that determine the allocation of sales and use tax revenue from E-commerce retail sales among California local jurisdictions such as the City, are the location from which the E-commerce order was placed, the location of the goods at the time of sale, the location of the fulfillment center.
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17 Property Taxes. Taxes are levied by the County for each Fiscal Year on taxable real and personal property which is situated in the City as of the preceding January 1. Effective July 1, 1983, real property which changes ownership or is newly constructed is reassessed at the time the change in ownership occurs or the new construction is completed. The current year property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due.
For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” Unsecured property comprises all property not attached to land, such as personal property or business property. Boats and airplanes are examples of unsecured property.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each Fiscal Year, and if unpaid become delinquent on December 10 and April 10, respectively, subject to a penalty of ten percent. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the Fiscal Year. Such property may thereafter be redeemed by payment of a penalty of 1.5 percent per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County Tax Collector.
Property taxes on the unsecured roll are due as of the January 1 lien date and, in general, become delinquent on August 31, subject to a ten percent penalty. If unsecured taxes are unpaid on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each month until paid. The City has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and Recorder’s office in order to obtain a lien on certain property of the taxpayer, and (4) seizing and selling personal property, improvements or possessory interests belonging or assessed to the entity assessed.
Economic and other factors beyond the City’s control, such as economic recession, deflation of land values, or the complete or partial destruction of taxable property caused by, among other things, earthquake, flood or other natural disaster could cause a reduction in the assessed value of taxable property in the City. See also “LIMITATIONS ON REVENUES AND APPROPRIATIONS – Property Tax Limitations – Article XIIIA, XIIIB, XIIIC (Proposition 218)” and “– Article XIIIA Implementing Legislation.”
Teeter Plan. The Board of Supervisors of the County adopted the “Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds” (the “Teeter Plan”) on October 12, 1993, as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State of California.
Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The Board of Supervisors of the County, however, may discontinue this administrative practice at any time and there is no assurance that the County will continue to maintain this practice.
Measure P Sales Tax
The City anticipates using a portion of the Measure P sales tax revenues to make the Base Rental Payments that will be used by the Authority to pay the principal of and interest on the 2023A Bonds.
Measure P sales tax revenues; however, are general sale tax revenues deposited into the City’s
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18 General Fund and are not pledged as security for the payment of the principal of and interest on the 2023A Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023A BONDS.” In November of 2016, El Centro residents approved Measure P, which increased the sales tax rate by ½ of 1% effective April 1, 2017. The purpose of the Measure P sales tax is to address major capital needs within the City, including the Police Station Project. The Measure P sales tax is a transaction and use tax paid in addition to, and as a percentage of the price of, tangible personal property. It is paid on retail transactions within the City in addition to and in the same manner as State sales tax and is imposed on retailers for the privilege of selling tangible personal property. The transactions and use tax does not apply to a transaction when the State sales tax does not apply. The Measure P sales tax will terminate without further action of the voters on June 30, 2047. Notwithstanding the termination of Measure P before the final maturity of the 2023A Bonds, the City expects to have sufficient General Fund revenues available to make all Base Rental Payments supporting the payment of the principal of and interest on the 2023A Bonds.
As of January 1, 2023, the Measure P fund balance was approximately $18.1 million. For the Fiscal Year ending June 30, 2023, Measure P sale tax revenues are projected to be approximately $7,457,000.
Management Discussion
The City plans to position its finances in a manner that will allow it to meet the City’s strategic goals and objectives of the City and to accomplish this within the parameters allowed by the economy. The City plans to continue to fund reserves and enforce revenue enhancement and cost containment measures.
Of course, the City cannot predict the ultimate impacts on General Fund revenues as a result of the Pandemic. See “RISK FACTORS – COVID 19 Pandemic.”
[discussion to come]
Future Financings. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Base Rental Payments, or which the City, in its discretion, may determine to pay prior to the Base Rental Payments. The City expects to issue approximately $__ million of lease revenue bonds in 2022 payable from the General Fund to finance a new fire station facility in the City. See “RISK FACTORS – Additional General Fund Obligations.” Certain City Policies and Practices
Financial Policies. The City adopted Financial Policies on October 7, 1998, and revised in 2014 and 2018 (the “Financial Policies”) to ensure that the City’s finances are managed in a manner which will, (i) continue to provide for the delivery of quality services, (ii) maintain and enhance service delivery as the community grows in accordance with the general plan, (iii) guarantee an annual balanced budget assuring that the City is always living within its means, and (iv) establish reserves necessary to meet known and unknown future obligations. To achieve these goals the Financial Policies include general policies, revenue policies, cost of growth policies, reserve policies, expenditure and budgeting policies, debt policies, and capital improvement policies. In particular, the Financial Policies call for the City to establish and maintain a General Fund reserve for economic uncertainties of not less than 10% of expenditures.
Debt Management Policy. The City adopted a Debt Management Policy on April 3, 2018 (the “Debt Policy”) to establish guidelines and parameters for the effective governance, management and administration of debt and other financing obligations issued by the City, the Authority and its other related entities. According to the Debt Policy, the City recognizes that debt levels and their related annual costs are important long-term obligations that must be managed within available resources. The objective of the Debt Policy is to provide written guidelines and restrictions concerning the amount and type of debt and other
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19 financing obligations issued by the City and its related entities and the ongoing management of the debt portfolio. The Debt Policy is intended to improve the quality of decisions, assist with the determination of the structure of debt issuance, identify policy goals, and demonstrate a commitment to long-term financial planning, including a multi-year capital plan.
Investment Policy. In accordance with California Government Code, Sections 53600 et seq., the City maintains an Investment Policy, which was adopted January 2001 (the “Investment Policy”). The Investment Policy’s primary objectives are to ensure the safety of principal, maintain a sufficiently liquid investment portfolio to ensure that the City has adequate cash to meet reasonably anticipated operating requirements and earn a reasonable yield consistent with the objectives of safety and liquidity. These objectives reflect the City’s investment philosophy, as expressed in the Investment Policy, to invest conservatively in order to minimize risk. The fundamental principles of the investment philosophy are:
diversification of the portfolio by investment type, quality standards for securities issuers, limits on the maximum maturity of investments, passive investment strategy of purchasing investments with the intent to hold them until maturity.
Pension Funding Policy. Like most municipalities, the City is facing rising pension costs and growing unfunded pension liabilities. On April 6, 2021, the City adopted a pension policy. The pension policy establishes a funding priority to pay off unfunded CalPERS liability. The City previously established a trust under Section 115 of the Internal Revenue Code for the purpose of funding City obligations to CalPERS. See “– Pension Plans – Public Agency Retirement Services Retirement Enhancement Plan below.”
Cybersecurity. The City provides training to its staff on phishing and safe browsing and how to avoid potential cyber threats. However, no assurances can be given that the security and operational control measures of the City will be successful in guarding against any and each cyber threat or breach. See “RISK FACTORS – Cybersecurity.” Staff is currently developing a standard operating procedure that will include cybersecurity related matters specifically.
City Budget
Budget Process. In accordance with the Financial Policies, the City’s goals when developing an annual budget are:
1. Follow the City's Strategic Plan which identifies community needs for essential services, activities and programs.
2. Identify and appropriate the resources required to perform program activities and accomplish program objectives.
3. Deliver services in the most cost effective manner, including utilizing the services of volunteers in areas where it is economically viable.
4. State the objectives of operating programs and identify the services and resources being provided to accomplish the specified objectives.
5. Periodically update replacement and maintenance financing plans and incorporate them into the budget.
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20 The City uses the following procedures when establishing the budgetary data reflected in its financial statements. The fiscal year of the City begins on the first day of July of each year and ends on the thirtieth day of June the following year. In June, the City Manager submits to the City Council the proposed budget during a public hearing. At the conclusion of the public hearing, the City Council reviews and considers the proposed budget and makes any revisions thereof that it deems advisable and on or before June 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council during a public meeting. At any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative vote of at least a majority of the total members of the City Council. The City Council must approve any amendments or supplements to the budget in excess of $50,000.
The City Council employs, at the beginning of each fiscal year, an independent certified public accounting firm which, at such time or times as specified by the City Council, at least annually, at such other times as such firm shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a report is submitted by such firm to the City Council and a copy of the financial statements as of the close of the fiscal year is published.
Adopted Budgets. The following table sets forth the City’s adopted budget and actual General Fund revenues, expenditures and changes in fund balance for the Fiscal Year shown. The adopted budget is the original budget at the start of the new Fiscal Year. Throughout the year, budget changes may be authorized by City Council which increase or decrease the City’s spending authority. Therefore, variances between the adopted budget and actual expenditures are common.
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21 TABLE 4
CITY OF EL CENTRO GENERAL FUND
COMPARISON OF ADOPTED BUDGET TO ACTUAL RESULTS
Final Fiscal
Year 2022
Budget
Fiscal Year
2022
Actual Variance
Final 2023
Budget
Revenues
Taxes $28,077,000 $31,376,087 $3,299,087 $30,790,760
Licenses and permits 346,600 441,200 94,600 346,300
Intergovernmental 1,280,000 7,480,152 6,200,152 6,398,000 Charges for services 918,200 1,000,693 82,493 934,540
Fines and forfeitures 68,000 34,508 (33,492) 35,300
Interest 145,000 95,613 (49,387) 155,300
Other 1,211,000 1,210,783 (217) 1,023,000
Total Revenues $32,045,800 $41,639,036 $9,593,236 $39,683,200 Expenditures
Current:
General government $3,686,501 $3,929,636 $(243,135) $4,447,203 Public safety 17,740,793 14,770,364 2,970,429 20,920,141 Public works 1,950,204 1,497,177 453,027 2,484,620
Parks & recreation 4,503,087 7,707,453 (3,204,366) 6,037,921 Community Development 2,028,088 1,981,524 46,564 2,140,413 Capital Outlay: 5,022,192 4,206,361 815,831 2,731,301
Total Expenditures $34,930,865 $34,092,515 $838,350 $38,761,599 Excess (deficiency) of revenues over
(under) expenditures $(2,885,065) $7,546,521 $10,431,586 $921,601 Other Financing Sources (Uses):
Transfers in $1,178,924 $3,630,142 $2,451,218 $1,337,550 Transfers out - (3,087,750) (3,087,750) (901,469)
Total Other Financing Sources (Uses) $1,178,924 $542,392 $(636,532) $436,081 Net Change in Fund Balances $(1,706,141) $8,088,913 $9,795,054 $1,357,682 Fund Balances at Beginning of Year $34,822,915 $34,822,915 $42,911,828 Fund Balances at End of Year $33,116,774 $42,911,828 $9,795,054 $44,269,510 ____________________
Source: City of El Centro.
Appropriations Limit
Section 7910 of the Government Code of the State requires the City to adopt a formal appropriations limit for each fiscal year. The City’s appropriations limit for Fiscal Year 2022-23 is $46,163,972. The appropriations limit is not expected to have any impact on the ability of the City to budget and appropriate the Base Rental Payments and Additional Rental Payments as required by the Lease.
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22 Assessed Valuation
The City’s second largest revenue source, property tax, is imposed on real property (land and permanently attached improvements, such as buildings) and tangible personal property (moveable property) located within the City. The assessed valuation of property in the City is established by the County Assessor, except for public utility property which is assessed by the California Department of Tax and Fee Administration (the “CDTFA”). Assessed valuations are reported at 100% of the full cash value of the property, as defined in Article XIII A of the California Constitution. See “ – Limitations on Taxes and Appropriations” below. Certain classes of property such as churches, colleges, not-for-profit hospitals and charitable institutions are exempt from property taxation and do not appear on the tax rolls.
Property tax revenue is recognized in the fiscal year for which the taxes have been levied providing they become available. Available means then due or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter (not to exceed 60 days) to be used to pay liabilities of the current period. The County collects property taxes for the City.
