Grover Beach City Council
September 8, 2025

AGENDA

GROVER BEACH CITY COUNCIL

GROVER BEACH CITY HALL - COUNCIL CHAMBER
154 SOUTH EIGHTH STREET

GROVER BEACH, CALIFORNIA
MONDAY, SEPTEMBER 8, 2025, 6:00 PM
Next Resolution No .25-30
Next Ordinance No. 25-05
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting, please contact the City Clerk's Office (805-473-4567) at least 48 hours prior to the meeting to ensure that reasonable arrangements can be made to provide accessibility to the meeting.

CALL TO ORDER

CALL TO ORDER

FLAG SALUTE
ROLL CALL Council Members Kathy McCorry-Driscoll, Jules Tuggle, Clint Weirick, Mayor Pro Tem Robert Robert, and Mayor Kassi Dee

CLOSED SESSION ANNOUNCEMENTS
On Monday, August 25, 2025 at 9:16 p.m. the City Council met in Closed Session regarding the following item:

A. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Initiation of Litigation Pursuant to paragraph (4) of subdivision (d) of section 54956.9 of the Government Code (Deciding Whether to Initiate Litigation) One (1) Case:
(1) Purdue/Sackler National Opioid Settlement
B. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) or (3) of subdivision (d) of Government Code section 54956.9
Two (2) Cases.

C. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Government Code Section 54957
Title: City Manager
Meetings can be viewed on cable Channel 20 in Grover Beach and are live streamed on www.slospan.org. Members of the public may provide public comment via the phone during the meeting by calling (805) 321-6639 (the phone line will open just prior to the start of the meeting at 6:00 PM). Written public comments can be submitted via email to [email protected]. To ensure distribution to the City Council, please submit comments not later than 12:00 p.m. the day of the meeting. All correspondence will be distributed to the City Council, posted on the City’s website, and be made part of the official public record of the meeting. Please note, comments will not be read into the record.

Agenda: Grover Beach City Council Meeting Page 2
Monday, September 8, 2025
Closed Session Announcements: At 10:01 p.m., Mayor Dee reconvened the meeting in open session with all Council Members present, and announced that a Motion was made by Council Member Tuggle to join and enter into Purdue/Sackler National Opioid Settlement. Motion was seconded by Council Member Weirick. The motion carried on the following roll call vote:

AYES: Council Members – McCorry-Driscoll, Tuggle, Weirick, Mayor Pro Tem Robert and Mayor Dee
NOES: Council Members – None
ABSENT: Council Members – None
ABSTAIN: Council Members – None

AGENDA REVIEW
At this time the City Council will review the order of business to be conducted and receive requests for, or make announcements regarding, any change(s) in the order of the day. The Council should adopt the agenda as presented or as revised by motion.

CEREMONIAL CALENDAR

1. Proclamation for National POW/MIA Recognition Day

PRESENTATIONS

2. 3CE Annual Update

PUBLIC COMMUNICATIONS
Any member of the public may address the Council for a period not to exceed three minutes total on any item of interest within the jurisdiction of this Council. The Council will listen to all communications; however, in compliance with the Brown Act, the Council cannot act on, or discuss, items not on the agenda.

CONSENT AGENDA
The following routine items listed below are scheduled for consideration as a group. Recommendations for each item are noted in parentheses. Members of the audience may speak on any item(s) listed on the Consent Agenda. Any Council Member, the City Attorney, or the City Manager may request that an item be withdrawn from the Consent Agenda to allow for full discussion. Items withdrawn from the Consent Agenda will be heard after the rest of the Consent Agenda is approved.

3. Minutes of the City Council Meeting on Monday, August 25, 2025 – City Clerk Sims (Recommended Action: Approve the minutes as submitted or revised.)

VOICE VOTE

4. Introduction and First Reading of an Ordinance to Amend Sections 31.08 and 31.23 of Chapter 31 (Organizations) of Title III (Administration) of the Grover Beach Municipal Code Pertaining to Appointments and Vacancies for the Planning Commission and Parks, Recreation and Beautification Commission; and Resolution Modifying the Composition of the Citizen Oversight Committee for City Revenue Measures into a Citizen Oversight Committee for Transaction and Use Tax Revenue Measures and a Citizen Oversight Committee for Revenue Measure K-14 – Assistant City Manager Eriksson and City Attorney Lomeli
(Recommended Action: 1) Conduct a first reading, by title only, and introduce an ordinance to Amend Sections 31.08 and 31.23 of Chapter 31 (Organizations) of Title III (Administration) of Agenda: Grover Beach City Council Meeting Page 3
Monday, September 8, 2025
the Grover Beach Municipal Code (GBMC) pertaining to appointments and vacancies for the Planning Commission and Parks, Recreation and Beautification Commission; and 2) Adopt a resolution to modify the composition of the Citizen Oversight Committee for City Revenue Measures into two separate advisory bodies; a five-member Oversight Committee for Transaction and Use Tax Revenue Measures and a three-member Oversight Committee for Revenue Measure K-14; and 3) Schedule a hearing at the next regular meeting to provide a second reading and adopt the ordinance.)

ROLL CALL VOTE

PUBLIC HEARING
None

REGULAR BUSINESS

5. Resolution to Authorize Execution and Delivery of Wastewater Infrastructure Financing Installment Purchase Contract – Assistant City Manager Eriksson (Recommended Action: Adopt a Resolution authorizing the execution and delivery by the City of an Installment Purchase Contract and Conveyance Agreement for wastewater infrastructure financing along with other necessary documents and related actions for the $5 million private placement financing.)

ROLL CALL VOTE

6. Water System Update – City Manager Bronson and Public Works Director/City Engineer Ray (Recommended Action: Receive a report on the status of the City’s water system including water infrastructure needs, water supply conditions and Water Enterprise Fund financial issues and provide direction to staff regarding a proposed water supply alternatives study.)

COUNCIL COMMITTEE REPORTS
This item gives the Mayor and Council Members the opportunity to present reports to the other members regarding committees, commissions, boards, or special projects on which they may be participating.

SLO Council of Governments/SLO Regional Transit Authority Kassi Dee (Alt: Robert Robert) (SLOCOG / SLORTA)
South County Transit Committee Kassi Dee (Alt: Robert Robert) South SLO County Sanitation District (SSLOCSD) Kassi Dee (Alt: Clint Weirick) Central Coast Community Energy (3CE) Kathy McCorry-Driscoll (Alt: N/A) REACH Kathy McCorry-Driscoll (Alt: Robert Robert)
Visit SLO CAL Advisory Committee Kathy McCorry-Driscoll (Alt: Robert Robert) Air Pollution Control District (APCD) Robert Robert (Alt: Kassi Dee) Integrated Waste Management Authority (IWMA) Robert Robert (Alt: Kathy McCorry-Driscoll) Homeless Services Oversight Council (HSOC) Jules Tuggle (Alt: Clint Weirick) SLO County Water Resources Advisory Committee (WRAC) Jules Tuggle (Alt: Robert Robert) South County Chambers of Commerce Jules Tuggle (Alt: Robert Robert) Zone Three Advisory Committee Jules Tuggle (Alt: Robert Robert) California Joint Powers Insurance Authority (CJPIA) Clint Weirick (Alt: Kathy McCorry-Driscoll) Community Action Partnership of San Luis Obispo County Clint Weirick (Alt: Kassi Dee) (CAPSLO)
Five Cities Fire Joint Powers Authority Clint Weirick and Kassi Dee Agenda: Grover Beach City Council Meeting Page 4
Monday, September 8, 2025

COUNCIL COMMUNICATIONS
This item gives individual Council Members the opportunity to seek consensus for scheduling a specific item on a future agenda, authorizing staff time to provide background information and prepare a staff report for a future agenda, or to comment on Council business, City operations, projects or other items of community interest.

CITY MANAGER’S REPORTS AND COMMENTS

CLOSED SESSION
It is the intention of the City Council to meet in Closed Session concerning the following item:

A. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Initiation of Litigation Pursuant to paragraph (4) of subdivision (d) of section 54956.9 of the Government Code (Deciding Whether to Initiate Litigation) One (1) Case:

Alvogen Opioid Settlement
B. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) or (3) of subdivision (d) of Government Code section 54956.9
Two (2) Cases.

ADJOURNMENT
* * * * *
Per Resolution No. 17-21, the public portion of City Council meetings will be scheduled to start at 6:00 p.m. and conclude no later than 11:00 p.m. Any open session items remaining on the agenda at 11:00 p.m. that have not been discussed or considered by the City Council will be continued to an adjourned meeting of the City Council (scheduled before the next regular meeting). However, the City Council may choose to continue the meeting past 11:00 p.m. upon a proper motion and a 4/5ths vote in favor of such an action.
* * * * *
Staff reports or other written materials relating to each item of business referred to on this agenda are available from the City website www.groverbeach.org and on file in the City Clerk’s Office. A public counter copy is available for public inspection and reproduction during normal business hours at City Hall, 154 South 8th Street, Grover Beach, CA. Related materials submitted after distribution of the agenda packet are available in the City Clerk's Office during normal business hours. If you have questions regarding any agenda item, please contact the appropriate City Department. Any writings or documents regarding any item on this agenda, not exempt from public disclosure, provided to a majority of the City Council and distributed subsequent to distribution of the agenda packet will be made available for public inspection in the City Clerk’s Office during normal business hours. * * * * *
Note: This agenda was prepared and posted pursuant to Government Code Section 54954.2. This agenda is subject to amendment up to 72 hours prior to the date and time set for the meeting. Please refer to the agenda posted at City Hall for any revisions or call the City Clerk’s Office at (805) 473-4567 for more information.
* * * * *
The agenda and staff reports are also available on the City’s website: www.groverbeach.org

CITY OF GROVER BEACH

POLICIES AND PROCEDURES FOR CONDUCT AND DECORUM AT COUNCIL MEETINGS (Pursuant to Resolution No. 07-44, adopted 04-16-07, revised 02-18-2020) The City Council and staff welcomes and encourages civic participation and debate on issues. The Council values the public’s opinion and in every Council meeting invite and encourage the public to address the Council on any matter of interest. The Council adopted these policies and procedures for appropriate conduct and decorum at Council meetings and establish guidance for public participation during Council meetings.

These policies will foster and provide greater clarity to preserve the intent of open government and maintain a positive environment for public input and City Council decision-making.

1.0 DECORUM AND ORDER – IN GENERAL

1.1 The presiding officer is responsible for the maintenance of order and decorum at all times.

1.2 The presiding officer shall determine all points of order subject to the right of any Council member to appeal to the City Council by majority vote. If any appeal is taken, the question shall be “Shall the decision of the presiding officer be sustained” in which event a majority vote of the Council shall govern and conclusively determine such question of order.

1.3 All Council members, staff members and members of the public should speak respectfully and avoid the use of profanity, vulgarity and slanderous comments. Recognizing that the First Amendment precludes the City Council from prohibiting speakers from speaking based upon the content of their speech, the presiding officer shall use their best efforts, short of enforcement action, to remind and encourage all participating in the meeting to keep their speech respectful towards others and within bounds appropriate for children and persons of sensitivity toward course language as a courtesy to others present or otherwise viewing Council meetings.

2.0 DECORUM AND ORDER – COUNCIL MEMBERS

2.1 Manner of Speaking.

Any Council member desiring to speak shall first address the presiding officer. Upon recognition by the presiding officer, the Council member shall speak only to the question under debate.

U2.1(a) Questioning Staff.

A Council member desiring to question the staff should address his question to the City Manager, or, in appropriate cases, the City Clerk or City Attorney, who shall be entitled either to answer the inquiry or to designate some staff member for that purpose. Such a designation may be made at the time of any staff presentation or on the agenda listing for the item.

U2.1(b) Interruptions.

Once recognized, a Council member shall not be interrupted while speaking unless called to order by the presiding officer; unless a point of order is raised by another Council member, or unless the speaker chooses to yield to questions from another Council member.

3.0 DECORUM AND ORDER – STAFF

3.1 City Manager Responsibilities
The City Manager is responsible for ensuring that members of the administrative staff observe the rules of decorum and order set forth in this Policy.