Tax liens attach annually as of 12:01 A.M. on the first day in January proceeding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property as it exists on that date. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one-half of the taxes on real property are due November 1; the second installment is due February 1. All taxes are delinquent, if unpaid, on December 10 and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent, if unpaid, on August 31. Economic and other factors beyond the City’s control, such as economic recession, deflation of land values, or the complete or partial destruction of taxable property caused by, among other things, earthquake, flood or other natural disaster could cause a reduction in the assessed value of taxable property in the City. See “RISK FACTORS.” The following table sets forth a summary of the City’s assessed valuations for the ten fiscal years shown.
Table 5
Property Ad Valorem Tax Assessed Values(1)
Fiscal Years Ended June 30, 2012 to 2021
Fiscal
Year
Total
Assessed
Value(2)
County
Tax Rate
Per $100
City
Portion of
Assessed Value
City
Tax Rate
City
Tax Levy
2012 $2,036,731,983 1.000 $1,431,557,030 0.210% $2,999,316 2013 2,013,469,116 1.000 1,398,499,071 0.210 2,940,201
2014 2,003,429,040 1.000 1,404,870,048 0.211 2,959,121
2015 2,022,063,289 1.000 1,423,277,054 0.212 3,011,823
2016 2,173,973,430 1.000 1,559,437,960 0.210 3,277,875
2017 2,280,920,814 1.000 1,629,348,747 0.209 3,397,728
2018 2,377,628,281 1.000 1,706,086,033 0.220 3,752,344
2019 2,484,436,442 1.000 1,782,565,134 0.216 3,852,841
2020 2,559,061,766 1.000 1,840,573,973 0.217 3,993,304
2021 2,698,126,894 1.000 1,933,714,878 0.215 4,150,691
_______________________
Source: Imperial County Auditor/Controller’s Office.
(1)
Estimated Actual Value of Taxable Property is not available since passage of Proposition 13 in 1978. Property assessed values may rise only to a maximum of 2% per year unless there is new construction or when the property is sold. Consequently, estimated values are not available. (2)
“Assessed Value” means 100% of full taxable value.
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23 Principal Property Taxpayers
The following table sets forth the top ten taxpayers in the City by taxable assessed value as of June 30, 2022.
Table 6
CITY OF EL CENTRO
Top Ten Taxpayers
Taxpayer Assessed Value
Percent of
Total AV
Description of
Primary
Business Use
1. IV Plaza LLC (RJFP LLC) $ 56,506,642 2.03% Retail
2. Imperial Valley Mall II, LP 50,876,479 1.82 Retail/ Prof. Offices
3. Town Center Courtyard 32,962,760 1.18 Retail
4. RJ Development Co. LLC 23,057,946 0.83 Retail
5. Wal-Mart Stores Inc. 21,589,830 0.77 Retail/ Prof. Offices
6. PMB EL CENTRO LLC 18,144,145 0.65 Multi-Family Units
7. Target Corporation 15,308,996 0.55 Retail
8. El Centro Miraflores LP 12,500,000 0.45 Multi-Family Units
9. Lakeside Investment LLC 12,575,311 0.45 Auto Dealership
10. EG P CH EL Centro LLC 11,800,000 0.42 Prof. Offices Top Ten Total $255,322,409 9.15%
_______________________
Source: Imperial County Assessor’s Office.
Direct and Overlapping Debt
Set forth on the following table is a direct and overlapping debt report (the “Debt Report”) for the City prepared by California Municipal Statistics, Inc., dated as of January 1, 2023. The Debt Report is included for general information purposes only.
The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases long-term obligations issued by a public agency are payable from the general fund or other revenues of such public agency. The City has not reviewed the Debt Report for completeness or accuracy and makes no representations in connection therewith.
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24 TABLE 7
CITY OF EL CENTRO
Statement of Direct and Overlapping Debt
January 1, 2023
[order submitted]
_______________________
Source: California Municipal Statistics, Inc.
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25 Long-Term Obligations
The following obligations payable from the City’s General Fund are identified in the City’s audited financial statements for the Fiscal Year ended June 30, 2021. However, the City through the Authority completed the following two transactions in the second half of 2021: $7,940,000 Lease Revenue Refunding Bonds, 2021 Series B (Transportation Improvements), closed on July 15, 2021, and $16,700,000 Lease Revenue Bonds, 2021 Series A (Library Project).
Long-Term Obligation
Balance at
July 1, 2020 Additions Reductions
Principal
Balance
June 30, 2021
Due within
one Year
Compensated absences $ 2,415,301 $ 1,212,149 ($ 882,123) $ 2,745,327 $ 928,931 Advances from Successor Agency 9,413,455 9,413,455
Unamortized premiums 618,936 (115,989) 502,947 115,989
Net Other OPEB (2,540,203) (272,712) (2,812,915)
Lease Revenue Bonds 10,125,000 16,700,000 (550,000) 26,275,000 725,000 Unamortized discount (130,466) 11,616 (118,850) (11,616) Unamortized premium 1,081,835 1,081,835 40,068
Revenue Bonds 4,390,000 (840,000) 3,550,000 860,000
Unamortized discount (63,063) 11,818 (51,245) (11,818)
Total $24,228,960 $18,993,984 ($2,637,390) $40,585,554 $2,646,554 ______________________________
Source: City of El Centro.
(1) Balance presented as “Net OPEB Asset” in Statement of Net Position. See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR THE FISCAL YEAR ENDING JUNE 30, 2021 – Note 8 Long-Term Debt.”
Labor Contracts
The following table sets forth the current status of the employment contracts, as applicable, for the City’s employee groups. The City has not experienced a labor stoppage during the past thirty-seven years and has generally experienced good relations with each employee group.
Unit
Budgeted
Number of
Employees
Date of Contract
Expiration
Contract Employees 12 Continuous
Supervisor, Professional and Technical Employees 13 June 30, 2025 Unrepresented Confidential Employees 7 June 30, 2025
General Employees Unit 94 June 30, 2025
Unrepresented Fire Safety Management Employees 4 June 30, 2025 El Centro Firefighters Association 36 June 30, 2025
Police Officers Association 59 June 30, 2025
Certified WTP Operators, WWTP Operators & Sewer 32 June 30, 2025 Unrepresented Management Employees 4 June 30, 2025
Unrepresented Police Management 4 June 30, 2025
Total 265
_______________________
Source: City of El Centro.
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26 Pension Plans
California Public Employees’ Retirement System. All qualified employees are eligible to participate in the City’s separate Miscellaneous (all other) and Safety (police and fire) plans (together, the “Plans”), cost-sharing and agent multiple-employer defined benefit pension plans, respectively, administered by the California Public Employees’ Retirement System (“CalPERS”), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Local Government resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
At June 30, 2021, the following employees were covered by the benefit terms for each Plan:
Miscellaneous Safety
Inactive employees or beneficiaries currently receiving benefits 155 137 Inactive employees entitled to but not yet receiving benefits 186 82 Active employees 117 123
Total 458 342
Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries.
Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following:
the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the California Public Employees’ Retirement Law (the “Retirement Law”).
The Plans’ provisions and benefits in effect at June 30, 2021, are summarized as follows:
CalPERS
City Miscellaneous City Safety
Hire date Prior to
July 1, 2013
On or after
July 1, 2013
Prior to
July 1, 2013
On or after
July 1, 2013
Benefit formula 2.5% @ 55 2% @ 62 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life monthly for life Retirement age 50 - 55 52 - 67 50 50 - 57
Monthly benefits, as a %
of eligible compensation 2.0% to 2.5% 1.0% to 2.5% 3% 2.0% to 2.7% Required employee contribution rates 7.00% 7.00% 9.00% 12.25% Required employer contribution rates 10.283% 10.283% 58.458% 12.25% _______________________
Source: Audited Financial Statements of the City of El Centro for Fiscal Year Ended June 30, 2021 at Note 15.
Net Pension Liability. The City’s net pension liability for each Plan is measured as the total pension liability, less the Plan’s fiduciary net position. The net pension liability of each of the Plans are measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The total pension liabilities in the June 30, 2019 actuarial valuations were determined using the following actuarial assumptions:
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27 Miscellaneous Safety (Classic)
Valuation Date June 30, 2019 June 30, 2019
Measurement Date June 30, 2020 June 30, 2020
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.75% 2.75%
Payroll Growth 3.00% 3.00%
Projected Salary Increase 3.30-14.20%(1) 3.30-14.20%(1) Investment Rate of Return 7.375%(2) 7.375%(2)
Mortality Derived using CalPERS’ Membership Data for all Funds _______________________
Source: Audited Financial Statements of the City of El Centro for Fiscal Year Ended June 30, 2021 at Note 15. (1) Depending on age, service and type of employment.
(2) Net of pension plan investment expenses, including inflation.
See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR FISCAL YEAR ENDED JUNE 30, 2021” at Note 15 for a more detailed description of net pension liability.
Contributions. Section 20814(c) of the Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the fiscal year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
Discount Rate. The discount rate used to measure the total pension liability in the Fiscal Year ended on June 30, 2021 was 7.15% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. The stress test results are presented in a detailed report that can be obtained from the CalPERS website. See APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR FISCAL YEAR ENDED JUNE 30, 2021” at Note 15 for asset allocation and return information.
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-
21. Since the return exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a portion of the investment gain to offset the cost of reducing the expected volatility of future investment returns. Based on the thresholds specified in the policy, the excess return of
14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate of
0.20%, from 7.00% to 6.80%. However, CalPERS net return on investments for the 12-month period ending on June 30, 2022 was -7.5%. This is CalPERS’ first loss since the global financial crisis of 2009. Employer contributions generally increase as funded status declines.
Funding Status. The Unfunded Accrued Liability (“UAL”) is the present value of future employer contributions for service that has already been earned and is in addition to future normal cost contributions for active members. The City’s required UAL payment contributions for 2023-24 for its Miscellaneous Plan is $ $2,343,973 and $4,163,010 for its Safety Plan.
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28 The funded status is an assessment of the need for future employer contributions based on the actuarial cost method used to fund the Plans. The following tables set forth the valuation results as of June 30, 2021. The valuation results are based on an investment return assumption of 6.8%. Other assumptions used in valuation reports are those recommended from in the CalPERS Experience Study and Review of Actuarial Assumptions November 2021 report available on the CalPERS website.
Miscellaneous Plan
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits $100,706,336 $106,026,392
2. Entry Age Normal Accrued Liability 88,901,025 92,132,284
3. Market Value of Assets 68,008,984 81,905,688
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 20,892,041 $ 10,226,596
5. Funded Ratio [(3) / (2)] 76.5% 88.9%
_______________________
Source: CalPERS July 2021 Valuation.
Safety Plan (Classic)
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits $128,028,024 $135,398,967
2. Entry Age Normal Accrued Liability 116,962,385 123,292,188
3. Market Value of Assets 80,937,807 96,192,001
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 36,024,578 $ 27,100,187
5. Funded Ratio [(3) / (2)] 69.2% 78.0%
_______________________
Source: CalPERS July 2021 Valuation.
Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following table presents the net pension liability of the Local Government for each Plan, calculated using the discount rate for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:
Miscellaneous Safety (Classic)
1% Decrease
Net Pension Liability
6.15% 6.15%
$30,207,097 $49,661,792
Current Discount Rate
Net Pension Liability
7.15% 7.15%
$18,788,796 $33,638,387
1% Increase
Net Pension Liability
8.15% 8.15%
$9,346,206 $20,489,667
_______________________
Source: Audited Financial Statements of the City of El Centro for Fiscal Year Ended June 30, 2021 at Note 15.
Public Employees’ Pension Reform Act (“PEPRA”). On September 12, 2012, Governor Brown signed Assembly Bill 340, creating PEPRA. Among other things, PEPRA creates a new benefit tier for new employees/members entering public agency employment and public retirement system membership for the first time on or after January 1, 2013. The new tier has a single general member benefit formula and three safety member benefit formulas that must be implemented by all public agency employers unless the formula in existence on December 31, 2012 has both a lower normal cost and a lower benefit factor at normal retirement age. PEPRA requires that all new employees/members, hired on or after January 1, 2013, pay at least 50% of the normal cost contribution. The normal cost contribution is the contribution set by the
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29 retirement system’s actuary to cover the cost of a current year of service. The small PEPRA plans for fire and safety are discussed in the Audited Financial Statements of the City of El Centro for Fiscal Year Ended June 30, 2021 at Note 15. The City believes that the provisions of PEPRA will help to control its pension benefit liabilities in the future.
Public Agency Retirement Services Retirement Enhancement Plan. The City has established the Public Agency Retirement System (“PARS”) Post-Employment Benefits Trust (the “Trust”) as a taxexempt trust within the meaning of Section 115 of the Internal Revenue Code to accumulate resources to “stabilize” the amount of its General fund resources that it will need to meet future contribution requirements to CalPERS. The balances and activities of the Trust are irrevocably dedicated to funding future obligations to CalPERS. The assets will benefit the City through reduced future cash flow demands on the City’s General Fund resources and continue to be assets of the City. These amounts are reflected as restricted cash and investments in the General Fund and are irrevocably dedicated to funding future obligations to CalPERS. As of November 30, 2022, the balance in the Trust was $4,006,010.78.
Other Post-Employment Benefits
The City provides other postemployment benefits (“OPEB”) for health and dental care benefits, as required by the various collective bargaining agreements for retirees that meet certain criteria. The OPEB plan is a single-employer defined healthcare plan administered by the City. The City provides postretirement health, dental, vision, and life insurance benefits, as provided for in various collective bargaining agreements for retirees that meet certain criteria. The City pays 100 percent of the employee’s premium for benefit coverage for qualifying management employees and elected & contract employees until age 65 and a portion of the employee’s premium for qualifying non-management employees.
At June 30, 2021, 288 employees were covered by the OPEB plan. For the Fiscal Year ended June 30, 2021, the total contribution made was $282,984. Fifty-two retired employees received OPEB benefits during such fiscal year. For additional information regarding the OPEB plan and its funding status, see APPENDIX B – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR FISCAL YEAR ENDED JUNE 30, 2021” at Note 14.
STATE OF CALIFORNIA BUDGET INFORMATION
State Budget
General. Information about the State budget is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. A summary of the May Revision to the State budget described below is located at www.ebudget.ca.gov/FullBudgetSummary.pdf. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City or the Authority, and the City and the Authority can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. Actions by the State, including through its budget process may have material impacts on the City’s operations and finances.
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30 2022-23 State Budget. On June 30, 2022, Governor Newsom signed into law the fiscal year 2022- 23 State Budget (the “2022-23 Budget”). The 2022-23 Budget totals about $308 billion and includes $37.2 billion in budgetary reserves, which are comprised of: $23.3 billion in the Budget Stabilization Account (the “Rainy Day Fund”) for fiscal emergencies; $9.5 billion in the Public School System Stabilization Account, the “rainy-day” fund used to lessen the impact of State revenue volatility on K-12 schools and community colleges; $900 million in the Safety Net Reserve (used to maintain benefits and services for CalWORKs and Medi-Cal participants during economic downturns); and $3.5 billion in the State’s operating reserve. The Rainy Day Fund is now at its constitutional maximum (10 percent of General Fund revenues) requiring $465 million to be dedicated for infrastructure investments in fiscal year 2022-23. Over the multi-year forecast period, the 2022-23 Budget reflects $8 billion in supplemental deposits split evenly between the Rainy Day Fund and the Safety Net Reserve. These deposits are above what is constitutionally required. The 2022-23 Budget allocates 93 percent of the discretionary surplus for one-time purposes and is projected to be structurally balanced in fiscal year 2025-26, the last year in the multi-year forecast.
Governor’s Proposed 2023-24 State Budget. Governor Newsom released the Proposed State 2023- 24 Budget (the “Proposed 2023-24 Budget”) on January 10, 2023. The Proposed 2023-24 Budget totals about $223 billion, with General Fund revenues projected to be $29.5 billion lower than the 2022 Budget Act and an estimated budget gap of $22.5 billion in Fiscal Year 2023-24. The Proposed 2023-24 Budget reflects lower projections based on personal income tax forecast, which were substantially revised down due to a less than positive economic outlook and ongoing weakness in personal income cash receipts. The Proposed 2023-24 Budget does not propose to draw from the State’s reserve accounts to close the budget gap, but rather includes building up the reserve account by $35.6 billion. The State is projected to end the Fiscal Year 2023-24 with available General Fund reserves that include: $22.4 billion in the Budget Stabilization Account (the General Fund’s “rainy-day” fund) for fiscal emergencies; $900 million in the Safety Net Reserve (used to maintain benefits and services for CalWORKs and Medi-Cal participants during economic downturns); $8.5 billion in the Public School System Stabilization Account (the Proposition 98 “rainy-day” fund used to lessen the impact of state revenue volatility on K-14 schools); and $3.8 billion in the Special Fund for Economic Uncertainties, the State’s operating reserve. In light of the decisions to address the budget problems, the Proposed 2023-24 Budget includes continued investments areas such as education, infrastructure, housing and homelessness.
Significant features of the Proposed 2023-24 Budget impacting cities and other local agencies in California include the following:
[to come]
Future State Budgets
No prediction can be made by the City as to whether the State will encounter budgetary problems in future fiscal years, and if it were to do so, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control.
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Packet Pg. 258 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264133.3
31 RISK FACTORS
Purchase of the 2023A Bonds will constitute an investment subject to certain risks, including the risk of nonpayment of principal and interest. Before purchasing any of the 2023A Bonds, prospective investors should carefully consider, among other things, the risk factors described below and otherwise referenced herein. However, the following is not meant to be an exhaustive listing of all the risks associated with the purchase of the 2023A Bonds. Moreover, the order of presentation of the risk factors does not necessarily reflect the order of their importance.
Base Rental Payments Are Not Debt; 2023A Bonds are Limited Obligations The obligation of the City to make the Base Rental Payments under the Lease does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the 2023A Bonds nor the obligation of the City to make Base Rental Payments constitutes a debt of the City, the State or any political subdivision thereof (other than the Authority) within the meaning of any constitutional or statutory debt limitation or restriction.
The 2023A Bonds are not general obligations of the Authority, but are limited obligations payable solely from and secured by a pledge of Revenues and amounts held in the funds and accounts created under the Indenture, consisting primarily of applicable Base Rental Payments. The Authority has no taxing power.
The 2023A Bonds are being issued by the Authority pursuant to the Act. The Supreme Court of the State in its 1998 decision of Rider v. City of San Diego, 18 Cal. 4th 1035, upheld the validity of a joint powers agency financing and found that bonds issued pursuant to the Act and payable from lease payments made pursuant to a lease with the City of San Diego were not subject to the State constitutional provisions that require two-thirds voter approval of indebtedness incurred by a city, county or school district. No voter approval of the 2023A Bonds or the Lease has been sought.
Although the Lease does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease to pay the Base Rental Payments from any source of legally available funds and the City has covenanted in the Lease that, for so long as the Leased Property is available for its use, it will make the necessary annual appropriations within its budget for the Base Rental Payments. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Base Rental Payments, or which the City, in its discretion, may determine to pay prior to the Base Rental Payments.
Additional General Fund Obligations
The City has the capacity to enter into other obligations payable from the City’s General Fund, without the consent of or prior notice to the Owners of the 2023A Bonds. To the extent that additional obligations are incurred by the City, the funds available to make Base Rental Payments may be decreased. If the City’s revenue sources are less than its total obligations, the City could choose to fund other activities before making Base Rental Payments and other payments due under the Lease. The same result could occur if state constitutional expenditure limitations were to prohibit the City from appropriating and spending all of its otherwise available revenues.
Abatement
The obligation of the City to pay Base Rental Payments and Additional Rental Payments shall be abated during any period in which by reason of any damage, destruction, condemnation or title defect there is substantial interference with the use by the City of the Leased Property or any portion thereof. Such
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32 abatement shall be in an amount such that the resulting Base Rental Payments in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or title defect does not substantially interfere with the City’s use and right of possession, as evidenced by a Certificate of the City. Such abatement shall continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation, taking or title defect and, with respect to damage to or destruction of the Leased Property, ending with the substantial completion of the work of repair or replacement of the Leased Property, or the portion thereof so damaged or destroyed, and the term of the Lease shall be extended as provided in the Lease.
Notwithstanding the foregoing, to the extent that moneys are available for the payment of base rental payments in any of the funds and accounts established under the Indenture, such base rental payments shall not be abated but shall be payable by the City as a special obligation payable solely from such funds and accounts. See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS – The Lease – Abatement of Rental.”
Police Station Project Completion
There can be no assurance that the Police Station Project will be completed for the costs and within the time described in this Official Statement. A delay in the completion or damage to the Police Station Project during construction could have an adverse effect on the costs of the Police Station Project.
Contractor and subcontractor performance and integrity, availability and cost of labor, equipment and materials, and weather conditions, among other unexpected factors, could cause such a failure of timely onbudget construction.
If the Police Station Project is not delivered and installed by _______, 20__, and if there are no amounts on deposit in the Lease Revenue Fund and the 2023 Reserve Fund, and the City determines that the fair rental value of the site for the Police Station Project and the Aquatic Center and any completed improvements on the Police Station Project site is less than the Base Rental Payment then due, the Lease remains in effect, but the Base Rental Payments are abated in proportion to the undelivered portion of the Police Station Project, until the Police Station Project or portion thereof is completed and the combination of the unabated Base Rental Payments plus the 2023 Reserve Fund and other funds held by the Trustee may not be sufficient to pay the full amount of principal and interest due with respect to the 2023A Bonds.
Risk of Uninsured Loss
The City covenants under the Lease to maintain certain insurance policies on the Leased Property.
These insurance policies do not cover all types of risk. The Leased Property could be damaged or destroyed due to earthquake or other casualty for which the Leased Property is uninsured. The Lease does not require earthquake insurance. Additionally, the Leased Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s liability will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Property will be sufficient to repair the Leased Property or to redeem the 2023A Bonds secured by Base Rental Payments.
City General Fund
In General. The Base Rental Payments and other payments due under the Lease are payable from funds lawfully available to the City. If the amounts which the City is obligated to pay in a fiscal year exceed the revenues for such year, the City may choose to make some payments rather than making other payments, including Base Rental Payments, based on the perceived needs of the City. The same result could occur if,
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33 because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare. For more information regarding California Constitutional limits on expenditures see “LIMITATIONS ON REVENUES AND APPROPRIATIONS – Property Tax Limitations – Article XIIIA, XIIIB, XIIIC (Proposition 218).”
Risk of Increased Expenditures. Under the Lease, provided the City is not currently in default thereunder, the City is permitted to expend for any municipal purpose or otherwise incur other evidences of indebtedness or other obligations payable from the City’s General Fund without the consent of Owners of the 2023A Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Base Rental Payments could decrease.
Risk of Decreased Revenues. A variety of national, state or regional factors, which are beyond the control of the City’s fiscal policies, as well as the City’s fiscal policies could reduce the amount of the City’s General Fund revenues. To the extent that City revenues decrease, the funds available to pay Base Rental Payments could decrease.
Public Health Emergencies
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. The spread of COVID-19 had adverse health and financial impacts throughout the City. From time to time since the onset of the COVID-19 pandemic, in California counties implemented and revised restrictions on mass gatherings and widespread closings or other limitations of the operations of government, commercial, educational, and other institutions. While significant portions of the population of the State of California have been vaccinated, COVID-19 variants have resulted, and may continue to result, in increased infection rates and the imposition of certain restrictions on commercial and other activities in the future. The City cannot predict what impact future public health emergencies will have on the City’s operations and finances or the regional economy.