3.2 AAddressing the City Council
Any administrative staff member desiring to address the City Council or members of the public shall first be recognized by the presiding officer. All remarks shall be addressed to the presiding officer and not to any individual Council Member or member of the public. Administrative staff members shall accord the utmost courtesy to the City Council, other administrative staff members and the public.

4.0 DECORUM AND ORDER – MEMBERS OF THE PUBLIC

4.1 AAddressing the City Council
Any member of the public desiring to address the City Council or members of the public shall first be recognized by the presiding officer at the appropriate place on the agenda. All remarks shall be addressed to the presiding officer and not to any individual Council Member, City Manager, City Attorney or member of the administrative staff or member of the public.

4.2 Time Limitation for Addressing the City Council
Public comment when addressing the City Council shall be generally limited to three (3) minutes per speaker. Depending on the extent of the agenda and the number of persons desiring to speak on an issue, the presiding officer may, at the beginning of the hearing, set a different time limit for each speaker. Any person may speak for a longer period of time upon approval from the presiding officer, when deemed necessary, for instance when a person is speaking on behalf of a group or has a graphic or slide presentation requiring more time.

4.3 Failure to Yield, Disruptions
Any person who refuses to relinquish the floor after their allotted time or while attending the City Council meeting engages in conduct or speech which disrupts the business of the meeting shall be brought to order and/or removed from the room if the sergeant-at-arms is so directed by the presiding officer.

Disruptive remarks from the audience, stamping of feet, clapping, whistles, yells and similar demonstrations shall not be permitted by the presiding officer who may direct the sergeant-at-arms to remove such offenders from the room.

4.4 Prosecution
Aggravated cases shall be prosecuted on appropriate complaint signed by the presiding officer.

5.0 ENFORCEMENT OF DECORUM

5.1 The Chief of Police or his designee shall be the ex-officio sergeant-at-arms of the City Council. The sergeant-at-arms shall carry out all legal and valid orders and instructions given by the presiding officer for the purpose of maintaining order and decorum in the Council Chamber. Upon instructions from the presiding officer, it shall be the duty of the sergeant-at-arms to remove any disorderly person from the Council Chambers or place the disorderly person under arrest or both.

5.2 As set forth in Government Code Section 54957.9, in the event that any meeting is willfully interrupted by a person or group of persons so as to render the orderly conduct of such meeting unfeasible or impedes the ability of the Council to hold the meeting, and order cannot be restored by the removal of individuals who are willfully interrupting the meeting, the presiding officer may order the meeting room cleared and continue in session. Only matters appearing on the agenda may be considered in such a session. Duly accredited representatives of the press or other news media, except those participating in the disturbance, shall be allowed to attend any session held pursuant to this Section. Nothing in this Section shall prohibit the City Council from establishing a procedure for readmitting an individual or individuals not responsible for willfully disturbing the orderly conduct of the meeting.

No Documents for this Agenda Item
Proclamation for National POW/MIA Recognition Day
Agenda Item No. 1
Placement: Ceremonial Meeting
Date: September 8, 2025
3CE Annual Update
City of Grover Beach
September 8, 2025
1 Agenda Item No. 2
Placement: Presentation Meeting
Date: September 8, 2025
Together,
Power for Good
2 2024 Energy Highlights
Sourced 409 Megawatts
of clean & renewable energy in 2024, enough to power
350,850 households with renewable energy.

Sourcing Renewable Energy
avoided more than 445,000 metric tons of CO2,the
equivalent of taking 105,911 gasoline-powered passenger vehicles off the road for a year.
3 Renewable Energy Progress Megawatts
(Oct.) 4
• Balances intermittent renewables
• Supports stability
• Reduces reliance on fossil fuels
• Drives affordability
• Empowers customers
Battery Energy Storage Systems
Support the Renewable Transition
Supply Trend September 2022
• Labor Day Weekend
2022
• Flex Alert
• Text message from
Governor's Office
6 Supply Trend July 2024
• Independence Day
holiday weekend
2024
7 Utility Scale Battery Safety
8 Our Energy Future
New Renewable Energy Projects
9 Willow Rock Energy Storage Center
● 200 MW Advanced Compressed Air Energy Storage
Aratina Solar + Storage
● 120 MW to power 90,000 homes
Atlas Solar + Storage
● 150 MW to power 105,100 homes
Victory Pass Solar + Storage – ONLINE
● 100 MW to power 68,000 homes
Community Engagement
• Ongoing outreach through events, webinars, and
workshops
• Added bilingual staff and expanded translated
materials
• Adopted Underserved Communities Action Plan
• Increased access with interpreters and bilingual
promotion
10 Community Programs
Up to
$4,000 (EV)
Up to
$100,000 (Charger)
Electrify Your
Ride
Electrify
Your Home*
$2,000-$4,000
per unit
(+$1,000)
Income-Qualified/Disaster
Rebuild
New Construction
Electrification
Program
$5,000
per ADU
$3,000
per Affordable Unit
$2,000
per Market Rate Unit
$15,000
per SFH Disaster Rebuild
Agricultural
Electrification
Program
50% up to $10,000
Tier 1 Equipment
50% up to $50,000
Tier 2 Equipment
(+$5,000-$25,000)
Income-Qualified Small
Businesses
Residential
Battery Rebate
Program
Up to
$13,000
$300 per kWh of Battery
Storage, up to 26 kWh
11 *Electrify Your Home Program on pause until October 2025.

Member Agency Programs
No-Cost Technical
Assistance Program
Plan Your
Fleet
Electric Bus
Program
50% up to
$200,000
per E Bus
+$50,000
Per additional E Bus
up to $400,000
Charge Your
Fleet
Up to
$150,000
Electrify
Your Fleet
Up to
$150,000
Reach Codes
Program
No-Cost Technical
Assistance Program
12 Community Investment
Rebates & Incentives
City of Grover Beach 3CE Investment:
• $ 10,000 – Electrify Your Home
• $ 206,538 – Electrify Your Ride
• $ 5,000 – New Construction Electrification Program
• $ 12,000 – Residential Battery Rebate Program
City of Pismo Beach 3CE Investment:
• $ 12,685 – Electrify Your Home
• $ 317,369 – Electrify Your Ride
• $ 189,500 – New Construction Electrification Program
• $ 37,300 – Residential Battery Rebate Program
13 Legislative Update
• EV and Home Energy Tax Credits
• Federal Taxes and & Tax Credits
• Resource Adequacy Slice of Day
• Pathways Initiative (SB 540)
14 Thank You!
Contact Us:
• Community Relations Manager: Spencer Brandt
([email protected])
• Senior Advisor for Policy and Legislative Affairs: Das Williams ([email protected])
Learn more & apply for programs at 3Cenergy.org
15 Agenda Item No. 3
Placement: Consent
Meeting Date: September 8, 2025

MINUTES

CITY COUNCIL MEETING
MONDAY, AUGUST 25, 2025
CALL TO ORDER Mayor Dee called the meeting to order at 6:00 p.m. in the City Hall Council Chamber, 154 South Eighth Street, Grover Beach, California.

FLAG SALUTE The flag salute was led by everyone in attendance.

ROLL CALL
City Council: Council Members Kathy McCorry-Driscoll, Jules Tuggle, Clint Weirick, Mayor Pro Tem Robert Robert, and Mayor Kassi Dee were present.

City Staff: City Manager Matthew Bronson, Assistant City Manager Kristin Ericksson, City Attorney Rob Lomeli, City Clerk Wendi Sims, Community Development Director Megan Martin, Public Works Director/City Engineer Greg Ray, Police Chief Jim Munro, Administrative Services Finance Manager Micheal Flores and Five Cities Fire Authority Chief Scott Hallett were also present.

CLOSED SESSION ANNOUNCEMENTS
On Monday, July 28, 2025 at 7:28 p.m. the City Council met in Closed Session regarding the following items:

A. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) or (3) of subdivision (d) of Government Code section 54956.9
Two (2) Cases.

Closed Session Announcements: At 8:00 p.m., Mayor Dee reconvened the meeting in open session with all Council Members present and announced there were no reportable actions taken during Closed Session.

AGENDA REVIEW
Action: Upon unanimous consensus, the Council adopted the agenda as presented.

CEREMONIAL CALENDAR
None.

PRESENTATIONS

1. Citizen Recognition for Bravery – South 14th Street Fire was read by Council Member McCorry-Driscoll and Five Cities Fire Chief Hallet presented the award to Corey and Jackie Clendenen.

2. Certificate of Achievement for Excellence in Financial Reporting presented by Finance Manager Flores.

Minutes: City Council Meeting Page 2
Monday, August 25, 2025
PUBLIC COMMUNICATIONS The Mayor opened the floor to any member of the public for comment on items of interest which were within the jurisdiction of the City Council, but were not listed on the agenda.
• Junaita Viscariello
• Pamela Storton
• Brenda Auer
• Elizabeth Doukas
• Rosco Doss
• James Prange
• Kevin and Maria Woolley
• Elmer Dale
• Randall Myrick
• Loren Westphal
• County Supervisor Dawn Ortiz-Legg
• Sandy Freis
• Krista Jeffries
There being no further public comments received, the Mayor closed public comment.

CONSENT AGENDA
Prior to consideration of the Consent Agenda, Mayor Dee opened public comment. • Joanna Rubba
• Brenda Auer
• Roscoe Doss
• Elizabeth Doukas
• Debbie Peterson
• Sharon Hight
• Loren Westphal
• David Swift
There being no further public comments received, the Mayor closed public comment.

It was motioned by Council Member Weirick and seconded by Council Member Tuggle to approve Consent Agenda Item No. 3, 4, 5, 6, 7, 8, 9, 10, and 11 as recommended. The motion carried on the following roll call vote:

AYES: Council Members – Tuggle, McCorry-Driscoll, Weirick, Mayor Pro Tem Robert and Mayor Dee
NOES: Council Members – None
ABSENT: Council Members – None.

ABSTAIN: Council Members – None

3. Treasurer’s Report for the Period of July 1, through July 31, 2025 Action: Approved the Treasurer’s Reports as submitted.

Minutes: City Council Meeting Page 3
Monday, August 25, 2025

4. Treasurer’s Report for the 2022 Streets Bond Account - $10,000,000 for the Period of July 1, through July 31, 2025
Action: Approved the Treasurer’s Reports as submitted.

5. Minutes of the City Council Meeting on Monday, July 28, 2025 Action: Approved the minutes as submitted.

6. Second Reading and Adoption of an Ordinance Amending the Grover Beach Municipal Code Article IX (Development Code); and Adoption of a Resolution Amending the Local Coastal Program
Action: Conducted the second reading and adopted Ordinance No. 25-03, amending the Grover Beach Municipal Code Article IX (Development Code) and adopted Resolution No. 25-27 to amend the Local Coastal Program by revising Chapter 2 (Zones and Allowable Land Uses), Section 3.10.020 (Fences and Walls), Section 3.10.030 (Height Limits and Exceptions), new Section 3.10.062 (Edge Conditions), amendments to Sections 3.10.065 (Screening), 3.10.080 (Upper Story Open Spaces), 4.10.030 (Accessory Structures),

5.10.030 (General Provisions), Chapter 6 (Procedures), 8.20.060 (Review Authority for Subdivision Decisions), new Section 8.170 (Urban Lot Subdivisions), and amendments to Chapter 9 (Definitions).

Ordinance No. 25-03: A Ordinance of the City Council of the City of Grover Beach, California, Adopting an Amendment to Article IX (Development Code) of the Grover Beach Municipal Code Including Amendments to Chapter 2 (Zones And Allowable Land Uses), Sections 3.10.020 (Fences And Walls), Section 3.10.030 (Height Limits And Exceptions), New Section 3.10.062 (Edge Conditions), Amendments to Sections 3.10.065 (Screening),

3.10.080 (Upper Story Open Spaces), 4.10.030 (Accessory Structures), 5.10.030 (General Provisions), Chapter 6 (Procedures), 8.20.060 (Review Authority for Subdivision Decisions), New Section 8.170 (Urban Lot Subdivisions), and Amendments to Chapter 9 (Definitions).

Resolution No. 25-27: A Resolution of the City Council of the City of Grover Beach, California, Authorizing and Directing the Community Development Director to Submit the Amended Local Coastal Program Amendment Associated with Ordinance No. 25-03 to the California Coastal Commission for Final Certification.

7. Second Reading and Adoption of an Ordinance Amending the Grover Beach Municipal Code Article IX (Development Code), and Adoption of a Resolution Amending the Local Coastal Program with revisions to Chapter 4, Section

4.10.015 (Accessory Dwelling Units (ADU)) to align with recent changes in State ADU Law requirements
Action: Conducted the second reading and adopted Ordinance No. 25-04, amending the Grover Beach Municipal Code Article IX (Development Code), and adopedt Resolution No. 25-28 to amend the Local Coastal Program by revising Chapter 4, Section 4.10.015 (Accessory Dwelling Units (ADU).

Ordinance No. 25-04: An Ordinance of the City Council of the City of Grover Beach, California, Adopting an Amendment to Article IX (Development Code) of the Grover Beach Municipal Code to Repeal and Replace Chapter 4 Section 4.10.015 (Accessory Dwelling Units), The Project also Includes a Local Coastal Program Amendment.

Minutes: City Council Meeting Page 4
Monday, August 25, 2025
Resolution No. 25-28: A Resolution of the City Council of the City of Grover Beach, California, Authorizing and Directing the Community Development Director to Submit the Amended Local Coastal Program Amendment Associated with Ordinance No. 25-04 to the California Coastal Commission for Final Certification

8. Selection of Voting Delegate and Alternate for the 2025 League of California Cities Annual Conference
Action: Selected Council Member Weirick to serve as delegate and Mayor Dee to serve as alternate for the upcoming annual business meeting to be held at the League of California Cities Annual Conference.

9. Appropriation of Urban Area Apportionment (USHA) funds to the West Grand Avenue Streetscape Project (CIP 2287)
Action: Adopted Resolution No. 25-29 to approve the appropriation of Urban Area Apportionment (USHA) grant funds to the West Grand Avenue Streetscape Project (CIP 2287).

Resolution No. 25-29: A Resolution of the City Council of the City of Grover Beach, California, Approving the Appropriation of Urban Area Apportionment (USHA) Funds to the West Grand Avenue Streetscape Project (CIP 2287).

10. Purchase of Public Works Dump Trunk
Action: Approved the purchase of a replacement dump truck from Central Coast Truck Center in the amount of $168,806.63; and authorized the City Manager to execute a contract for the purchase.

11. Introduction and First Reading of an Ordinance to Approve the Reorganization, Compilation, Renumbering, Amendment, Repeal, Restatement, and Codification of Existing Ordinances and Adopting a New Municipal Code
Action: 1) Conducted the first reading, by title only, and introduced an Ordinance to approve Reorganization, Compilation, Renumbering, Amendment, Repeal, Restatement and Codification of the existing Ordinances and Adopting a New Municipal Code; 2) Scheduled a Public Hearing for a second reading and adoption at the next regularly scheduled City Council Meeting.

PUBLIC HEARINGS
None.

RECESS: Mayor Dee requested a recess; upon consensus of the City Council the meeting recessed at 7:23 p.m.

RECONVENED: At 7:33 p.m. the meeting was reconvened with all the members of Council present.

REGULAR BUSINESS

12. Homelessness Response Update
Mayor Dee read the title of the foregoing item and deferred to staff for a report.

City Manager Bronson and Police Chief Munro presented a PowerPoint presentation discussing the homelessness response update. With additional comments by 5CHC Minutes: City Council Meeting Page 5
Monday, August 25, 2025
Assistant Director Devin McQuade; Deputy Director of SLO County Social Services Department Linda Belch and County Supervisor Dawn Ortiz-Legg.

Mayor Dee opened and invited public comments on this matter. There being no public comments received, the Mayor Closed the public comment.

Action: City Council received an update on the City’s response to homelessness including implementation of camping ordinance, partnership with the 5Cities Homeless Coalition on temporary emergency housing facilities, and future challenges affecting homelessness response; and provided direction to staff regarding a potential change in the City’s camping ordinance.

13. Subsea Transoceanic Cables Update
Mayor Dee read the title of the foregoing item and deferred to staff for a report.

City Manager Bronson introduced Chris Brungartdt, President of RTI Solutions who presented a PowerPoint presentation discussing the Subsea Transoceanic Cables update.

Mayor Dee opened and invited public comment on this matter. • Lauren Westphal
• Brenda Auer
• Debbie Peterson
• County Supervisor Dawn Ortiz-Legg
There being no further public comments received, the Mayor Closed the public comment.

Action: City Council received an update on the installation and operation of subsea transoceanic cables in Grover Beach and the benefits of these cables from a revenue and economic development perspective.

14. FY 2024-25 Year-End Council Goals Implementation Report Mayor Dee read the title of the foregoing item and deferred to staff for a report.

Assistant City Manager Eriksson presented PowerPoint presentation discussing the FY 2024-25 Year-End Council Goals Implementation report.

Mayor Dee opened and invited public comment on this matter. There being no public comments received, the Mayor Closed the public comment.

Action: City Council receive a report on the year-end implementation status of the Council Goals in FY 2024-25.

Minutes: City Council Meeting Page 6
Monday, August 25, 2025

COUNCIL COMMITTEE REPORTS
A. Council Member Weirick reported on the Community Action Partnerships of San Luis Obispo County (CAPSLO) meeting.
.

B. Mayor Pro Tem reported his attendance at the Integrated Waste Management Authority (IWMA) Meeting.

C. Mayor Dee reported on the South SLO Council of Governments (SLOCOG) meeting and mentioned she attended with the SLOCOG staff the Coast Rail Coordinating Council meeting in Los Angeles.

COUNCIL COMMUNICATIONS
Mayor Dee referred to City Manager Bronson to respond to the questions from the public comment regarding the Central Blue Project. City Council meeting on September 8th will have a Water Update. She also mentioned she attended the entire 2-day Stone Soup Festival.

Council Member McCorry-Driscoll stated she attended the Newly Elected Officials Academy.

Council Member Tuggle discussed attending Spoon Trades 10th Anniversary Celebration.

Council Member Weirick mentioned attending the last summer concert, and the Stone Soup Festival. He also requested Council consideration for a future agenda item regarding Community Engagement strategies for proactive communication above and beyond State required and legally required noticing in which he received concurrence with Council.

Mayor Pro Tem Robert mentioned the EcoClub 5 Cities was honored to attend the Pismo Beach Rotary zero waste event and Stone Soup Festival.

CITY MANAGER'S REPORTS AND COMMENTS
City Manager Bronson reiterated Stone Soup being a great Community event. He mentioned the 3 upcoming events; Movie Night on September 5th showing Minecraft at 16th Street Park at 6:00 pm; Dune Run on Sunday, September 14th at 9:00am at the Beach Plaza at the end of West Grand Avenue and the first ever West Grand Block Party on Saturday, September 20th from 12:00 pm to 3:00 pm on West Grand between 5th and 7th Streets.

CITY ATTORNEY’S REPORTS AND COMMENTS
City Attorney Lomeli had no comments

CLOSED SESSION
City Attorney Lomeli read the Closed session items into the record.

It is the intention of the City Council to meet in Closed Session concerning the following item:

Minutes: City Council Meeting Page 7
Monday, August 25, 2025
A. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Initiation of Litigation Pursuant to paragraph (4) of subdivision (d) of section 54956.9 of the Government Code (Deciding Whether to Initiate Litigation) One (1) Case:
(1) Purdue/Sackler National Opioid Settlement
B. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) or (3) of subdivision (d) of Government Code section 54956.9
Two (2) Cases.

C. PUBLIC EMPLOYEE PREFORMANCE EVALUATION
Government Code Section 54957
Title: City Manager
Mayor Dee invited public comment on this matter.
• Brenda Auer
• Loren Westphal
• Debbie Peterson
No additional comments were received at this time and the Mayor closed public comment.

At 9:16 p.m., the Council met in Closed Session regarding the items above.

Closed Session Announcements: At 10:01 p.m., Mayor Dee reconvened the meeting in open session with all Council Members present and announced the reportable actions taken during Closed Session. Motion made by Council Member Tuggle and seconded by Council Member Weirick to join and enter the Purdue/Sackler National Opioid Settlement. The motion carried on the following roll call vote:

AYES: Council Members – Tuggle, McCorry-Driscoll, Weirick, Mayor Pro Tem Robert and Mayor Dee
NOES: Council Members – None
ABSENT: Council Members – None.

ABSTAIN: Council Members – None

ADJOURNMENT
There being no further business to come before the City Council, Mayor Dee adjourned the meeting at 8:02 p.m.
_____________________________

KASSI DEE, MAYOR
Attest:
______________________________

WENDI SIMS, CITY CLERK
(Approved at CC Mtg ______)

CITY OF GROVER BEACH

CITY COUNCIL STAFF REPORT
Agenda Item No. 4
Placement: Consent
Meeting Date: September 8, 2025
TO: Honorable Mayor and City Council
FROM: Matthew Bronson, City Manager
PREPARED BY: Kristin Eriksson, Assistant City Manager
Robert Lomeli, City Attorney
SUBJECT: Introduction and First Reading of an Ordinance to Amend Sections

31.08 and 31.23 of Chapter 31 (Organizations) of Title III (Administration) of the Grover Beach Municipal Code Pertaining to Appointments and Vacancies for the Planning Commission and Parks, Recreation and Beautification Commission; and Resolution Modifying the Composition of the Citizen Oversight Committee for City Revenue Measures into a Citizen Oversight Committee for Transaction and Use Tax Revenue Measures and a Citizen Oversight Committee for Revenue Measure K-14

RECOMMENDATION
1) Conduct a first reading, by title only, and introduce an ordinance to Amend Sections

31.08 and 31.23 of Chapter 31 (Organizations) of Title III (Administration) of the Grover Beach Municipal Code (GBMC) pertaining to appointments and vacancies for the Planning Commission and Parks, Recreation and Beautification Commission; and 2) Adopt a resolution to modify the composition of the Citizen Oversight Committee for City Revenue Measures into two separate advisory bodies; a five-member Oversight Committee for Transaction and Use Tax Revenue Measures and a three-member Oversight Committee for Revenue Measure K-14; and 3) Schedule a hearing at the next regular meeting to provide a second reading and adopt the ordinance.

BACKGROUND
The City currently has three advisory bodies established by the City Council: Planning Commission, Parks, Recreation and Beautification Commission and Citizen Oversight Committee for City Revenue Measures. The Planning Commission is authorized to grant or deny land use applications submitted to the City along with reviewing and making recommendations to the Council on topics related to the City’s General Plan. The Parks, Recreation and Beautification Commission provides recommendations to the Council on issues involving parks, recreation, Citysponsored special events and beautification efforts. The Citizen Oversight Committee reviews the City’s annual report on sales tax and Measure K-14 revenues and expenditures.

Advisory Body Selection Process
The Planning Commission and Parks, Recreation and Beautification Commission are comprised of five members who are appointed by the Mayor with the Council’s approval as shown in Attachment 1 (Grover Beach Municipal Code (GBMC) Title III, Chapter 31, §§31.02, 31.08 31.20 and 31.23; Resolutions 19-44 and 20-47). In practice, the City accepts applications from Staff Report: Intro to Advisory Bodies Ordinance Page 2 September 8, 2025
interested qualified electors when there is a vacancy and the Mayor convenes an interview panel of their choosing which generally includes an existing member of the advisory body and a Council Member. The Mayor then selects one or more qualified applicant(s) for the vacant Commission seat(s) and the Council is subsequently asked to approve the Mayor’s selection(s) at the next regular Council meeting. This process is unique among cities in the county as several cities have their full Council interview applicants and appoint advisory body members in open session.

On March 10, 2025, staff brought forward a review of the City’s advisory body selection process to receive Council input and direction on whether to continue or modify the City’s current process.