Bankruptcy
General. A bankruptcy petition may be filed by the City. In particular, the City may file a petition under Chapter 9 (“Chapter 9”) of Title 11 of the United States Code (the “Bankruptcy Code”), provided that it complies with requirements of Section 53760 et seq. of the Government Code of the State. Under the Government Code, a local public entity, including the City, is prohibited from filing under the Bankruptcy Code unless it has participated in a specified neutral evaluation process with interested parties, as defined, or it has declared a fiscal emergency and has adopted a resolution by a majority vote of the governing board at a noticed public hearing that includes findings that the financial state of the local public entity jeopardizes the health, safety, or well-being of the residents of the local public entity’s jurisdiction or service area absent bankruptcy protections.
The adjustment plans approved by the Bankruptcy Courts in connection with the bankruptcies of the cities of Vallejo, San Bernardino and Stockton resulted in significant reductions in the amounts payable by the cities under lease revenue obligations substantially identical or similar to the 2023A Bonds. The City can provide no assurances about the outcome of the bankruptcy cases of other California municipalities or the nature of any adjustment plan if it were to file for bankruptcy.
City Bankruptcy. If the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments
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34 from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have a priority of payment superior to that of the Base Rental Payments under the Lease as they relate to Revenues due to Owners of 2023A Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the City’s debt (a “Plan”) without the consent of the Trustee or all of the Owners of 2023A Bonds, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable.
In addition, the City could either reject the Lease or assume the Lease despite any provision of the Lease which makes the bankruptcy or insolvency of the City an event of default thereunder. If the City rejects the Lease, the Trustee, on behalf of the Owners of the 2023A Bonds, would have a pre-petition claim that may be limited under the Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of the 2023A Bonds. Moreover, such rejection would terminate the Lease and the City’s obligations to make payments thereunder.
Authority Bankruptcy. Further, the Authority is a public agency and, like the City, is not subject to the involuntary procedures of the Bankruptcy Code. The Authority may also seek voluntary protection under Chapter 9 of the Bankruptcy Code. In the event the Authority were to become a debtor under the Bankruptcy Code, the Authority would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Such a bankruptcy could adversely affect the payments under the Indenture. Among the adverse effects might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the Authority or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the Authority; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have priority of payment superior to that of the Owners of the 2023A Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the Authority’s debt without the consent of the Trustee or all of the Owners of the 2023A Bonds, which plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable.
However, the bankruptcy of the Authority, and not the City, should not affect the Trustee’s rights under the Lease. The Authority could still challenge the assignment, and the Trustee and/or the Owners of the 2023A Bonds could be required to litigate these issues in order to protect their interests.
Medical Center Bankruptcy. The Medical Center is currently experiencing financial and operational difficulties. See “EL CENTRO REGIONAL MEDICAL CENTER.” The City Attorney has advised the City Council and the Medical Center Board of Trustees there is uncertainty under applicable law regarding whether the Medical Center may file a petition under Chapter 9 of the Bankruptcy Code independently from the City. The outstanding Medical Center Bonds are supported by installment purchase payments that constitute special limited obligations of the City, secured solely by all revenues, income, receipts and money received in any period by the Medical Center (other than donor-restricted gifts, grants, bequests, donations, contributions, and tax revenues). Neither the faith and credit nor the taxing power of the City is pledged to the repayment of the Medical Center Bonds. The Medical Center Bonds do not constitute a debt of the City, the Authority (other than as provided in the financing documents for such bonds) or of the State of California.
Opinion Qualifications. The various legal opinions to be delivered concurrently with the 2023A Bonds (including Bond Counsel’s approving opinion) will be qualified as to the enforceability of the various agreements relating to the 2023A Bonds by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by general principles of equity applied in the exercise of judicial discretion. Further, Bond Counsel provides no opinion regarding whether the
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35 Medical Center can petition for Chapter 9 protection apart from the City filing for such protection. The City is currently not in financial distress.
State Finances
According to the State Constitution, the Governor is required to propose a budget to the State Legislature by no later than January 10 of each year, and a final budget must be adopted by the vote of each house of the Legislature no later than June 15, although this deadline has been breached in the past. In November 2010, the voters of the State passed Proposition 25, which reduced the vote required to adopt a budget to a majority vote of each house and which provided that there would be no appropriation from the current budget or future budget to pay any salary or reimbursement for travel or living expenses for members of the Legislature for the period during which the budget was presented late to the Governor. The State budget becomes law upon the signature of the Governor, who may veto specific items of expenditure.
The State’s financial condition and budget policies affect communities and local public agencies throughout California. State budgets are affected by regional, national or even international economic conditions and a multitude of other factors over which the City has no control. The City cannot give any assurances regarding the financial conditions of the State during any period of time. The City also cannot predict what measures the State will adopt to respond to any future financial difficulties. The City can provide no guarantees regarding the outcome of future State budget negotiations, the actions that will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures, or the impact that such budgets or actions will have on the City’s finances and operations.
Some of the State’s budget solutions have caused in the past, and may cause in the future, increased financial stress to cities, counties and other local governments by: (i) decreasing local revenues (for example, the property tax, road improvement funding, public safety or other categorical funded initiatives), or (ii) increasing directly or indirectly demand for local programs (such as public safety or indigent health programs).
Information about the State budget and State spending is available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the State Department of Finance, www.dof.ca.gov. An analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various official statements for State-issued bonds, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov. None of the websites referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The City makes no representation concerning, and does not take any responsibility for, the accuracy or timeliness of information posted on such websites or the continued maintenance of such websites by the respective entities.
No Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the Owners of the 2023A Bonds with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease or the Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture.
No Limitation on Incurring Additional Obligations
Neither the Lease nor the Indenture contains any limitations on the ability of the City to enter into other obligations that may constitute additional claims against its General Fund revenues. To the extent that the City incurs additional obligations, the funds available to make Base Rental Payments may be
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36 decreased. The City is currently liable on other obligations payable from General Fund revenues and expects to enter into other such obligations in the future. Such obligations may impose significant additional burdens on the City’s General Fund.
Natural Disasters
General. From time to time, the City is subject to natural calamities which could result in the substantial interference with the use and occupancy of the Leased Property, which could result in Base Rental Payments being subject to abatement or an adverse impact on the City’s General Fund. Under such circumstances, no assurance can be given that the City would have insurance or other resources available to make repairs to the Leased Property or to make Base Rental Payments under the Lease.
Geological and Seismic. The Leased Property is located within the Imperial Valley portion of the Salton Trough, the dominant landform within the County. The Salton Trough encompasses the Coachella, Imperial and Mexicali valleys and extends north from the Gulf of California. The geologic structure of the trough is a result of an evolving “rift” in the earth’s crustal plates. Non-marine and alluvium sediments cover large portions of the area. The Imperial Valley is drained by an 8,360 square mile watershed, which eventually empties into the Salton Sea.
The State of California, including the Imperial Valley and the City, are located in seismically active regions and subject to seismic events with related concerns of ground shaking, liquefaction and landslides.
Subsidence, a phenomenon associated with groundwater withdrawal, can occur in the Imperial Valley as a result of geothermal operations; however, the potential is considered low to moderate on the Imperial Valley floor under current hydrological conditions. The most noteworthy of the numerous active faults traversing the Salton Trough is the San Andreas Fault. The other two major northwest-trending fault zones bounding the Trough are the San Jacinto Fault on the northwest and the Elsinore Fault on the southwest.
The City is particularly susceptible to strong ground shaking and significant earthquake damage from liquefaction, land subsidence and ground lurching. Historically, the Imperial Valley is a seismically active area associated with numerous earthquakes registering from point 4.3 and 6.6 on the Richter scale.
There are no assurances, however, that a future earthquake will be limited to this range in the Richter scale.
The Leased Property could also be subjected to moderate to severe ground shaking in the event of an earthquake on any of the faults in the southern California and northern Baja California area.
Should an earthquake occur that results in substantial interference with the use of the Leased Property, under the abatement provisions of the Lease, the City would not be obligated to make the Base Rental Payments. See “RISK FACTORS – Abatement” above.
Wildfires. In recent years, portions of California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildfires. Such areas affected by wildfires are more prone to flooding and mudslides that can further lead to the destruction of homes. Fires may cause damage to the Leased Property, which could result in Base Rental Payments being subject to abatement or an adverse impact on the City’s General Fund.
Hazardous Substances
The public works activities of the City may, from time to time, result in the use of hazardous substances on the facilities owned and operated by the City, including, but not limited, to the Leased Property. Accordingly, it is possible that spills, discharges or other adverse environmental consequences of such use in the future could cause an adverse effect on the fair rental value of the Leased Property and
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37 lead, in an extreme case, to abatement, in whole or in part, of all or a portion of the Base Rental Payments.
See “RISK FACTORS – Abatement” above.
Cybersecurity
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations and finances. As a recipient and provider of personal, private or other electronic sensitive information, the City is potentially subject to multiple cyber threats including, but not limited to, hacking, viruses, malware, ransomware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s systems for the purposes of misappropriating assets or information or causing operational disruption or damage.
The City provides training to its staff on phishing and safe browsing and how to avoid potential cyber threats. However, no assurances can be given that the security and operational control measures of the City will be successful in guarding against any and each cyber threat or breach. A ransomware or other cyberattack could result in the disruption of City operations and a material financial liability.
Climate Change
Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise, extreme temperatures will become more common, wildfires will become more common and intense, and extreme weather events will become more frequent as a result of increasing global temperatures attributable to atmospheric pollution. For example, the Fourth National Climate Assessment, published by the U.S. Global Change Research Program, in November 2018 (NCA4) finds that more frequent and intense extreme weather and climate-related events, as well as changes in average climate conditions, are expected to continue to damage infrastructure, ecosystems and social systems over the next 25 to 100 years. The City cannot predict what impacts climate change will ultimately have on its finances and operations in the future. Such impacts could be material and adverse.
Future Initiatives
From time to time, other initiative measures may be adopted, which may affect the City’s revenues and its ability to expend said revenues. The above-mentioned measures and any future measures could restrict the City’s ability to raise additional funds for its General Fund.
Limitations on Remedies
The enforceability of the rights and remedies of the owners of the 2023A Bonds and the Trustee, and the obligations incurred by the Authority and the City, respectively, may be subject to the following, among others: the limitations on legal remedies against joint powers authorities and cities in California; the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; principles of equity that may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the U.S. Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the owners of the 2023A Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights. See also, “– Bankruptcy” above.
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38 Remedies on Default
If an Event of Default occurs and is continuing under the Lease, the Authority at its option may terminate the Lease and re-lease all or any portion of the Leased Property. The City irrevocably appoints the Authority under the Lease as the agent and attorney-in-fact of the City and the City will allow the Trustee to enter upon and re-lease the Leased Property upon the occurrence and continuation of an Event of Default, other than as described in the preceding paragraph. The Authority may take whatever action at law or in equity may appear necessary or desirable, to collect each Base Rental Payment as it becomes due under the Lease, if the Lease is not terminated in accordance with its terms. See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS.” Substitution of Property
Pursuant to the Lease, the City will have, so long as the Lease is in effect, the option at any time and from time to time, to substitute other real property for any portion of the Leased Property or release any identifiable real property and/or improvements constituting the Leased Property, provided that the City shall satisfy all of the requirements set forth in the Lease. See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS – The Lease – Substitution and Release of Property.”
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or sale of the 2023A Bonds, and from time to time there may be no market for them, depending upon prevailing market conditions, the financial condition or market position of firms who may make the secondary market and the financial condition of the City.
LIMITATIONS ON REVENUES AND APPROPRIATIONS
There are a number of provisions in the State of California Constitution that limit the ability of the City to raise and expend revenues. Contained below is a description of some of these limitations. In addition to the ones discussed in this section below, other initiative measures could be adopted from time to time further affecting the City’s revenues and finances.
Property Tax Limitations – Article XIIIA, XIIIB, XIIIC (Proposition 218) Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the City Assessor’s valuation of real property as shown on the 1975-76 tax bill under `full cash value’, or thereafter the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment period.” Furthermore, all real property valuation may be increased to reflect the inflation rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors.
Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting on the proposition approving such bonds, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax law resulting in increased tax revenues.
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39 Article XIIIB of the California Constitution limits the annual appropriations from the proceeds of taxes of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the subsequent two years.