The Council directed staff to return with an ordinance that amends the selection process to receive applications for vacancies in advisory bodies and conduct public interviews at a Council meeting with selection to fill the vacant seat(s) made by a majority vote of the full Council. The ordinance shown in Attachment 2 makes the necessary changes to the GBMC to implement this new selection process. Pending Council’s approval of the first reading and introduction of this Ordinance, a public hearing will be scheduled for the second reading and adoption at the September 22, 2025 meeting.

Reorganization of the Citizen Oversight Committee for City Revenue Measures The City has established several revenue measures over the years that require citizen oversight.

In 2006, Grover Beach voters approved Measure X-06 (Ordinance No. 06-12), which established a 0.5% Transaction and Use Tax. Section 15014 of this ordinance requires the City Council to “appoint a citizen committee to review the annual report, and who will provide a report on expenditures of the revenues generated from the Transaction and Use Tax to the City Council.” Subsequently, in 2014, Grover Beach voters approved Measure K-14 (Ordinance No. 14-05), which authorized the issuance of up to $48 million in general obligation bonds for street improvements. Section 10(c) of this ordinance specifically requires that “A Citizen Oversight Committee composed of three voters of the City of Grover Beach shall be formed and will be charged with an annual review of all Bond proceeds expenditures and an annual report to the City Council regarding their findings as to those expenditures.” Further, in 2020, Grover Beach voters approved Measure F-20 (Ordinance No. 20-10), which amended the Transaction and Use Tax rate though maintained the oversight provisions of the original Transaction and Use Tax ordinance.

Upon review of these voter-approved revenue ordinances (measures), it is important to note that none of them contain specific language clarifying the process by which committee members are to be selected or appointed. Furthermore, with the exception of Measure K-14, which explicitly establishes a three-member committee structure, the other revenue measures contain no language that clarifies or mandates the number of committee members to serve on these oversight bodies. Recognizing this absence of procedural guidance while understanding the intent of voters to establish advisory citizen oversight committees for the revenue measures, the City has applied a limited set of processes necessary to ensure these committees can be created and fulfill their voter-mandated purpose. This limited application extends only to those procedural elements minimally necessary to establish functioning committees, including the appointment process and vacancy procedures used for other City advisory bodies. State law prohibits the City from adopting any additional bylaws, procedures, or modifications to the committees’ purpose beyond what is provided within their enabling ordinances. Any substantive changes to the scope, authority, or mandate of these committees as established in the voter-approved ordinances would require modification through a ballot measure approved by voters during an election. The City’s approach ensures that the will of the public in creating these oversight committees is carried out Staff Report: Intro to Advisory Bodies Ordinance Page 3 September 8, 2025
while respecting the legal boundaries that protect the integrity of voter-approved measures.

To fulfill these requirements, in August 2019, the City Council adopted Resolution No. 19-44, which established a consolidated “Citizen Oversight Committee for City Revenue Measures” (Oversight Committee) that would provide oversight for all approved revenue measures. This resolution specified that the committee would consist of three members from the community who were currently serving on the Measure K-14 Oversight Committee, with vacancies to be filled through the City’s standard process for advisory commissions. Following the approval of Measure F-20 in November 2020, the City Council adopted Resolution No. 20-47 in December 2020, which expanded the Oversight Committee from three to five members. The policy intent of this expansion was to increase public input and community participation in the oversight process for the City’s revenue measures and to mirror the composition of other advisory bodies. While this expansion provided for broader community involvement, it created a discrepancy with the specific requirements outlined in Ordinance No. 14-05 for Measure K-14, which explicitly calls for a threemember oversight committee and outlines specific parameters for the committee structure.

After consideration of all applicable ordinances and resolutions, staff recommended to the Council that the City revert to the Citizen Oversight Committee as a three-member body as established in Resolution No. 19-44, which aligns with the provisions in Ordinance No. 14-05 for Measure K-14 oversight. While the expansion to five members provided additional community input, maintaining the three-member structure ensures strict adherence to the legally binding provisions of Ordinance No. 14-05. This approach would provide consistency with the provisions outlined in the voter-approved Measure K-14 while maintaining efficient oversight of all revenue measures.

This recommendation was shared with the Council at the March 10th meeting. However, the Council provided subsequent direction to staff to instead split the existing Citizen Oversight Committee into two separate bodies: a five-member Oversight Committee for Sales Tax Revenue Measures and a three-member Oversight Committee for Measure K-14. Adoption of the resolution in Attachment 3 will effectuate this change and staff would use a similar selection process for the Oversight Committee members as the Planning and Parks, Recreation, and Beautification Commissions to be consistent pending adoption of the related Ordinance on September 22.

FISCAL IMPACT
There are no funding impacts to this staff report.

ALTERNATIVES
The Council has the following alternatives to consider:
1) Conduct a first reading, by title only, and introduce an Ordinance to Amend Sections 31.08 and 31.23 of Chapter 31 (Organizations) of Title III (Administration) of the Grover Beach Municipal Code Pertaining to Appointments and Vacancies for the Planning Commission and Parks, Recreation and Beautification Commission; and Resolution Modifying the Composition of the Citizen Oversight Committee for City Revenue Measures into a Citizen Oversight Committee for Transaction and Use Tax Revenue Measures and a Citizen Oversight Committee for Revenue Measure K-14; or
2) Provide alternative direction to staff.

Staff Report: Intro to Advisory Bodies Ordinance Page 4 September 8, 2025
Multi-Year Goals
☐ Public Safety and Community Services ☐ Economic Development and Housing ☐ Community Infrastructure ☒ Financial and Organization Sustainability Council Priorities
☐ Water & Wastewater Infrastructure ☐ Community Engagement

PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.

ATTACHMENTS

1. Current Advisory Body Code Sections and Resolutions

2. Ordinance

3. Resolution






 

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ORDINANCE NO. 25-__

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GROVER
BEACH, CALIFORNIA AMENDING SECTIONS 31.08 AND 31.23 OF
CHAPTER 31 (ORGANIZATIONS) OF TITLE III (ADMINISTRATION) OF

THE GROVER BEACH MUNICIPAL CODE PERTAINING TO

APPOINTMENTS AND VACANCIES FOR THE PLANNING

COMMISSION AND PARKS, RECREATION AND BEAUTIFICATION

COMMISSION
WHEREAS, Grover Beach Municipal Code Article III, Chapter 31, provides selection processes for the Planning Commission and the Parks, Recreation, and Beautification Commission, collectively the City’s “Advisory Bodies” and individually each a City “Advisory Body”; and
WHEREAS, the City Council desires to change the selection process by requiring the full Council to conduct interviews of applicants for vacant Advisory Body seats at a public meeting and select Advisory Body members by a majority vote; NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Grover Beach as follows:

SECTION 1. Section 31.08 (“Appointment; Vacancies”) of Chapter 31 (“Organizations”) of Article II (“Administration”) of the Grover Beach Municipal Code is hereby amended to read in its entirety as follows:

Sec. 31.08. Appointment; Vacancies. When a term expires before a new appointment is made, the incumbent shall continue to serve on the Commission until reappointed or replaced. When a vacancy occurs for reasons other than term expiration, the City Council shall appoint a replacement to complete the unexpired portion of the term. However, if the unexpired term is for a period of less than one year, the City Council may appoint a member to serve both the unexpired term and an additional full four-year term. All appointments require a majority vote of the City Council following applicant interviews conducted at a regular or special City Council meeting.

SECTION 2. Section 31.23 (“Appointments”) of Chapter 31 (“Organizations”) of Article II (“Administration”) of the Grover Beach Municipal Code is hereby added to read as follows:

Sec. 31.23. Appointment; Vacancies. When a term expires before a new appointment is made, the incumbent shall continue to serve on the Commission until reappointed or replaced. When a vacancy occurs for reasons other than term expiration, the City Council shall appoint a replacement to complete the unexpired portion of the term. However, if the unexpired term is for a period of less than one year, the City Council may appoint a member to serve both the unexpired term and an additional full four-year term. All appointments require a majority vote of the City Council following applicant interviews conducted at a regular or special City Council meeting.

Attachment 2
SECTION 3. SEVERABILITY. If any part of this Ordinance is held invalid for any reason by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portion of this Ordinance, and the City Council hereby declares that it would have passed the remainder of the Ordinance if such invalid portion thereof had been deleted.

SECTION 4. EFFECTIVE DATE. This ordinance shall take effect and be in force thirty (30) days from and after its final passage.

SECTION 5. PUBLICATION. Within fifteen (15) days after passage, the City Clerk shall cause this ordinance to be published in a newspaper of general circulation.

INTRODUCED at a regular meeting of the City Council held September 8, 2025. PASSED, APPROVED, and ADOPTED by the City Council at a regular meeting held on_________________, on the following roll call vote, to wit:

AYES: Council Members –
NOES: Council Members –
ABSENT: Council Members –
ABSTAIN: Council Members –
APPROVED:
__________________________
Kassi Dee, Mayor
ATTEST:
____________________________________
Wendi Sims, City Clerk
APPROVED AS TO FORM:
_____________________________________
Robert Lomeli, City Attorney
RESOLUTION NO. 25-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER BEACH,

CALIFORNIA, MODIFYING THE COMPOSITION OF THE CITIZEN OVERSIGHT

COMMITTEE FOR CITY REVENUE MEASURES TO COMPORT WITH

REVENUE MEASURE ORDINANCE REQUIREMENTS
WHEREAS, in 2006, Grover Beach voters approved Measure X-06 (Ordinance No. 06- 12), which established a 0.05% Transaction and Use Tax, and required the City to “appoint a citizen committee to review the annual report, and who will provide a report on expenditures of the revenues generated from the Transaction and Use Tax to the City Council; and WHEREAS, in 2014, Grover Beach voters approved Measure K-14 (Ordinance No, 14- 05), which authorized the issuance of up to $48 million in general obligation bonds for street improvements and provided that “A Citizen Oversight Committee composed of three voters of the City of Grover Beach shall be formed and will be charged with an annual review of all Bond proceeds expenditures and an annual report to the City Council regarding their findings as to those expenditures.”; and
WHEREAS, in 2020, Grover Beach voters approved Measure F-20 (Ordinance No, 20- 10), which amended the Transaction and Use Tax rate and maintained the oversight provisions of Ordinance 06-12; and
WHEREAS, in 2019, the City Council adopted Resolution 19-44 which established a consolidated “Citizen Oversight Committee for City Revenue Measures”, consisting of three members to provide oversight for all approved revenue measures; and WHEREAS, in 2020, the City Council adopted Resolution 20-47 which expanded the Citizen Oversight Committee for City Revenue Measures from three to five members, creating a discrepancy with the requirements in Ordinance 14-05 for Measure K-14, which explicitly requires a three-member committee; and
WHEREAS, the City Council, at its March 10, 2025 meeting, directed staff to reorganize the Citizen Oversight Committee for City Revenue Measures into two separate bodies; a fivemember Oversight Committee for Transaction and Use Tax Revenue Measures and a threemember Oversight Committee for Revenue Measure K-14, consistent with Ordinance 14-05 NOW, THERFORE, BE IT RESOLVED that the City Council of the City of Grover Beach, California, does hereby establish two advisory bodies for oversight of City revenue measures; a five-member Oversight Committee for Transaction and Use Tax Revenue Measures and a threemember Oversight Committee for Revenue Measure K-14.

On motion by Council Member _____, seconded by Council Member ____, and on the following roll-call vote, to wit:

AYES: Council Members –
NOES: Council Members –
ABSENT: Council Members –
ABSTAIN: Council Members –
RECUSED: Council Members –
Attachment 3
Resolution No. 25- Page 2
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a regular meeting of the City Council of the City of Grover Beach, California this ___ day of ___ 2025.

KASSI DEE, MAYOR
Attest:

WENDI B. SIMS, CITY CLERK

CITY OF GROVER BEACH

CITY COUNCIL STAFF REPORT
Agenda Item No. 5
Placement: Business
Meeting Date: September 8, 2025
TO: Honorable Mayor and City Council
FROM: Matthew Bronson, City Manager
PREPARED BY: Kristin Eriksson, Assistant City Manager
SUBJECT: Resolution to Authorize Execution and Delivery of Wastewater Infrastructure Financing Installment Purchase Contract

RECOMMENDATION
Adopt a Resolution authorizing the execution and delivery by the City of an Installment Purchase Contract and Conveyance Agreement for wastewater infrastructure financing along with other necessary documents and related actions for the $5 million not-to-exceed private placement financing.

BACKGROUND
On July 28, 2025, the City Council approved two Resolutions related to the financing of Capital Improvement Program (CIP) Project 5002 (Sewer System Upgrades). The Reimbursement Resolution allows the City to be reimbursed for prior expenditures related to the Sewer System Upgrades up to sixty days prior to the adoption of the Resolution. The Intent Resolution authorized staff to proceed with the private placement financing and enter into contingent agreements with A. M. Peché & Associates as Municipal Advisor, Piper Sandler & Co. as Placement Agent, and Kutak Rock LLP as Bond Counsel (collectively, the “Financing Team”).

On July 30, 2025, Piper Sandler sent out the Term Sheet to 28 banks along with the City’s most recent Annual Comprehensive Financial Report (ACFR) from FY 2023-24, the wastewater revenue and expense projections and other relevant information pertaining to the City and the City’s Wastewater Enterprise Fund. Piper Sandler received several questions over the following two weeks and responded to these inquiries. Bids were due on August 13, 2025 with six banks responding with a proposed structure.

On August 14, 2025, the Financing Team went over a summary of the bids prepared by Piper Sandler with Staff, shown as Attachment 1. Webster Bank provided the lowest interest rate and the most favorable terms. Staff approved Webster Bank as the winning bidder through signing the Term Sheet and directed the Financing Team to proceed with the next steps in the financing process including Council approval of the issuance resolution and legal documents at this Counsel meeting. The following is a summary of Webster Bank’s bid:
• Interest Rate – 4.425%
• Lock – through the anticipated Closing Date of September 24, 2025 • Additional Fees – Not-to-exceed $6,500 Bank Counsel
• Estimated Annual Average Debt Service – $380,899.04 based on the construction bids received on August 28th
Staff Report: Wastewater Infrastructure Financing Contract Page 2 September 8, 2025
• Optional Redemption – As follows:
• Default Rate – 6% as a taxable rate
• Maturity Date - September 1, 2045
• Expected Closing Date – Wednesday, September 24, 2025 (required by September 26th) • Additional Requirements – Annual ACFR and budget provided within 270 days of the end of each fiscal year.

The Resolution provides for a not-to-exceed loan amount of $5 million and a not-to-exceed interest rate of 4.425% and a maturity date not to exceed September 1, 2045. The loan must be closed by September 26th as planned to hold this interest rate. The Installment Payments made under the Installment Purchase Contract will be secured by a pledge of net revenues of the City’s Wastewater System. Under the Installment Purchase Contract, the City may establish and hold a Rate Stabilization Fund to deposit excess Net Wastewater Revenues to assist with meeting debt service coverage requirements. The debt service coverage ratio pursuant to the Installment Purchase Contract is 120%.

The City is required to set rates, fees and charges at the beginning of each Fiscal Year which are reasonably expected to yield estimated Net Revenues which are at least equal to 120% of debt service due in such Fiscal Year. Should the City not be able to set rates, fees and charges at a level which are reasonably expected to yield 120% coverage of debt service, the City is required to consult with a Rate Consultant within 120 days of the end of the fiscal year, adjust operational costs (if recommended by the Rate Consultant) and may transfer funds from the Rate Stabilization Fund, all to assist in making the required 1.20x debt service coverage.

The projected Wastewater proforma reflecting the debt service coverage was prepared by Tuckfield & Associates and is shown in Attachment 2. The estimated Cost of Issuance that cover the costs for issuing the private placement are estimated to be approximately $138,844 that will cover the fees and expenses of the Financing Team, the Bank Counsel, California Debt and Investment Advisory Commission (“CDIAC”) fees and other expenses related to the financing.

The Cost of Issuance is 2.81% of the estimated par amount of the $4,940,000 private placement and below the 3-5% range for an issue of this size.

The legal structure utilizes two primary documents:

Conveyance Agreement: The City hereby sells, conveys and transfers to the Lender all of its right, title and interest in and to the Project and the Lender hereby purchases, acquires and accepts from the City, the Project.

Installment Purchase Contract: creates an obligation of the Lender to resell the Project to the City and the City agrees to make installment payments to purchase the Project from the Lender equal to annual debt service payments on the private placement.

Staff Report: Wastewater Infrastructure Financing Contract Page 3 September 8, 2025
Multi-Year Goals
☐ Public Safety and Community Services ☐ Economic Development and Housing ☒ Community Infrastructure ☒ Financial and Organization Sustainability Council Priorities
☐ Water & Wastewater Infrastructure ☐ Community Engagement Lastly, staff would note that the City received bids for constructing the related wastewater upgrade project on August 28th and the lowest responsive bid was in the amount of $3,405,239. Staff will bring a contract for construction to the Council for approval at the September 22, 2025 meeting.

The total project cost is estimated to be $4.8 million including project contingency and costs for construction management services which is within the $5 million loan amount.

FISCAL IMPACT
Estimated debt service of approximately $95,331.71 representing the interest payment for March 1, 2026; the full year estimated average annual debt service of approximately $380,899.04 will begin in FY 2026-27 and will be repaid by net revenue of the City’s Wastewater Enterprise Fund.

Any bond proceeds that remain upon project completion will be applied to other wastewater system projects.

ALTERNATIVES
The Council has the following alternatives to consider:

1. Adopt a Resolution authorizing the execution and delivery by the City of an Installment Purchase Contract and a Conveyance Agreement for wastewater infrastructure financing along with other necessary documents and related actions for the $5 million not-to-exceed private placement financing; or

2. Do not adopt a Resolution; or

3. Provide alternate direction to staff.

PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.

ATTACHMENTS

1. Summary of Bank Bids for Private Placement

2. Wastewater Proforma showing projected debt service coverage

3. Resolution

4. Installment Purchase Contract

5. Conveyance Agreement
City of Grover Beach
2025 Wastewater System Project Financing
Summary of Bank Bids
Attachment 1
Table 1
City of Grover Beach Wastewater Debt Service Coverage
With Principal FY 26-27
Estimated Projected
FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 System Revenues
Rate Revenues [1] 1,044,690 1,047,829 1,051,125 1,054,264 1,057,560 1,060,699 1,063,996 Revenue from Increases - 186,514 407,504 669,133 978,948 1,345,428 1,349,610 Miscellaneous Revenue [2] 330,032 354,304 350,684 346,860 342,944 338,816 340,038 Interest Income [3] 96,800 80,550 71,348 54,668 32,344 28,617 33,698 Development Impact Fees - 19,849 35,404 - - - -
Total Revenues 1,471,522 1,689,046 1,916,065 2,124,925 2,411,796 2,773,560 2,787,342 Operation and Maintenance Costs [4]
Salaries and Benefits 827,991 864,533 903,130 943,920 987,050 1,032,685 1,105,886 Supplies and Services 404,825 413,072 421,484 430,080 438,851 447,809 432,057 Transfers Out 248,152 253,115 258,177 263,341 268,608 273,980 279,460 Total O&M 1,480,968 1,530,720 1,582,791 1,637,341 1,694,509 1,754,474 1,817,403 Net Revenues (9,446) 158,326 333,274 487,584 717,287 1,019,086 969,939 Debt Service Obligations
Series 2025 Debt Service - 95,332 262,599 382,843 380,209 382,244 378,948 2028 Proposed Debt Service [5] - - - - 182,600 182,600 182,600 2030 Proposed Debt Service [6] - - - - - - 167,300
Total Debt Service - 95,332 262,599 382,843 562,809 564,844 728,848 Debt Service Coverage - 1.66 1.27 1.27 1.27 1.80 1.33
Revenue Available for Capital/Other (9,446) 62,995 70,674 104,741 154,477 454,241 241,091 [1] Assumes 0.50 percent growth in residential accounts. [2] Includes General Fund loan interest repayment, storm water revenue, and miscellaneous revenue. [3] Assumes an interest earnings rate of 3.0 percent on the average fund balance. [4] Budgeted expenses for FY 24-25 and FY 25-26.
[5] Proposed debt issue in FY 27-28 of about $2,180,000 assumes an interest rate of 5.5% with a 20 year term. [6] Proposed debt issue in FY 29-30 of about $1,960,000 assumes an interest rate of 5.75% with a 20 year term. 9/2/2025 11:40 AM
Attachment 2
4868-1056-8092.4
RESOLUTION NO. ___

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GROVER

BEACH, CALIFORNIA, APPROVING A CONVEYANCE AGREEMENT

AND AN INSTALLMENT PURCHASE CONTRACT, MAKING CERTAIN

DETERMINATIONS RELATING THERETO AND AUTHORIZING

CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH
WHEREAS, the City of Grover Beach, is a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”); and
WHEREAS, the City Council of the City (the “City Council”) is the governing body of the City; and
WHEREAS, the City proposes to finance public capital improvements to the City’s wastewater system (the “Project”); and
WHEREAS, in order to finance the Project, the City desires to enter into a Conveyance Agreement between the City and Webster Bank, National Association (the “Lender”), pursuant to which the City will sell the Project to the Lender in return for certain funds, which the City will use to acquire the Project for the benefit of its wastewater system; and
WHEREAS, in order to finance the Project, the City has determined to enter into an Installment Purchase Contract, between the City and the Lender, pursuant to which the City will repurchase the Project from the Lender; and WHEREAS, under and pursuant to such Installment Purchase Contract, the City will be obligated to make certain installment payments to the Lender; and WHEREAS, Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) (“SB 450”) requires that the City obtain from an underwriter, municipal advisor or private lender and disclose, prior to authorization of the issuance of bonds, including debt instruments such as the Installment Purchase Contract, with a term of greater than 13 months, good faith estimates of the following information in a meeting open to the public: (a) the true interest cost of the Installment Purchase Contract; (b) the sum of all fees and charges paid to third parties with respect to the Installment Purchase Contract; (c) the amount of proceeds of the Installment Purchase Contract 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 Installment Purchase Contract; and (d) the sum total of all debt service payments on the Installment Purchase Contract calculated to the final maturity of the Installment Purchase Contract plus the fees and charges paid to third parties not paid with the proceeds of the Installment Purchase Contract; and
Attachment 3
2 4868-1056-8092.4
WHEREAS, in compliance with SB 450, the City obtained from Piper Sandler & Co. (the “Placement Agent”), the required good faith estimates, and such estimates are disclosed and set forth on Exhibit A attached hereto; and WHEREAS, there have been presented at this meeting forms of the Conveyance Agreement and the Installment Purchase Contract; and
WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing and refinancing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided.

NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY THE CITY OF GROVER BEACH AS FOLLOWS:

SECTION 1. Approval of Conveyance Agreement. The form of Conveyance Agreement, between the City and the Lender, as presented to the City at this meeting, is hereby approved. The Mayor of the City, and such other members of the City Council as the Mayor may designate, the City Manager of the City, the Assistant City Manager of the City, and such other officers of the City as the City Manager of the City may designate (each, an “Officer” and collectively, the “Officers”), are hereby authorized and directed, for and on behalf of the City, to execute, acknowledge and deliver the Conveyance Agreement, in substantially the form presented to the City at this meeting, with such changes therein as such Officers may require or approve, with the advice and approval of counsel to the City and Kutak Rock LLP (“Special Counsel”), such approval to be conclusively evidenced by the execution and delivery thereof.

SECTION 2. Approval of Installment Purchase Contract. The form of Installment Purchase Contract, between the City and the Lender, as presented to the City at this meeting, is hereby approved. The Officers are hereby authorized and directed, for and on behalf of the City, to execute, acknowledge and deliver the Installment Purchase Contract, in substantially the form presented to the City at this meeting, with such changes therein as such Officers may require or approve, with the advice and approval of counsel to the City and Special Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. In connection therewith, the City approves the execution and delivery of the Installment Purchase Contract so long as the maturity does not exceed September 1, 2045, the interest rate with respect to the Installment Payments does not initially exceed 4.425%, and the principal amount does not exceed $5,000,000.