On November 5, 1996, California voters approved an initiative to amend the California Constitution known as the Right to Vote on Taxes Act (“Proposition 218”), which added Article XIIIC and XIIID to the California Constitution. Among other provisions, Proposition 218 requires majority voter approval for the imposition, extension or increase of general taxes and two-thirds voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include cities. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995 and prior to November 6, 1996 will continue to be imposed only if approved by a majority vote in an election held within two years of November 6, 1996. Proposition 218 also provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. This extension of the initiative power is not limited by the terms of Proposition 218 to impositions after November 6, 1996 and absent other legal authority, could result in retroactive reduction in any existing taxes, assessments, fees and charges. In addition, Proposition 218 limits the application of assessments, fees and charges and requires certain existing, new and increased assessments, fees and charges to be submitted to property owners for approval or rejection, after notice and public hearing. Neither the City nor the Authority expects the provisions of Proposition 218 to have any immediate material effect on the revenues from which Base Rental Payments are expected to be appropriated.
Article XIIIA Implementing Legislation
Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based on the traditional practice of using 25% of full cash value as the assessed value for tax purposes).
The legislation further provided that, for Fiscal Year 1978-79 only, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years.
Future assessed valuation growth allowed under Article XIIIA (i.e., new construction, change of ownership, and 2% annual value growth) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year. The Authority is unable to predict the nature or magnitude of future revenue sources that may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above those described above, even with the approval of the affected voters.
Challenges to Article XIIIA
There have been many challenges to Article XIIIA of the California Constitution. The United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property.
Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. Neither the Authority
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40 nor the City can predict whether there will be any future challenges to California’s present system of property tax assessment.
Statutory Revenue Limitations – Proposition 62
Proposition 62 is a statewide statutory initiative adopted by the voters at the November 4, 1986 general election. It added Sections 53720 to 53730 to the Government Code to require that all new local taxes be approved by the voters. The statute provides that all local taxes are either general taxes or special taxes. General taxes are imposed for general governmental purposes. Special taxes are imposed for specific purposes only. General taxes may not be imposed by local government unless approved by a two-thirds vote of the entire legislative body and a majority of the voters voting on the proposed general tax. Special taxes may not be imposed by local government unless approved by a majority of the entire legislative body and by two-thirds of the voters voting on the special tax. Soon after Proposition 62 was adopted by the voters, legal challenges to taxes adopted contrary to its provisions were filed. In 1991, in the most significant case, City of Woodlake v. Logan, the California Court of Appeal held that the statutory voter approval requirement for general taxes was unconstitutional. The California Supreme Court refused to review Woodlake.
On September 28, 1995, the California Supreme Court, on a 5-2 vote, in a decision entitled Santa Clara County Local Transportation Authority v. Guardino (Case No. S036269), “disapproved” Woodlake and held that the voter approval requirements of Proposition 62 are valid. On December 14, 1995, the Supreme Court made minor nonsubstantive changes to its written opinion and denied the petition for rehearing. The decision provides that the voter approval requirements of Proposition 62 for both general and special taxes are valid. The Guardino case fails to say (1) whether the decision is retroactively applicable to general taxes adopted prior to the decision; (2) whether taxpayers have any remedies for refund of taxes paid under a tax ordinance that was not voter approved; (3) what statute of limitations applies to taxes adopted without voter approval prior to Guardino; (4) whether Proposition 62 applies only to new taxes or to tax increases as well.
The Court of Appeals in a December 15, 1997 decision entitled McBearty v. City of Brawley (Case No. D027877) addressed some of these issues. In Brawley, a taxpayer challenged the city’s utility tax that was passed by the city council in 1991 without a vote of the electorate. The Court of Appeals held that (i) a three year statute of limitations applies to challenges to a tax ordinance subject to Proposition 62; and (ii) the statute of limitations did not begin to run until September 1995 when the Guardino case determined that Proposition 62 was constitutional. The effect of the holding in Brawley is that any tax ordinances passed between November 1986 and December 1995 that were not approved by the electorate would be subject to a challenge until December 1998. The court ordered the city to either cease collecting the tax or seek voter approval to continue levying the tax. However, in Howard Jarvis Taxpayers Association v. City of La Habra, decided on June 4, 2001, the California Supreme Court overruled part of McBearty, finding that the three year statute of limitations applicable to such taxes does not run from the date of the Guardino decision, but rather the continued imposition and collection of such tax is an ongoing violation, upon which the limitations period begins with each new collection.
Several questions raised by the Guardino decision remain unresolved. Proposition 62 provides that if a jurisdiction imposes a tax in violation of Proposition 62, the portion of the one percent general ad valorem tax levy allocated to that jurisdiction is reduced by $1 for every $1 in revenue attributable to the improperly imposed tax for each year that such tax is collected. The practical applicability of this provision has not been fully determined. Potential future litigation and legislation may resolve some or all of the issues raised by the Guardino decision.
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41 Neither the Authority nor the City can predict the outcome of any pending or future litigation concerning the validity of Proposition 62, nor can either predict the scope of the Guardino or McBearty decisions discussed above. Proposition 62 could affect the ability of the City to continue the imposition of, or to retain, certain taxes, and restrict the City’s ability to raise revenue.
Proposition 1A
Proposition 1A (“Proposition 1A”), proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, restricts State authority to reduce major local tax revenues such as the tax shifts permitted to take place in Fiscal Years 2004/05 and 2005-06. Proposition 1A provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions.
Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such a shift may not occur more than twice in any ten-year period. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county.
Proposition 1A provides that if the State reduces the vehicle license fee (“VLF”) rate below 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates.
Proposition 22
On November 2, 2010, voters in the State approved Proposition 22. Proposition 22, known as the “Local Taxpayer, Public Safety, and Transportation Protection Act of 2010,” eliminates or reduces the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for state-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues.
Proposition 26
On November 2, 2010, voters in the State also approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a
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42 charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. Neither the City nor the Authority expects provisions of Proposition 26 to materially impede the City’s ability to pay Base Rental Payments when due.
Unitary Property
AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the CDTFA (“Unitary Property”), commencing with the 1988-89 fiscal year, will be allocated as follows: (i) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (ii) if county-wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or benefit of the excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed properties nor a revision of the methods of assessing utilities by the CDTFA. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county.
EL CENTRO REGIONAL MEDICAL CENTER
The El Centro Regional Medical Center provides medical services within the City of El Centro.
The Medical Center is organized and existing under and by virtue of the laws of the State of California, including Article 7 (commencing with Section 37600) of Chapter 5 of Part 2 of Division 3 of Title 4 of the Government Code of the State of California. Currently, for purposes of state audit requirements, the Medical Center’s finances are reported within the Proprietary Funds of the City’s Annual Comprehensive Financial Report. However, the Medical Center operation is separate and apart from the City. The Medical Center has a separate governing board, EIN, employees, location and management structure.
On April 19, 2018, the Authority issued the Medical Center Bonds to refund $50,000,000 of outstanding bonds previously issued for the benefit of the Medical Center and to finance structural modifications to existing buildings to meet future required seismic performance requirements, construct a new Ancillary Services Building, expand the Emergency Department, and upgrade and consolidate heating, ventilation, and air conditioning functions, among other projects. The Medical Center Bonds are outstanding in the aggregate principal amount of $123,825,000 and are non-recourse to the City’s General Fund. The Medical Center Bonds are supported by installment purchase payments that constitute special limited obligations of the City, secured solely by all revenues, income, receipts and money received in any period by the Medical Center (other than donor-restricted gifts, grants, bequests, donations, contributions, and tax revenues). Neither the faith and credit nor the taxing power of the City is pledged to the repayment of the Medical Center Bonds. The Medical Center Bonds do not constitute a debt of the City.
The Medical Center is now experiencing significant financial and operational difficulties. On November 15, 2022, the City Council re-assumed governance of the Medical Center’s Board of Trustees by urgency Ordinance No. 22-08 to help stabilize the Medical Center. The City Council has taken similar
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43 action in the past to assume board-level control when necessary. At the request of the majority bondholder, the Board of Trustees replaced the management of the Medical Center, as described below.
The Medical Center has failed to observe certain covenants with respect to the Medical Center Bonds and has received forbearance/waivers from the majority bondholder. No payment defaults, however, have occurred to date on the Medical Center Bonds. The successor trustee for the Medical Center Bonds, U.S. Bank Trust Company, National Association, is holding $8,094,300 (representing the Medical Center Bonds reserve requirement) in the Series 2018 Bond Reserve Account.
As a result of the financial and operational difficulties at the Medical Center, the majority bondholder of the Medical Center Bonds suggested that Healthcare Management Partners (“HMP”) be retained by the Medical Center. HMP serves in interim and crisis management roles to help guide healthcare providers through periods of crisis or change. HMP has been retained to provide executive guidance to the Medical Center.
[HMP has represented to the Medical Center Board of Trustees that the Medical Center is losing approximately $1-2 million per month and may run out of cash in the first or second quarter of 2023 without outside solutions. Further, HMP estimates that $20-30 million of cash is needed to complete needed capital projects and attract and retain the medical and nursing staffs necessary to maintain existing services or recapture rapidly growing outmigration of services (and declining patient volumes) to San Diego and other markets. HMP is actively working with the City Council/Medical Center Board of Trustees to achieve restructuring solutions.]
[HMP advised the Medical Center Board of Trustees that the Medical Center should file for protection from its creditors, among other actions, to stabilize the financial situation at the Medical Center.
The Medical Center Board of Trustees has not yet made any determination with regard to filing for Chapter 9 protection for the Medical Center under the Bankruptcy Code or any other restructuring solution. Further, the City Attorney has advised the City Council and the Medical Center Board of Trustees there is uncertainty under applicable law regarding whether the Medical Center may even file a petition under Chapter 9 of the Bankruptcy Code independently from the City. The City is not experiencing financial difficulties.]
TAX MATTERS
General
The delivery of the 2023A Bonds is subject to delivery of the opinion of Bond Counsel, to the effect that interest on the 2023A Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the 2023A Bonds (the “Code”), of the owners thereof pursuant to section 103 of the Code, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof. The delivery of the 2023A Bonds is also subject to the delivery of the opinion of Bond Counsel, based upon existing provisions of the laws of the State, that interest on the 2023A Bonds is exempt from personal income taxes of the State. A form of Bond Counsel’s anticipated opinion is included as APPENDIX E – FORM OF OPINION OF BOND COUNSEL. The statutes, regulations, rulings, and court decisions on which such opinion will be based are subject to change.
In rendering the foregoing opinions, Bond Counsel will rely upon the representations and certifications of the Authority and the City made in a certificate of even date with the initial delivery of the 2023A Bonds (the “Tax Certificate”) pertaining to the use, expenditure and investment of the proceeds of
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44 the 2023A Bonds and will assume continuing compliance with the provisions of the Indenture and the Lease by the Authority and the City subsequent to the issuance of the 2023A Bonds. The Indenture, the Lease and the Tax Certificate contain covenants by the Authority and the City with respect to, among other matters, the use of the proceeds of the 2023A Bonds and the facilities and equipment financed or refinanced therewith by persons other than state or local governmental units, the manner in which the proceeds of the 2023A Bonds are to be invested, if required, the calculation and payment to the United States Treasury of any “arbitrage profits” and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the 2023A Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the 2023A Bonds.
Except as described above, Bond Counsel will express no other opinion with respect to any other federal, State or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the 2023A Bonds. Prospective purchasers of the 2023A Bonds should be aware that the ownership of tax-exempt obligations such as the 2023A Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, corporations subject to the alternative minimum tax on adjusted financial statement income, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust (“FASIT”), and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.
Bond Counsel’s opinions are not a guarantee of a result, but represent its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the Authority and the City described above. No ruling has been sought from the Internal Revenue Service (the “Service”) or the State with respect to the matters addressed in the opinions of Bond Counsel, and Bond Counsel’s opinions are not binding on the Service or the State. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations.