SECTION 3. Good Faith Estimates. In accordance with SB 450, good faith estimates of the following have been obtained from the Placement Agent and are set forth on Exhibit A attached hereto: (a) the true interest cost of the Installment Purchase Contract; (b) the sum of all fees and charges paid to third parties with respect to the Installment Purchase Contract; (c) the amount of proceeds of the Installment Purchase 3 4868-1056-8092.4
Contract 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 Installment Purchase Contract; and (d) the sum total of all debt service payments on the Installment Purchase Contract calculated to the final maturity of the Installment Purchase Contract plus the fees and charges paid to third parties not paid with the proceeds of the Installment Purchase Contract.

SECTION 4. Other Acts. The Authorized Officers and staff of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents, including but not limited to a fee agreement, costs of issuance agreement, custodian agreement or other similar agreements, which in consultation with the City Attorney and Special Counsel, they may deem necessary or advisable in order to effectuate the purposes of this Resolution, and any and all such actions previously taken by such Officers or staff members are hereby ratified and confirmed.

SECTION 5. Effective Date. This Resolution shall take effect upon adoption.

On motion by Council Member _____, seconded by Council Member ____, and on the following roll-call vote, to wit:

AYES: Council Members –
NOES: Council Members –
ABSENT: Council Members –
ABSTAIN: Council Members –
RECUSED: Council Members –
the foregoing Resolution was PASSED, APPROVED, and ADOPTED at a regular meeting of the City Council of the City of Grover Beach, California this 8TH day of September 2025.

KASSI DEE, MAYOR
ATTEST:

WENDI SIMS, CITY CLERK
4868-1056-8092.4
Exhibit A

GOOD FAITH ESTIMATES
The following information was obtained from the City’s Placement Agent, and is provided in compliance with Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) with respect to the Installment Purchase Contract:

1. True Interest Cost of the Installment Purchase Contract. Assuming the maximum aggregate principal amount of the Installment Purchase Contract authorized to be issued ($4,940,000) is sold, and based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the true interest cost of the Installment Purchase Contract, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for Installment Purchase Contract, is 4.425%.

2. Finance Charge of the Installment Purchase Contract. Assuming the maximum aggregate principal amount of the Installment Purchase Contract authorized to be issued ($4,940,000) is sold, and based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the City’s finance charge of the Installment Purchase Contract, which means the sum of all fees and charges paid to third parties from the principal amount of the Installment Purchase Contract, is $138,844.

3. Amount of Proceeds to be Received by the City. Assuming the maximum aggregate principal amount of the Installment Purchase Contract authorized to be issued ($4,940,000) is sold, and based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the amount of proceeds expected to be received by the City for sale of the Installment Purchase Contract less the finance charge of the Installment Purchase Contract described in paragraph 2 above and any reserves or capitalized interest paid or funded with proceeds of the Installment Purchase Contract, is $4,800,000.

4. Total Payment Amount. Assuming the maximum aggregate principal amount of the Installment Purchase Contract authorized to be issued ($4,940,000) is sold, and based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Installment Purchase Contract plus the finance charge of the Installment Purchase Contract described in paragraph 2 above not paid with the proceeds of the Installment Purchase Contract, calculated to the final maturity of the Installment Purchase Contract, is $7,593,646.

Attention is directed to the fact that the foregoing information constitutes good faith estimates only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary from those presently estimated due to variations from these estimates in the timing of the sale of the Installment Purchase Contract, the actual principal amount of Installment Purchase Contract sold, the amortization of the Installment Purchase Contract sold and market interest rates at the time of sale. The A-2
date of sale and the amount of Installment Purchase Contract sold will be determined by the City based on need for improvement funds and other factors. The actual interest rates at which the Installment Purchase Contract will be sold will depend on the bond market at the time of sale. The actual amortization of the Installment Purchase Contract will also depend, in part, on market interest rates at the time of sale. Market interest rates are affected by economic and other factors beyond the City’s control. The City Council has approved the execution of the Installment Purchase Contract with a maximum true interest cost of 4.425%.
4869-1116-5852.9

INSTALLMENT PURCHASE CONTRACT
between the

CITY OF GROVER BEACH
and

WEBSTER BANK, NATIONAL ASSOCIATION
Dated as of September 1, 2025
Attachment 4

TABLE OF CONTENTS
Page
4869-1116-5852.9
ARTICLE I DEFINITIONS ...................................................................................................... 2 Section 1.01. Definitions ................................................................................................. 2 ARTICLE II ACQUISITION OF THE PROJECT ..................................................................... 7 Section 2.01. Acquisition of the Project .......................................................................... 7 Section 2.02. Indemnification and Expenses of the Lender ............................................ 8 Section 2.03. City To Acquire Project; Lender Not Liable ............................................. 9 Section 2.04. Disclaimer of the Lender ........................................................................... 9 Section 2.05. Acquisition Fund ....................................................................................... 9 ARTICLE III INSTALLMENT PAYMENTS, REVENUES AND ACCOUNTS ...................... 9 Section 3.01. Payment of the Installment Payments ....................................................... 9 Section 3.02. Interest Component of the Installment Payments ................................... 10 Section 3.03. Establishment of Accounts ...................................................................... 11 Section 3.04. Pledge of Net Revenues and Other Funds; Debt Service Fund ............... 11 Section 3.05. Receipt and Deposit of Gross Revenues ................................................. 11 Section 3.06. Establishment and Maintenance of Accounts for Gross Revenues; Use and Withdrawal of Gross Revenues ................................................. 12 Section 3.07. [Reserved] ............................................................................................... 13 Section 3.08. Investment of Funds ................................................................................ 13 ARTICLE IV PARITY OBLIGATIONS ................................................................................... 13 Section 4.01. Parity Obligations .................................................................................... 13 ARTICLE V REPRESENTATIONS, COVENANTS AND WARRANTIES ......................... 14 Section 5.01. Compliance With Installment Purchase Contract ................................... 14 Section 5.02. Observance of Laws and Regulations ..................................................... 14 Section 5.03. Prosecution and Defense of Suits ............................................................ 15 Section 5.04. Accounting Records and Statements ....................................................... 15 Section 5.05. Further Assurances .................................................................................. 15 Section 5.06. Against Encumbrances ............................................................................ 15 Section 5.07. Against Sale or Other Disposition of Property ........................................ 15 Section 5.08. Against Competitive Facilities ................................................................ 16 Section 5.09. Tax Covenants ......................................................................................... 16 Section 5.10. Maintenance and Operation of the Enterprise; Budgets .......................... 16 Section 5.11. Payment of Claims .................................................................................. 17 Section 5.12. Compliance With Contracts .................................................................... 17 Section 5.13. Insurance ................................................................................................. 17 Section 5.14. Books and Accounts; Financial Statements ............................................ 18 Section 5.15. Payment of Taxes and Compliance With Governmental Regulations .............................................................................................. 18 Section 5.16. Amount of Rates and Charges ................................................................. 18 Section 5.17. Collection of Rates and Charges ............................................................. 20 ii
4869-1116-5852.9
Section 5.18. Eminent Domain Proceeds ...................................................................... 20 Section 5.19. Release and Indemnification Covenants ................................................. 20 Section 5.20. Further Representations, Covenants and Warranties of the City ............ 21 Section 5.21. Representations, Covenants and Warranties of the Lender ..................... 23 ARTICLE VI PREPAYMENT OF INSTALLMENT PAYMENTS ......................................... 23 Section 6.01. Prepayment .............................................................................................. 23 Section 6.02. Method of Prepayment ............................................................................ 24 Section 6.03. Security Deposit ...................................................................................... 24 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES ...................................................... 25 Section 7.01. Events of Default and Events of Mandatory Acceleration; Acceleration of Maturities ....................................................................... 25 Section 7.02. Application of Funds Upon Default ........................................................ 27 Section 7.03. Other Remedies of the Lender ................................................................ 27 Section 7.04. Non-Waiver ............................................................................................. 28 Section 7.05. Remedies Not Exclusive ......................................................................... 28 ARTICLE VIII MISCELLANEOUS ............................................................................................ 28 Section 8.01. Liability of City Limited ......................................................................... 28 Section 8.02. Benefits of Installment Purchase Contract Limited to Parties ................ 28 Section 8.03. Successor Is Deemed Included in All References to Predecessor........... 29 Section 8.04. Waiver of Personal Liability ................................................................... 29 Section 8.05. Article and Section Headings, Gender and References ........................... 29 Section 8.06. Partial Invalidity ...................................................................................... 29 Section 8.07. Assignment .............................................................................................. 29 Section 8.08. California Law ........................................................................................ 30 Section 8.09. Notices ..................................................................................................... 30 Section 8.10. Judicial Reference ................................................................................... 30 Section 8.11. Effective Date .......................................................................................... 30 Section 8.12. Execution in Counterparts ....................................................................... 31 Section 8.13. Amendments ........................................................................................... 31 Section 8.14. Restrictions .............................................................................................. 31 Section 8.15. Website Disclosure .................................................................................. 31 EXHIBIT A – INSTALLMENT PAYMENT SCHEDULE .............................................................. A-1 EXHIBIT B – FORM OF ACQUISITION FUND REQUISITION .................................................. B-1 EXHIBIT C – DESCRIPTION OF THE PROJECT ......................................................................... C-1 4869-1116-5852.9

INSTALLMENT PURCHASE CONTRACT
This INSTALLMENT PURCHASE CONTRACT, dated as of September 1, 2025 (as amended and supplemented hereafter, the “Installment Purchase Contract”), between the CITY OF GROVER BEACH, a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”), and WEBSTER BANK, NATIONAL ASSOCIATION, a national banking association (including its successors and permitted assigns hereunder, the “Lender”);
W I T N E S S E T H:

WHEREAS, the City is authorized and empowered under the laws of the State of California, to purchase, or lease, or otherwise acquire, hold and enjoy, and lease or dispose of, real and personal property of every kind within or without the City through the execution of installment purchase contracts; and
WHEREAS, the City proposes to finance certain improvements to the Enterprise, as described herein (the “Project”); and
WHEREAS, in order to finance the Project, the City has entered into a Conveyance Agreement, dated as of September 1, 2025, pursuant to which the City has sold the Project to the Lender, but only to the extent the components of the Project could be legally transferred by the City; and WHEREAS, in order to provide moneys to pay the costs of acquiring, constructing and improving the Project, the City proposes to purchase the Project pursuant to this Installment Purchase Contract; and
WHEREAS, the City has determined that it is in the best interests of the City, and it is necessary and proper for City purposes, that the City acquire the Project from the Lender in the manner described herein for the purposes of financing the Project as described herein, and that the City pay the Lender for the costs of acquiring the Project in the manner described herein; 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 Installment Purchase Contract 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 Installment Purchase Contract;

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:
2 4869-1116-5852.9

ARTICLE I

DEFINITIONS
Section 1.01. Definitions.

Unless the context otherwise requires, the terms defined in this Section 1.01 shall for all purposes hereof, and of any amendment hereof, and of any opinion or report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein. “Acquisition,” “Acquire” or “Acquired” means, with respect to the Project or the Enterprise, the acquisition or perfection of an ownership or capacity interest in the Project or the Enterprise, or the construction, refinancing or ownership of the Project or the Enterprise, including payment of Delivery Costs.
“Acquisition Costs” with respect to the Project means the contract price paid or to be paid for the Acquisition of the Project.
“Acquisition Fund” means the fund established by and maintained by the City, as described in Section 2.05.
“Additional Revenues” means, with respect to the issuance of any Parity Obligations, an allowance for Net Revenues: (i) arising from any increase in the charges made for service from the Enterprise adopted prior to the incurring of such Parity Obligations and effective within eighteen (18) months following the date of incurring such Parity Obligations, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of the most recent completed Fiscal Year or during any more recent twelve (12) month period selected by the City; and (ii) arising from any increase in service connections to the Enterprise prior to the incurring of such Parity Obligations, in an amount equal to the total amount by which the Net Revenues would have been increased if such connections had been in existence during the whole of the most recent completed Fiscal Year or during any more recent twelve (12) month period selected by the City, all as shown by the certificate or opinion of an Independent Financial Consultant.
“Alternate Project” means an alternate project designated by the City pursuant to Section 2.01 hereof.
“Business Day” means any day other than a Saturday, Sunday or legal holiday or a day on which banks are authorized to be closed for business in California and New York. “Closing Date” means September 24, 2025.
“Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
“Conveyance Agreement” means that Conveyance Agreement, dated as of September 1, 2025, between the City and the Lender, as amended and supplemented. “Debt Service” means, for any Fiscal Year, the sum of: (1) the Installment Payments (except to the extent that interest has been fully capitalized and is invested in Federal Securities which mature 3 4869-1116-5852.9
at times and in such amounts as are necessary to pay the interest to which such amounts are pledged) required to be paid hereunder during such Fiscal Year; (2) the interest falling due during such Fiscal Year on all Parity Obligations, if any, (which are outstanding under the documents or agreements pursuant to which they were issued), assuming that all outstanding serial Parity Obligations are retired as scheduled and that all outstanding term Parity Obligations are redeemed from sinking fund payments as scheduled (except to the extent that such interest has been fully capitalized and is invested in Federal Securities which mature at times and in such amounts as are necessary to pay the interest to which such amounts are pledged); (3) the principal amount of all serial Parity Obligations (which are outstanding under the documents or agreements pursuant to which they were issued) falling due by their terms during such Fiscal Year; and (4) the minimum amount of term Parity Obligations (which are outstanding under the documents or agreements pursuant to which they were issued) required to be paid or called and redeemed during such Fiscal Year, together with the redemption premiums, if any, thereon; provided that, whenever interest as described herein accrues at other than a fixed rate, such interest shall be assumed to be a rate equal to the greater of: (i) the actual rate on the date of calculation, or if the Parity Obligations are not yet outstanding, the initial rate (if established and binding); (ii) if the Parity Obligations have been outstanding for at least twelve months, the average rate over the twelve months immediately preceding the date of calculation; and (iii) (x) if interest on the Parity Obligations is excludable from gross income under the applicable provisions of the Code, the most recently published SIFMA Index (or comparable index if no longer published) plus fifty (50) basis points; or (y) if interest is not so excludable, the interest rate on direct U.S. Treasury Obligations with comparable maturities, plus fifty (50) basis points; and provided further that if any series or issue of Parity Obligations have twenty-five percent (25%) or more of the aggregate principal amount of such series or issue due in any one year, Debt Service shall be determined for the Fiscal Year of determination as if the principal of and interest on such series or issue of such Parity Obligations were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of thirty (30) years from the date of calculation.
“Debt Service Fund” and “Debt Service Account” means the fund and the account in such fund established as described in Section 3.04 hereof.
“Debt Service Payments” mean the payments of Debt Service. “Default” means any of the events specified in Section 7.01 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. “Default Rate” means, for any date of determination, a fluctuating rate of interest per annum equal to the rate of interest otherwise applicable under this Installment Purchase Contract (including, without limitation, the Gross Up Rate) plus 3%.
“Delivery Costs” means all items of expense directly or indirectly payable by or reimbursable to the City or the Lender relating to the refinancing and financing of the Project, including but not limited to filing costs, settlement costs, printing costs, reproduction and binding costs, initial fees and charges of the Lender and its counsel, financing discounts, California Debt Investment Advisory Commission fees, legal fees and charges, financial and other professional consultant fees, and charges and fees in connection with the foregoing.
“Determination of Taxability” means any determination, decision or decree by the Commissioner of Internal Revenue, or any District Director of Internal Revenue, or any court of competent jurisdiction, to the effect that: (a) interest paid or to be paid to the Lender hereunder is or 4 4869-1116-5852.9
will be includable for federal income tax purposes in the gross income of the Lender, but excluding the inclusion of interest as an item of tax preference for purposes of the calculation of an alternative minimum tax imposed on the Lender; or that (b) an Event of Taxability shall have occurred; provided, however, that the City shall have the opportunity to take such remedial action necessary to restore the tax-exempt status of the interest component of Installment Payments under this Installment Purchase Contract specifically afforded to it in such determination, decision or decree so long as such remedial action is promptly commenced by the City and in no event later than thirty (30) days after receipt of such determination, decision or decree. A Determination of Taxability also shall be deemed to have occurred on the date when the City files any statement, supplemental statement, or other tax schedule, return or document, which discloses that an Event of Taxability shall have occurred. “Due Date” means the date three (3) Business Days prior to an Installment Payment Date. “Enterprise” means the entire wastewater collection, treatment and disposal system owned or operated by the City, including but not limited to all facilities, properties and improvements at any time owned or operated by the City for the collection, treatment and disposal of wastewater within the service area of the City, together with any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by the City including, without limitation, the Project. “Environmental Regulations” means all Laws and Regulations, now or hereafter in effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9601, et seq.) (together with the regulations promulgated thereunder, “CERCLA”), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.) (together with the regulations promulgated thereunder, “RCRA”), the Emergency Planning and Community Right-to-Know Act, as amended (42 U.S.C. Section 11001, et seq.) (together with the regulations promulgated thereunder, “Title III”), the Clean Water Act, as amended (33 U.S.C. Section 1321, et seq.) (together with the regulations promulgated thereunder, “CWA”), the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.) (together with the regulations promulgated thereunder, “CAA”) and the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.) (together with the regulations promulgated thereunder, “TSCA”), and any state or local similar Laws and Regulations and any so-called local, state or federal “superfund” or “superlien” law and any other applicable state, local or federal environmental laws or regulations.
“Event of Default” means an event of default described in Section 7.01. “Event of Taxability” means, with respect to this Installment Purchase Contract: (a) the application of the proceeds of the purchase price of the Project pursuant to the Conveyance Agreement in such manner that this Installment Purchase Contract becomes an “arbitrage bond” within the meaning of Tax Code Sections 103(b)(2) and 148, and with the result that interest component of the Installment Payments is or becomes includable in a recipient’s gross income (as defined in Tax Code Section 61); or (b) if as the result of any act, failure to act or use of the proceeds of the purchase price of the Project pursuant to the Conveyance Agreement or any misrepresentation or inaccuracy in any of the representations, warranties or covenants contained in this Installment Purchase Contract by the City the interest component of Installment Payments is or becomes includable in a recipient’s gross income (as defined in Tax Code Section 61); and (c) with respect to (a) and (b), the City does not undertake any remedial action afforded to it by the Internal Revenue Service. 5 4869-1116-5852.9
“Federal Securities” means direct obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States), or obligations the timely payment of the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America.
“Finance Officer” means the City Manager of the City or any officer of the City duly designated by the City Manager in writing.
“Fiscal Year” means the period commencing on July 1 of each year and terminating on June 30 of the following year, or any other annual accounting period hereafter selected and designated by the City as its Fiscal Year in accordance with applicable law. “Generally Accepted Accounting Principles” means: (a) the uniform accounting and reporting procedures prescribed by the California State Controller or his or her successor for cities in the State of California; or (b) failing the prescription of such procedures, generally accepted accounting principles as presented and recommended by the American Institute of Certified Public Accountants or its successor, or by the National Council on Governmental Accounting or its successor, or by any other generally accepted authority on such principles.
“Governmental Loan” means a loan from the State of California or the United States of America, acting through any of its agencies, to finance improvements to the Enterprise, and the obligation of the City to make payments to the State of California or the United States of America under the loan agreement memorializing said loan on a parity basis with the payment of Installment Payments.
“Gross Revenues” means for each Fiscal Year, all gross income and revenue received or receivable by the City from the ownership or operation of the Enterprise, determined in accordance with Generally Accepted Accounting Principles, including all rates, fees, and charges (including connection fees, property tax revenues and capacity charges) as received by the City for the services of the Enterprise, and all other income and revenue howsoever derived by the City from the ownership or operation of the Enterprise or arising from the Enterprise, including all income from the deposit or investment of any money in the Revenue Fund, and any refundable deposits made to establish credit, and advances or contributions in aid of construction. Gross Revenues shall include amounts on deposit in the Revenue Fund which have been previously released from the pledge and lien of this Installment Purchase Contract. Gross Revenues shall also be increased by the amounts, if any, transferred during such Fiscal Year from a Rate Stabilization Fund to the Revenue Fund. “Gross Up Rate” means, for any date of determination, 6.00% per annum. “Independent Certified Public Accountant” means any certified public accountant or firm of certified public accountants duly licensed and entitled to practice, and practicing as such, under the laws of the State of California, appointed and paid by the City, and each of whom: (a) is in fact independent and not under the domination of the City; (b) does not have a substantial financial interest, direct or indirect, in the operations of the City; and (c) is not connected with the City as a city council member, officer or employee of the City, but may be regularly retained to audit the accounting records of and make reports thereon to the City.
“Independent Engineer” means any registered engineer or firm of engineers of national reputation generally recognized to be well qualified in engineering matters relating to systems similar 6 4869-1116-5852.9
to the Enterprise, appointed and paid by the City, and who or each of whom: (a) is in fact independent and not under the domination of the City; (b) does not have a substantial financial interest, direct or indirect, in the City; and (c) is not connected with the City as a city council member, officer or employee of the City, but may be regularly retained to make reports to the City. “Independent Financial Consultant” means any financial consultant or firm of such consultants of national reputation generally recognized to be well qualified in financial matters relating to systems similar to the Enterprise, appointed and paid by the City, and who, or each of whom: (a) is in fact independent and not under the control of the City; (b) does not have a substantial financial interest, direct or indirect, in the City; and (c) is not connected with the City as a council member, officer or employee of the City, but may be regularly retained to make reports to the City. “Installment Payment Date” means each March 1 and September 1, commencing March 1, 2026.
“Installment Payments” means the installment payments of principal and interest scheduled to be paid by the City hereunder on the Installment Payment Dates. “Insurance Consultant” means any nationally recognized independent actuary, insurance company or broker who has actuarial personnel knowledgeable with respect to insurance carried by, required for and available to municipalities operating facilities similar to the Enterprise, including a pooled self-insurance program in which premiums are established on the basis of the recommendation of an actuary of national reputation.
“Laws and Regulations” means federal, regional, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other governmental authority having jurisdiction as may be in effect from time to time.
“Maintenance and Operation Costs of the Enterprise” means the reasonable and necessary costs and expenses paid or incurred by the City for maintaining and operating the Enterprise, as determined in accordance with Generally Accepted Accounting Principles, including but not limited to: (a) the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the Enterprise in good repair and working order; and (b) administrative costs of the City attributable to the Enterprise and the financing thereof; but excluding: (x) depreciation, replacement and obsolescence charges or reserves therefor; (y) in any Fiscal Year prior to setting aside an amount equal to the Installment Payments for such Fiscal Year, capital expenditures other than as set forth in clause (a) above; and (z) amortization of intangibles or other bookkeeping entries or a similar nature. “Material Adverse Effect” means an event or occurrence which adversely affects in a material manner: (a) the assets, liabilities, condition (financial or otherwise), business, facilities or operations of the City; (b) the ability of the City to carry out its business in the manner conducted as of the date of this Installment Purchase Contract or to meet or perform its obligations under this Installment Purchase Contract on a timely basis; (c) the validity or enforceability of this Installment Purchase Contract; or (d) the exclusion of the interest component of the Installment Payments from gross income for federal income tax purposes or the exemption of such interest for state income tax purposes. 7 4869-1116-5852.9
“Maximum Annual Debt Service” means the largest annual Debt Service due hereunder and on any Parity Obligations during the period from the date of such determination through the final Installment Payment Date hereunder or maturity date of such Parity Obligations. “Net Proceeds” means, when used with respect to any insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all reasonable expenses (including attorneys’ fees) incurred in the collection of such proceeds. “Net Revenues” means, for any period, all of the Gross Revenues during such period less all of the Maintenance and Operation Costs of the Enterprise during such period. “Outstanding” (a) when used as of any particular time with reference to this Installment Purchase Contract, means all Installment Payments except Installment Payments paid or deemed to have been paid within the meaning of Article VI; and (b) when used as of any particular time with reference to any Parity Obligations, means all debt service payments due and owing on such Parity Obligations except debt service payments paid or deemed to have been paid pursuant to the terms thereof.
“Parity Obligations” means all bonds, notes, loan agreements, installment sale agreements, leases or other obligations of the City, payable from and secured by a pledge of and lien upon any of the Net Revenues incurred on a parity with the payment of the Installment Payments pursuant to Section 4.01. As of the Closing Date, there are no Parity Obligation secured by Net Revenues. “Project” means, the acquisition, installation and construction of certain improvements to the Enterprise consisting of pipeline improvements, and upsizing of existing sewer mains, as further described in Exhibit C, and any Alternate Project.
“Qualified Investments” means any investment that is a legal investment under the laws of the State of California for the moneys proposed to be invested therein. “Prepayment Account” means the account established within the Debt Service Fund and into which funds shall be deposited as described herein.
“Rate Stabilization Fund” means any fund established and held by the City as a fund for the stabilization of rates and charges imposed by the City with respect to the Revenue Fund, which fund is established, held and maintained in accordance with Section 3.06(d). “Revenue Fund” means the fund, account, or accounts maintained by the City into which it deposits Gross Revenues of the Enterprise.