If an audit of the 2023A Bonds is commenced, under current procedures, the Service is likely to treat the Authority as the “taxpayer,” and the owners of the 2023A Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the 2023A Bonds, the Authority may have different or conflicting interests from the owners of the 2023A Bonds.
Public awareness of any future audit of the 2023A Bonds could adversely affect the value and liquidity of the 2023A Bonds during the pendency of the audit, regardless of its ultimate outcome.
For taxable years beginning after 2022, the Code imposes a minimum tax of 15 percent of the adjusted financial statement income of certain large corporations, generally consisting of corporations (other than S corporations, regulated investment companies and real estate investment trusts) with more than $1 billion in average annual adjusted financial statement income, determined over a three-year period.
For this purpose, adjusted financial statement income generally consists of the net income or loss of the taxpayer set forth on the taxpayer’s applicable financial statement for the taxable year, subject to various adjustments, but is not reduced for interest earned on tax-exempt obligations, such as the 2023A Bonds.
Prospective purchasers that could be subject to this minimum tax should consult with their own tax advisors regarding the potential impact of owning the 2023A Bonds.
Existing law may change to reduce or eliminate the benefit to owners of the 2023A Bonds of the exclusion of interest on the 2023A Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of
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45 the 2023A Bonds. Prospective purchasers of the 2023A Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law.
Tax Accounting Treatment of Discount and Premium on Certain 2023A Bonds The initial public offering of certain of the 2023A Bonds (the “Discount Bonds”) may be less than the amount payable on such 2023A Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the 2023A Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount, allocable to the holding period of such Discount Bond by the initial purchaser, will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the 2023A Bonds described above. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond taking into account the semiannual compounding of accrued interest at the yield to maturity on such Discount Bond, and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year.
However, such interest may be required to be taken into account in determining the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, “S” corporations with “subchapter C” earnings and profits, corporations subject to the alternative minimum tax on adjusted financial statement income, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal income tax purposes of accrued original issue discount on Discount Bonds and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.
The purchase price of certain 2023A Bonds (the “Premium Bonds”) paid by an owner may be greater than the amount payable on such 2023A Bonds at maturity. An amount equal to the excess of a purchaser’s tax basis in a Premium Bond over the amount payable at maturity constitutes premium to such purchaser. The basis for federal income tax purposes of a Premium Bond in the hands of such purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium that is amortizable each year by a purchaser is determined by using such purchaser’s yield to maturity (or, in some cases with respect to a callable 2023A Bond, the yield based on a call date that results in the lowest yield
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46 on the 2023A Bond). Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds.
LITIGATION
There is no controversy of any nature now pending against the City or the Authority or, to the knowledge of their respective officers threatened, seeking to restrain or enjoin the sale, execution, issuance or delivery of the 2023A Bonds or in any way contesting or affecting the validity of the 2023A Bonds or any proceedings of the City or the Authority taken with respect to the sale, execution, issuance or delivery thereof or the pledge or application of any moneys or security provided for the payment of the 2023A Bonds or the use of the 2023A Bond proceeds or contesting the corporate existence of the City or the Authority, or the title of the officers thereof to their respective offices.
There are currently some lawsuits and claims pending against the City for which the City is either self-insured or insured in varying degrees by commercial insurance, or which in the aggregate, if determined adversely to the City, could have a material adverse impact on the City’s finances in the future. However, the City does not expect any such suits or claims to have a material adverse effect on the City’s ability to make Base Rental Payments under the Lease.
FINANCIAL STATEMENTS
The City’s financial statements for the Fiscal Year ended June 30, 2021, included in APPENDIX B hereto, have been audited by Moss, Levy & Hartzheim LLP (the “Auditor”). The Auditor was not requested to consent to the inclusion of its report in APPENDIX B and it has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in the Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report.
MUNICIPAL ADVISOR
The City has retained NHA Advisors, LLC, as Municipal Advisor in connection with the authorization and delivery of the 2023A Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent municipal advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
RATINGS
S&P Global Ratings (“S&P) has assigned its rating of “__” to the 2023A Bonds. Such rating reflects only the view of S&P. Any explanation of the significance of such ratings may only be obtained from S&P.
The information set forth on such website is not incorporated by reference herein. Generally, a rating agency bases its ratings on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that any rating will continue for any given period of time or that any of them will not be revised downward, suspended or withdrawn entirely by the rating agency, if in the judgment of the rating agency circumstances so warrant. Any such downward revision, suspension or withdrawal of a rating may have an adverse effect on the market price of the 2023A Bonds.
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47 UNDERWRITING
Samuel A. Ramirez & Co., Inc. (the “Underwriter”) has agreed, subject to certain customary conditions precedent to closing, to purchase the 2023A Bonds from the Authority at a price equal to $___________ (which equals the principal amount of the 2023A Bonds, [plus/minus] a [net] original issue [premium/discount] of $___________, and less an underwriting discount of $__________). The Underwriter intends to offer the 2023A Bonds to the public initially at the prices set forth on the inside cover page of this Official Statement, plus accrued interest from the dated date of the 2023A Bonds to their date of delivery, which prices may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the 2023A Bonds to the public. In connection with the offering of the 2023A Bonds, the Underwriter may over allot or effect transactions that stabilize or maintain the market price of the 2023A Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
CONTINUING DISCLOSURE
The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the 2023A Bonds and the Authority will not provide any such information.
The City has covenanted for the benefit of the holders and beneficial owners of the 2023A Bonds pursuant to a Continuing Disclosure Agreement, dated the date of issuance of the 2023A Bonds (the “Continuing Disclosure Agreement”), by and between the City and NHA Advisors, LLC, as Dissemination Agent, to provide certain financial information and operating data relating to the City (the “Annual Report”) no later than March 31 following the end of each fiscal year, commencing with the report for Fiscal Year 2020-21, and to provide notices of the occurrence of certain enumerated events through the EMMA System.
The specific nature of the information to be contained in the Annual Report and the enumerated events is set forth in APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” In connection with the El Centro Financing Authority’s (i) Wastewater Revenue Refunding Bonds, Series 2012-A, the City did not timely file balance sheet information for the enterprise fund for the period covered by the 2016 annual report; (ii) Water Revenue Refunding Bonds, 2014 Series A, the City did not timely file certain financial and operating information or properly link CUSIP numbers to such bond issues for the period covered by the 2016-2020 annual reports; and (iii) Lease Revenue bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build American Bonds), the City did not timely file certain financial and operating information for the period covered by the 2017 annual report. Such filings and linking have since been made by the City.
APPROVAL OF LEGAL PROCEEDINGS
The issuance of the 2023A Bonds is subject to the approving opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel to the Authority, to be delivered in substantially the form set forth in APPENDIX E. Norton Rose Fulbright US LLP in its role as Bond Counsel has undertaken no responsibility to the owners of the 2023A Bonds or any other party for the accuracy, completeness or fairness of this Official Statement or any other offering material related to the 2023A Bonds, and expresses no opinion to the Owners with respect thereto. Certain legal matters also will be passed upon for the City and the Authority by the City Attorney and for the Underwriter by its counsel Kutak Rock LLP, Irvine, California.
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48 EXECUTION AND DELIVERY
The execution and delivery of this Official Statement has been authorized by the Authority and the City.
CITY OF EL CENTRO FINANCING
AUTHORITY
By:
Interim Executive Director
CITY OF EL CENTRO, CALIFORNIA
By:
Interim City Manager
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APPENDIX A
SUPPLEMENTAL INFORMATION – THE CITY OF EL CENTRO AND IMPERIAL COUNTY The following information relating to the City of El Centro, California (the “City”) is provided for informational purposes only. The 2023A Bonds (as defined in the front part of this Official Statement) are payable solely as described in this Official Statement and are not payable or secured by a pledge of the faith and credit or taxing power of the City.
COVID 19 Pandemic
The economic and demographic data contained in this Appendix A are the latest available, but are as of dates and for periods before the economic impact of the COVID 19 pandemic and measures instituted to slow it. Accordingly, they are not indicative of the current financial condition or future prospects of the City, the County or the region or of expected revenues to the General Fund. See “RISK FACTORS – COVID 19 Pandemic” in the forepart of this Official Statement.
General
The City. The City of El Centro, California (the “City”) is the seat of the County of Imperial (the “County”), California. Administrative offices for the U.S. Social Security Administration, the Imperial Irrigation District in addition to the County offices are located in the City.
The City is located approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. The City lies 13 miles north of the City of Mexicali with a population of approximately 1 million, the capital of the State of Baja California, Mexico, and its strategic border location makes it a prime link between the interior of Mexico and the major markets along the West Coast of the United States. The City encompasses approximately 11 square miles and straddles the busy Interstate 8, the major interstate highway linking southern California to its eastern neighbors. As of January 1, 2022, the City had a population of 44,508.
The County. The City is the seat of the County of Imperial (the “County”). The City is located approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona.
The County consists of seven cities and an unincorporated area with a countywide population of approximately 181,697. The County serves as the Gateway to the United States for the City of Mexicali, Mexico, the capital of Baja California. Mexicali has a population in excess of 1,000,000 and a significant number of maquiladoras (A maquiladora is an assembly plant in Mexico, especially one along the border between the United States and Mexico, to which foreign materials and parts are shipped and from which the finished product is returned to the original market).
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Government and Services
The City was incorporated under the Laws of the State of California in 1908. However on November 3, 2009 voters approved Measure G adopting a City Charter. Under the provisions of the charter, the City of El Centro has authority over its own municipal affairs including; bidding and contracting procedures; regulation of parks; libraries; and other facilities; certain fees; imposition of taxes; municipal zoning; municipal utilities and municipal election procedures.
The City operates under a Council-Manager form of Government. The City Council consists of five members elected by the residents of the City. Council terms are four years, elected in November of even-numbered years. Each December, the City Council selects the Mayor from among its members for a one-year term. The Council is elected on an at large non-partisan basis.
Population
The following table shows a historical comparison of the respective populations of the City, the County and the State for the years shown.
Table A-1
CITY OF EL CENTRO, IMPERIAL COUNTY,
AND THE STATE OF CALIFORNIA
Population Comparison(1)
Year
City of
El Centro
Imperial
County
State of
California
2017 45,228 186,664 39,352,398
2018 45,667 188,042 39,519,535
2019 45,667 188,552 39,605,361
2020 45,509 188,422 39,648,938
2021 44,871 179,488 39,303,157
2022 44,508 179,329 39,185,605
(1) As of January 1. Data for 2017-2020 from Table E-4 released May 7, 2021, with 2010 Benchmark; data for 2021 and 2022 from Table E-4 released May 2, 2022, with 2020 Benchmark.
Source: State Department of Finance.
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Employment and Industry
The following table summarizes the annual average civilian labor force, employment and unemployment in the County for the calendar years 2016 through 2020. Economic growth/development is fueled by low-cost land, utilities and labor.
Table A-2
IMPERIAL COUNTY
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
2017 2018 2019 2020 2021
Civilian Labor Force(1) 72,000 71,200 73,800 71,500 69,100 Employment 57,900 57,700 58,400 55,200 57,100
Unemployment 14,200 13,400 15,400 16,300 12,000
Unemployment Rate 19.7% 18.9% 20.9% 22.8% 17.3%
Wage and Salary Employment:(2)
Agriculture 12,300 11,700 11,300 10,400 10,600
Mining, Logging and Construction 1,800 1,800 1,900 1,900 1,900 Manufacturing 1,500 1,600 1,800 2,000 2,100
Wholesale Trade 1,800 1,800 1,800 1,700 1,700
Retail Trade 8,000 8,000 7,900 7,200 7,900
Transportation, Warehousing, Utilities 2,200 2,200 2,200 2,200 2,300 Information 300 300 300 200 200
Finance and Insurance 1,300 1,300 1,200 1,100 1,100
Professional and Business Services 3,100 3,100 3,000 2,700 2,900 Educational and Health Services 8,800 9,200 9,700 9,700 9,700 Leisure and Hospitality 4,400 4,300 4,400 3,400 4,000
Other Services 900 900 900 800 1,000
Federal Government 2,100 2,100 2,100 2,300 2,400
State Government 2,700 2,700 2,800 2,800 2,700
Local Government 13,700 14,100 14,200 13,300 13,400
Total, All Industries (3) 64,900 65,000 65,500 61,700 63,900 _______________________________
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: Labor Division of the California State Employment Development Department, March 2021 Benchmark.
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Major Employers
The following table lists the major employers within the County.
Table A-3
COUNTY OF IMPERIAL
Major Employers – Listed Alphabetically
Employer Name Location Industry
8A Packing LLC El Centro Labor Organizations
Academic Services Imperial University-College Dept/Facility/Office Calipatria State Prison Calipatria Government Offices-State Centinela State Prison Imperial Government Offices-State Central Union High School District El Centro School Districts El Centro Naval Air Base El Centro Federal Government-National Security El Centro Regional Medical Ctr El Centro Hospitals
Imperial County Behavioral El Centro Mental Health Services Imperial County Coroner El Centro Government Offices-County Imperial County Ofc-Edu Fndtn El Centro Educational Associations Imperial County Sheriff El Centro Government Offices-County Imperial Date Gardens Winterhaven Nurserymen
Imperial Irrigation District El Centro Distribution Services Jjall LLC Calexico Labor Contractors
Pioneers Memorial Healthcare Brawley Health Care Management Quechan Casino Resort Felicity Casinos
Spreckels Sugar Co Inc Brawley Sugar Refiners (mfrs)
Target El Centro Department Stores
United States Gypsum Co Imperial Gypsum & Gypsum Products (mfrs) US Border Patrol El Centro Federal Government-Police
Vulcan-Bn Geothermal Power Calipatria Power Plants
Walmart Supercenter Brawley Department Stores
Walmart Supercenter El Centro Department Stores
Walmart Supercenter Calexico Department Stores
Western Mesquite Mines Inc Brawley Mines
Source: Employment Development Department extracted from America’s Labor Market Information System (ALMIS) Employer Database, 2022 1st Edition.
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Commercial Activity
The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City is presented in the following table.
Table A-4
CITY OF EL CENTRO
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Other Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2015 615 809,678 384 175,819
2016 622 808,024 402 177,303
2017 589 845,013 387 183,234
2018 622 898,401 434 194,791
2019 605 937,540 454 184,429
2020 643 841,185 467 157,127
2021 651 1,074,358 457 178,611
Sources: California Department of Tax and Fee Administration – Taxable Sales – Large Cities.
The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the County is presented in the following table.
Table A-5
IMPERIAL COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Number
of Permits
Taxable
Transactions
2012 3,288 2,356,313
2013 3,239 3,661,582
2014 3,266 2,893,261
2015 3,498 2,676,631
2016 3,554 2,481,424
2017 3,444 2,563,117
2018 3,702 2,793,206
2019 3,602 2,764,236
2020 3,846 2,721,031
2021 3,549 3,215,255
Source: California Department of Tax and Fee Administration – Taxable Sales – By County.
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Construction Activity
The following tables show a five year summary of the valuation of building permits issued in the City and the County.
Table A-6
CITY OF EL CENTRO
Building Permit Valuation
2017 2018 2019 2020 2021
Permit Valuation
Single-family dwelling $ 970,407 $ 4,559,430 $ 2,699,566 $7,929,431 $4,459,683 Multi-family 0 6,476,598 5,641,600 6,127,700 6,809,847
Res. Alterations/Additions 1,566,907 1,029,742 965,255 476,150 6,929,421 Total Residential $ 2,537,314 $12,065,770 $ 9,306,421 $4,533,281 $18,198,951 Hotels & Motels -- -- -- -- --
Non-Housekeeping Shelter -- -- -- -- --
Amusement and Recreation -- -- -- -- --
Churches -- -- -- -- --
Industrial & Manufacturing -- -- -- -- --
Parking Garages -- -- -- -- --
Service Stations -- -- -- -- --
Hospitals -- -- 1,475,000 -- --
Offices 12,508,658 134,800 -- -- --
Public Works 35,000 225,000 -- -- --
Schools Education -- 13,000,000 -- -- 2,174,455
Stores, Mercantile &
Warehouses -- 2,542,618 11,576,079 1,176,238 587,000
Other Non-Residential
Buildings 48,000 50,000 7,840 738,562 2,345,832
Structures Other Than
Buildings 1,084,089 1,492,030 1,054,292 1,712,128 2,080,070 Non-Residential Alterations 3,900,790 7,879,703 4,082,458 600,400 3,278,595 Residential Garages 102,166 212,640 308,792 61,425 149,190 Total Nonresidential $17,678,703 $25,536,791 $18,504,461 $4,288,753 $10,615,142 New Dwelling Units
Single Family 7 22 14 28 27
Multiple Family 0 75 75 62 44
Total 7 99 89 90 71
Source: Construction Industry Research Board, Annual Building Permit Summary.
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Table A-7
IMPERIAL COUNTY
Building Permit Valuation
2017 2018 2019 2020 2022
Permit Valuation
New Single-family $36,490,475 $53,710,416 $49,234,937 $56,996,203 $71,015,047 New Multi-family 733,713 10,626,698 36,793,883 7,382,020 6,312,788 Res. Alterations/Additions 5,166,395 5,183,087 4,984,289 3,702,681 9,311,252 Total Residential $42,390,583 $69,520,201 $91,013,109 $68,080,904 $86,639,087 New Commercial $63,056,273 $48,303,730 $20,712,119 $ 3,948,064 $ 4,147,656 New Industrial 1,977,216 160,000 30,000 -- 13,200,000
New Other 12,700,984 29,858,362 18,683,113 28,849,432 31,497,387 Alterations/Additions 94,446,493 73,121,099 23,516,795 8,603,754 11,586,357 Total Nonresidential $172,180,966 $220,963,392 $62,942,027 $41,401,250 $60,431,400 New Dwelling Units
Single Family 191 279 267 319 406
Multiple Family 8 133 394 75 58
Total 199 412 661 394 464
Source: Construction Industry Research Board, Annual Building Permit Summary.
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APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
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C-1
[insert Appendix C]
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D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
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APPENDIX E
FORM OF OPINION OF BOND COUNSEL
[Closing Date]
El Centro Financing Authority
El Centro, California
City of El Centro
El Centro, California
$[Par Amount]
El Centro Financing Authority
Lease Revenue Bonds, 2023 Series A
(Police Station Project)
Ladies and Gentlemen:
We have acted as Bond Counsel to the El Centro Financing Authority (the “Authority”) in connection with the issuance by the Authority of its $[Par Amount] Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “2023A Bonds”). The 2023A Bonds are being issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the “Bond Law”), and pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).
The 2023A Bonds are limited obligations of the Authority secured under the Indenture by a pledge of Revenues and certain other moneys held under the Indenture. The Revenues consist of (i) all Base Rental Payments payable by the City pursuant to the Lease Agreement, dated as of February 1, 2023 (the “Lease”), by and between the Authority, as lessor, and the City, as lessee (including prepayments), (ii) any proceeds of 2023A Bonds deposited with the Trustee and all moneys on deposit in the funds and accounts established under the Indenture, (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments.
The City has leased certain real property and improvements (the “Leased Property”) to the Authority pursuant to the Site and Facility Lease, dated as of February 1, 2023 (the “Site Lease”), by and between the City and the Authority. Pursuant to the Assignment Agreement, dated as of February 1, 2023 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority has assigned to the Trustee, for the benefit of the Owners, certain of the Authority’s rights under the Site Lease and the Lease, including the right to receive Base Rental Payments under the Lease.
As Bond Counsel, we have reviewed relevant portions of the Bond Law, the Indenture, the Site Lease, the Lease, the Assignment Agreement and certifications of the Authority, the City, the Trustee and others, opinions of counsel to the Authority, the City and the Trustee, and such other documents, opinions and instruments as we deemed necessary to render the opinions set forth herein. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.
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Based upon the foregoing, we are of the opinion that:
1. The 2023A Bonds constitute valid and binding limited obligations of the Authority as provided in the Indenture, and are entitled to the benefits of the Indenture.
2. The Indenture has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms. The Indenture creates a valid pledge, to secure the payment of principal of and interest on the 2023A Bonds, of the Revenues and certain other amounts held by the Trustee in certain funds and accounts established pursuant to the Indenture, subject to the provisions of the Indenture permitting the application thereof for other purposes and on the terms and conditions set forth therein.
3. The Lease and Site Lease have been duly and validly authorized, executed and delivered by the Authority and the City and constitute the legally valid and binding obligations of the Authority and the City, enforceable against the Authority and the City in accordance with their terms.
4. The Assignment Agreement has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms.
5. Under existing law, and assuming compliance with the covenants mentioned below after the date hereof, interest on the 2023A Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 as amended to the date hereof (the “Code”) from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals. We are further of the opinion that interest on the 2023A Bonds is exempt from personal income taxes of the State of California under present state law.
The Code imposes certain requirements that must be met subsequent to the issuance and delivery of the 2023A Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the 2023A Bonds to fail to be excluded from the gross income of the owners thereof retroactive to the date of issuance of the 2023A Bonds. Pursuant to the Indenture, the Lease and the Tax Certificate being delivered by the Authority and the City in connection with the issuance of the 2023A Bonds, the Authority and the City are making representations relevant to the determination of, and are undertaking certain covenants regarding or affecting, the exclusion of interest on the 2023A Bonds from the gross income of the owners thereof for federal income tax purposes. In reaching our opinions described in the immediately preceding paragraph, we have assumed the accuracy of and have relied upon such representations and the present and future compliance by the Authority and the City with such covenants. Further, except as stated in the preceding paragraph, we express no opinion as to any federal, state or local tax consequences of the receipt of interest with respect to, or the ownership or disposition of, the 2023A Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the 2023A Bonds, or the interest thereon, if any action is taken with respect to the 2023A Bonds or the proceeds thereof predicated or permitted upon the advice or approval of other counsel. Ownership of tax-exempt obligations such as the 2023A Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits,
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corporations subject to the alternative minimum tax on adjusted financial statement income, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.
The opinions expressed in paragraphs 1, 2, 3 and 4 above are qualified to the extent the enforceability of the 2023A Bonds, the Indenture, the Lease, the Site Lease and the Assignment Agreement may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally or as to the availability of any particular remedy. The enforceability of the 2023A Bonds, the Indenture, the Lease, the Site Lease and the Assignment Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in the State of California.
No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the 2023A Bonds.
Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service or the State of California; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.
Respectfully submitted,
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APPENDIX F
BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that each of the Authority and the City believes to be reliable, but the Authority and the City take no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2023A Bonds, payment of principal, premium, if any, and interest on the 2023A Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2023A Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the 2023A Bonds. The 2023A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2023A Bond will be issued for each annual maturity of the 2023A Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has an S&P Global Ratings rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information set forth on such website is not incorporated herein by reference.
Purchases of 2023A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2023A Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2023A Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2023A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive 2023A Bonds representing their ownership
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interests in 2023A Bonds, except in the event that use of the book-entry system for the 2023A Bonds is discontinued.
To facilitate subsequent transfers, all 2023A Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2023A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the 2023A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2023A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2023A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2023A Bonds, such as prepayments, tenders, defaults, and proposed amendments to the 2023A Bond documents. For example, Beneficial Owners of 2023A Bonds may wish to ascertain that the nominee holding the 2023A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the 2023A Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2023A Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 2023A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the 2023A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority, the City or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, the Authority or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
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A 2023A Bond Owner shall give notice to elect to have its 2023A Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2023A Bonds by causing the Direct Participant to transfer the Participant’s interest in the 2023A Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2023A Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2023A Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered 2023A Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the 2023A Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, 2023A Bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2023A
BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC
PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT
OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2023A BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
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Packet Pg. 292 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023
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Packet Pg. 293 Attachment: Preliminary Official Statement - El Centro - 2023 Police Station Project (5832 : Approval of Issuance of Lease Revenue Bonds, 2023 134264272.1
1 NRF DRAFT – 1/12/22
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of February 1, 2023, is executed and delivered by the City of El Centro, California (the “City”), and NHA Advisors, LLC, as dissemination agent, in connection with the issuance by the El Centro Financing Authority (the “Authority”) of its $_________ aggregate initial principal amount of Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “Bonds”). The Bonds are being issued pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”). The City and the Dissemination Agent covenant and agree as follows:
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below).
Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Dissemination Agent” shall mean NHA Advisors, LLC, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. “EMMA” shall mean the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for Municipal Securities disclosures, maintained on the internet at http://emma.msrb.org. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. “MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the U.S. Securities and Exchange Commission, filings with the MSRB are to be made through the EMMA website. “Official Statement” shall mean the final Official Statement, dated _________, 2023, relating to the Bonds.
“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12 adopted by the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
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Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later March 31 of each year, commencing March 31, 2023 with the report for the 2021-22 fiscal year, provide to the MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b).
(b) Not later than fifteen (15) business days prior to the date specified in subsection (a) above for providing the Annual Report to the MSRB, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the first sentence of this subsection (b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice in a timely manner to the MSRB in substantially the form attached as Exhibit A, or in such other form as prescribed or acceptable to MSRB.
(d) The Dissemination Agent (if other than the City) shall, if and to the extent, the City has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the City certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement, and stating the date it was provided.
Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:
(a) Audited financial statements of the City prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Financial information and operating data contained in the Official Statement presented on an annual basis for the immediately preceding Fiscal Year of the type set forth in Tables 1, 2, 5 and 6 contained in the body of the Official Statement.
Any or all of the items listed above may be included by specific reference to other documents, including the audited financial statements, official statements of debt issues of the City or related public entities, which have been available to the public on the MSRB’s internet website or filed with the U.S.
Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference in the applicable Annual Report.
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3 Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds, which notice shall be given in a timely manner, not in excess of ten (10) business days after the occurrence of such Listed Event:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults, if material;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;
(7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the securities, if material
(11) Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the City; (13) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material;
(15) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material; and
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4 (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties.
The term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. (b) The City shall, in a timely manner not later than nine (9) business days after its occurrence, notify the Dissemination Agent in writing of the occurrence of a Notice Event. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) and shall be accompanied by a Certification. Such notice or Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the City desires to make, contain the written authorization of the City for the Dissemination Agent to disseminate such information, and identify the date the Issuer desires for the Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (c) The Dissemination Agent is under no obligation to notify the City or the Disclosure Representative of an event that may constitute a Notice Event. If the Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within two business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Notice Event, if the City determines that a Notice Event has occurred), instruct the Dissemination Agent that either (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Dissemination Agent is to report the occurrence pursuant to subsection (d) of this Section 5, together with a Certification.
Such Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the City desires to make, contain the written authorization of the City for the Dissemination Agent to disseminate such information, and identify the date the City desires for the Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event).
(d) If the Dissemination Agent has been instructed by the City as prescribed in subsection (b) or (c) of this Section 5 to report the occurrence of a Notice Event, the Dissemination Agent shall promptly file a notice of such occurrence with MSRB.
Section 6. Termination of Reporting Obligation. The City’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).
Section 7. Dissemination Agent.
(a) The City hereby appoints and engages NHA Advisors, LLC as the Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The City may replace the Dissemination Agent with or without cause. If at the time there is no designated Dissemination Agent appointed by the City, the City shall be the Dissemination Agent and undertake or assume its obligations hereunder. Any company succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act. The Dissemination Agent may resign its duties hereunder by giving 30-days written notice to the City.
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Packet Pg. 297 Attachment: Continuing Disclosure Agreement - El Centro 2023 Lease Revenue Bonds - Police Station Project (5832 : Approval of Issuance of 134264272.1
5 (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees agreed to between the Dissemination Agent and the City from time to time and for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, holders or beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City, and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the City, provided the Dissemination Agent shall not be obligated to enter into any amendment increasing or affecting its duties or obligations), and any provision of this Disclosure Agreement may be waived, provided that in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB in the same manner as for a Listed Event under Section 5(b). No amendment to this Agreement which modifies the duties or rights of the Dissemination Agent shall be made without the prior written consent of the Dissemination Agent.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City, or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City, or the Dissemination Agent, as the case may be,
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Packet Pg. 298 Attachment: Continuing Disclosure Agreement - El Centro 2023 Lease Revenue Bonds - Police Station Project (5832 : Approval of Issuance of 134264272.1
6 to comply with its respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City, or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent, and its, officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:
To the City: City of El Centro
1275 West Main Street
El Centro, California 92243
Attention: City Manager
To the Dissemination Agent: NHA Advisors, LLC
4040 Civic Center Drive, Suite 200
San Rafael, California 94903
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank.]
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S-1
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first written above.
CITY OF EL CENTRO
______________________________________
City Manager
NHA ADVISORS, LLC, as Dissemination Agent
______________________________________
Authorized Representative
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Packet Pg. 300 Attachment: Continuing Disclosure Agreement - El Centro 2023 Lease Revenue Bonds - Police Station Project (5832 : Approval of Issuance of 134264272.1
A-1
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING
BOARD OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: El Centro Financing Authority
Name of Bond Issue: $_______ initial principal amount of El Centro Financing Authority Lease Revenue Bonds, 2023 Series A (Police Station Project) Date of Issuance: __________, 2023
NOTICE IS HEREBY GIVEN that the City of El Centro, California (the “City”) has not provided an Annual Report with respect to the above-named Bonds as required by the Indenture, dated as of February 1, 2023, by and between the City and The Bank of New York Mellon Trust Company, N.A., as trustee. The City anticipates that the Annual Report will be filed by _______________________.
Date: __________, 20_ _______________________,
as Dissemination Agent
By:
Title:
cc: City Manager, City of El Centro
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Packet Pg. 301 Attachment: Continuing Disclosure Agreement - El Centro 2023 Lease Revenue Bonds - Police Station Project (5832 : Approval of Issuance of 1 $______
EL CENTRO FINANCING AUTHORITY
LEASE REVENUE BONDS, 2023 SERIES A
(POLICE STATION PROJECT)
BOND PURCHASE AGREEMENT
_________, 2023
El Centro Financing Authority
1275 Main Street
El Centro, California 92243
City of El Centro
1275 Main Street
El Centro, California 92243
Ladies and Gentlemen:
Samuel A. Ramirez & Co., Inc. (the “Underwriter”), hereby offers to enter into this Bond Purchase Agreement with you, the City of El Centro (the “City”) and the El Centro Financing Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Authority’s Lease Revenue Bonds, 2023 Series A (Police Station Project) (the “Bonds”). The Bonds are being issued to: (i) finance the acquisition, construction and improvement of a new police station in the City (ii) fund a debt service reserve for the Bonds, (iii) [fund a portion of interest for the Bonds,] and (iv) pay the related costs of issuing the Bonds. This offer is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter.
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority all (but not less than all) of the $______ aggregate principal amount of the Bonds.
The purchase price for the Bonds shall be $______ (the “Purchase Price”) (being the principal amount of the Bonds, plus a net original issue premium in the amount of $______ and less an Underwriter’s discount in the amount of $______).
The Bonds will be dated the date of delivery thereof and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Indenture and Official Statement herein described. The Bonds will be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement.
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Packet Pg. 302 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 2 2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Authority on January 17, 2023 authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584, et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an Indenture, dated as of February 1, 2023 (the “Indenture”), between the Authority and _________, as trustee (the “Trustee”), and shall be as described in the Indenture.
The Bonds are limited obligations of the Authority payable primarily from and secured by certain base rental payments (the “Base Rental Payments”) to be paid by the City pursuant to a Lease Agreement, dated as of February 1, 2023, between the City and the Authority (the “Lease”), for certain real property and the improvements thereon (the “Leased Property”).
3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated _______, 2023 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Authority, the City, the Underwriter or its legal counsel in accordance with the provisions of Sections 6(j) and 7(j) hereof or otherwise consented to by the Underwriter pursuant to Section 10(b)(v), are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as they deem necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold.
The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and have not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or is currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any.
4. Delivery of Official Statement. If requested by the Underwriter, the Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute
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Packet Pg. 303 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 3 a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Underwriter informs the Authority in writing of a different end of the underwriting period. “End Date” as used herein is that date which is the earlier of:
(a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or
(b) the time when the Official Statement becomes available from the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12) ends.
The Underwriter acknowledges that the “End Date” will be the date of Closing unless the Underwriter otherwise notifies the Authority and the City in writing that the Underwriter still owns some or all of the Bonds.
The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated _____, 2023, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Underwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request.
5. The Closing. At 8:30 A.M., California time, on ______, 2023, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Norton Rose Fulbright US LLP, Los Angeles, California (“Bond Counsel”), or another place to be mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer of immediately available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.”
6. City Representations, Warranties and Covenants. The representations, warranties and covenants provided in this Section 6 are given to best knowledge of the City, without independent investigation and with reliance upon representations of City officials and staff. The City represents, warrants and covenants to the Underwriter that:
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Packet Pg. 304 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 4 (a) The City is a charter city organized and operating pursuant to the laws of the State of California (the “State”) with power and authority to enter into and perform its duties under the Lease, the Continuing Disclosure Agreement, dated the date of Closing (the “Continuing Disclosure Agreement”), by and between the City and _______, as dissemination agent, the Site Lease, dated as of February 1, 2023 (the “Site Lease”), between the City and the Authority, the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”). (b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in a security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents.
(c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against cities in the State.
(d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Lease, or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements
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Packet Pg. 305 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 5 therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Official Statement, nor is there any basis for any such action, suit, proceeding or investigation.
(f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing, the information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect.
(g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. The Underwriter shall be responsible for all costs relating to such qualification of the Bonds under blue sky or similar laws.
(h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the City’s finances, the Leased Property, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official
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Packet Pg. 306 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 6 Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City.
(k) If the information relating to the Leased Property, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect. (l) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Tax Certificate.
(m) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein.
(n) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement.
(o) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal course of its operations, incur any material liabilities, direct or contingent, secured by or payable from the City’s general fund. (p) The City will undertake, pursuant to the Continuing Disclosure Agreement, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Except as disclosed in the Preliminary Official Statement and Official Statement, the City and its related entities have not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years.
(q) The financial statements of, and other financial information regarding the City in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth and the audited financial statements have been prepared in accordance with generally accepted accounting principles applicable to cities.
7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that:
(a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder.
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Packet Pg. 307 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 7 (b) By all necessary official action, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, the Lease, the Site Lease, and the Assignment Agreement, dated as of February 1, 2023 (the “Assignment Agreement”), between the Authority and the Trustee (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied and will at the Closing, be in compliance in all respects, with the terms of the Authority Documents.
(c) The Bonds, when issued in accordance with the Indenture, will be valid and binding limited obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California.
(d) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions thereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents. (e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect:
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Packet Pg. 308 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 8 (i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Lease and to pledge the Base Rental Payments for repayment of the Bonds; (iii) which may result in any material adverse change relating to the financial condition of the Authority;
(iv) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or
(v) challenging the ability of the Authority to sell the Bonds to the Underwriter.
(f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject.
(g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein.
(h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act.
(i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds.
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Packet Pg. 309 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 9 (j) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the Authority will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Lease, as amended from time to time.
(k) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter and Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading.
8. Establishment of Issue Price.
(a) The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. (c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Bond Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has
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Packet Pg. 310 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 10 been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”).
So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(A) the close of the fifth (5th) business day after the sale date; or (B) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that:
(i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it
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Packet Pg. 311 Attachment: BPA - El Centro FA Lease Revenue Bonds 2023 Series A (Police Station Project) (5832 : Approval of Issuance of Lease Revenue 11 have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Authority acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The Authority further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offeringprice rule, if applicable to the Bonds. (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
a. “public” means any person other than an underwriter or a related party;
b. “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public); c. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and