ARTICLE II

ACQUISITION OF THE PROJECT
Section 2.01. Acquisition of the Project.

The Lender agrees to use or permit the use of the proceeds received by the City pursuant to the Conveyance Agreement for the payment, as herein provided, of the costs and expenses of the Acquisition of the Project and the expenses incidental thereto (including reimbursement to the City for any such costs or expenses paid by it for the account of the Lender, including costs and expenses paid by the City prior to the date hereof). To provide moneys for the Acquisition of the Project, the Lender 8 4869-1116-5852.9
agrees to sell and hereby sells its rights to the Project obtained pursuant to the Conveyance Agreement to the City, and the City agrees to purchase and hereby purchases the Project from the Lender.

The City hereby covenants to use the proceeds received from the Lender pursuant to the Conveyance Agreement for the costs and expenses of the acquisition of the Project, including any Alternate Project, if applicable. The City may change the specifications of the Project, so long as such change does not substantially alter the nature of the Project; provided, however, that the City and the Lender, in their sole discretion, may jointly designate an Alternate Project and upon such designation, such Alternate Project shall be deemed part of the Project for the purposes of this Installment Purchase Contract and the Conveyance Agreement. In the event that an Alternate Project is designated, the City shall certify in writing to the Lender that Acquisition Costs shall not materially decrease as a result of such change. In the event that Acquisition Costs shall materially increase as a result of the designation of an Alternate Project, prior to designating such Alternate Project the City shall either deposit in the Acquisition Fund an amount sufficient to pay such increase, or shall certify in writing to the Lender that funds sufficient to pay such increase in Acquisition Costs are otherwise available to the City.

The Lender agrees, upon the effective date hereof, to cause to be deposited in the Acquisition Fund the amount of $_____. In the event the money so deposited as first above provided is insufficient to pay all the costs of the Acquisition of the Project, the Lender shall have no obligation whatsoever to use or provide any additional funds for the foregoing purposes.

Upon the Closing Date, all of the Lender’s remaining interest in the Project, if any, shall be transferred to and vest in the City, without the necessity of any additional document or transfer.

Nothing herein shall require the Lender to perform any obligations of any purchaser with respect to any contract or purchase order with respect to the Project.

In the event the Lender fails to observe or perform any agreement, condition, covenant or term contained herein required to be observed or performed by it, the City may institute such action or proceeding against the Lender as the City may deem necessary to compel the observance or performance of such agreement, condition, covenant or term, or to recover damages for the nonobservance or nonperformance thereof; provided, however, that the City shall have no right to terminate this Installment Purchase Contract as a remedy to such failures. The City may, at its own cost and expense and in its own name or in the name of the Lender, prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to protect or secure its rights hereunder, and in such event the Lender agrees to cooperate fully with the City and to take all action necessary to effect the substitution of the City for the Lender in any action or proceeding if the City shall so request.

On the Closing Date, the Lender shall pay Delivery Costs payable by the City, on behalf of the City, with proceeds of the financing on deposit with the Lender and at the direction of the City, in the amount of $138,844.00, including the fees of the Lender’s legal counsel in the amount of $6,500.00.

Section 2.02. Indemnification and Expenses of the Lender.

In addition to the provisions of Section 5.19 hereof, to the extent permitted by law, the City does hereby assume liability for, and agrees to defend, indemnify, protect, save and keep harmless the Lender and its directors, officers and employees and its successors and assigns from and against any and all liabilities, obligations, losses, damages (including consequential damages incurred by others), taxes and impositions, penalties, fines, claims, actions, suits, costs and expenses and disbursements 9 4869-1116-5852.9
(including legal fees and expenses (to include outside counsel fees and all allocated costs of the Lender’s in-house counsel to the extent permissible)) of whatsoever kind and nature imposed on, asserted against or incurred or suffered by the Lender or its directors, officers or employees or its successors and assigns in any way relating to or arising out of the purchase or Acquisition of the Project or the City’s use thereof, the execution and delivery or performance hereof or the assignment hereof (except with respect to any representations and warranties made by the Lender therewith) or any other agreements related thereto, or the enforcement of any of the terms thereof.

Section 2.03. City To Acquire Project; Lender Not Liable.

The City shall cause such Acquisition of the Project to be completed as soon as is reasonably practicable and in accordance with this Installment Purchase Contract and any applicable requirements of governmental authorities and law. The Lender and its directors, officers and employees shall not be liable to the City or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on, or about or relating to the Project, and in no event shall the Lender be liable for any incidental, indirect, special or consequential damage in connection herewith or arising hereunder.

Section 2.04. Disclaimer of the Lender.

The City acknowledges and agrees that the Lender makes no representation or warranty, express or implied, as to the Enterprise or the Project, except as expressly set forth in this Installment Purchase Contract. The City acknowledges that all risks relating to the Project or the transactions contemplated hereby or by the Conveyance Agreement, are to be borne by the City, and the benefits of any and all implied warranties and representations of the Lender are hereby waived by the City.

Section 2.05. Acquisition Fund.

The City hereby agrees to establish and maintain the Acquisition Fund until the completion of the Acquisition of the Project. On the Closing Date, $4,861,156.00 shall be deposited into the Acquisition Fund. The City covenants that the Acquisition Fund shall be maintained and invested in Qualified Investments. The moneys in the Acquisition Fund shall be applied to the payment of the costs and expenses of the Acquisition of the Project and the expenses incidental thereto (including reimbursement to the City for any such costs or expenses paid by it for the account of the Lender, including costs and expenses paid by the City prior to the date hereof). The City hereby grants to the Lender a first priority security interest in the Acquisition Fund. Requisitions from the Acquisition Fund shall be made in the form set forth in Exhibit B.

ARTICLE III

INSTALLMENT PAYMENTS, REVENUES AND ACCOUNTS
Section 3.01. Payment of the Installment Payments.

The total principal amount of the Installment Payments owed and to be paid by the City to the Lender hereunder for the Acquisition of the Project is $_____, plus interest thereon, calculated at the rate of 4.425% per annum provided that, upon a Determination of Taxability, each such interest rate shall automatically, without any further action by the Lender, be increased to the applicable Gross Up Rate. The Installment Payments shall, subject to any rights of prepayment of the City provided in 10 4869-1116-5852.9
Article VI, be due in installments in the amounts and on the dates described in Exhibit A attached hereto.

Each Installment Payment shall be payable to the Lender in accordance with the terms hereof and at the times required by this Section 3.01 in lawful money of the United States of America. In the event the City fails to make any of the payments required to be made by it under this Section 3.01, such payment shall continue as an obligation of the City until such amount shall have been fully paid and the City agrees to pay the same with the stated interest thereon at the rate set forth in the preceding paragraph.

So long as this Installment Purchase Contract is held by the Lender, all Installment Payments paid hereunder shall be paid by wire transfer using the wire instructions provided in writing by the Lender to the City. If no wire instructions are so provided, Installments Payments may be mailed to the address set forth in Lender’s invoice provided to the City.

Subject to Section 8.01 hereof, the obligation of the City to make the Installment Payments is absolute and unconditional, whether or not the Project shall be acquired, and until such time as all Installment Payments shall have been fully paid (or provision for the payment thereof shall have been made pursuant to Article VI hereof), the City will not, under any circumstances, discontinue, abate or suspend any Installment Payments required to be made by it under this Section 3.01 when due, whether or not the Enterprise or any part thereof is operating or operable or has been completed, or whether or not the Enterprise is condemned, damaged, destroyed or seized or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments shall not be subject to reduction whether by offset, counterclaim, defense, recoupment, abatement, suspension, deferment or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or covenant contained herein for any cause whatsoever.

Section 3.02. Interest Component of the Installment Payments.

The Installment Payments shall bear interest from the Closing Date until the payment of the principal thereof and the prepayment premiums, if any, thereon, shall have been made or provided for in accordance with the provisions of Article VI hereof, whether at maturity, upon prepayment or otherwise. Interest accrued on the Installment Payments from the Closing Date and from each Installment Payment Date to, but not including, the next succeeding Installment Payment Date shall be paid on each such succeeding Installment Payment Date and shall be computed on the basis of a year of 360 days and twelve 30-day months. In the event of an Event of Default hereunder, the interest component of the portion of the Installment Payment shall be calculated based on the Default Rate.

Upon the occurrence of a Determination of Taxability with respect to this Installment Purchase Contract, the City shall pay to the Lender, within thirty (30) days after the Lender notifies the City of such determination, the amount which, with respect to Installment Payments previously paid by the City to the Lender, results from the application of the Gross Up Rate thereto equal to the difference between the interest component of such Installment Payments calculated at the interest rate provided in this Installment Purchase Contract and the interest component of the Installment Payments calculated at the Gross Up Rate. The Installment Payments shall bear interest at the Gross Up Rate upon the occurrence of a Determination of Taxability.
11 4869-1116-5852.9
Section 3.03. Establishment of Accounts.

The funds and accounts and flow of funds set forth in this Article III are hereby established and shall control to the extent inconsistent with any other terms of this Installment Purchase Contract.

Section 3.04. Pledge of Net Revenues and Other Funds; Debt Service Fund.

The City hereby irrevocably pledges all of the Net Revenues to the punctual payment of the Installment Payments and such Net Revenues, except as otherwise permitted herein, shall not be used for any other purpose while any of the Installment Payments are due hereunder. This pledge shall constitute a first lien on and security interest in the Net Revenues for the payment of the Installment Payments and payments of all Parity Obligations in accordance with the terms hereof and thereof. No filing, registering, recording or publication of this Installment Purchase Contract is required to establish such pledges hereunder or to perfect, protect or maintain such lien and security interest created hereby on the Net Revenues.

All Installment Payments shall be transferred by the City from the Revenue Fund to the Debt Service Fund, which fund the City hereby agrees to establish and maintain so long as any Installment Payments are due hereunder, on the applicable Due Date. Such payments shall be held in trust by the City under the terms hereof.

Within the Debt Service Fund, the City shall establish a Debt Service Account and a Prepayment Account. Installment Payments made by the City shall be deposited in the Debt Service Account. Such payments shall be net of amounts already on deposit therein that are in excess of the amount required to accumulate therein pursuant to Section 3.01. The City shall transfer the money contained in the Debt Service Account and the Prepayment Account at the following respective times in the following respective accounts in the following order of priority in the manner hereinafter provided, each of which accounts the City hereby agrees to establish and maintain so long as any Installment Payments are due hereunder, and the money in each of such accounts shall be disbursed only for the purposes and uses hereinafter authorized:
(a) Debt Service Account. All moneys in the Debt Service Account shall be used and withdrawn by the City solely for the purpose of paying Installment Payments and principal of and interest on any Parity Obligations on each Installment Payment Date or mandatory redemption dates, as applicable. The City shall be entitled to receive as a credit against Installment Payments an amount equal to the amount of any balance contained in the Debt Service Account prior to the Due Date for such Installment Payments (excluding money designated or necessary for the payment of Parity Obligations).
(b) Prepayment Account. The City, on any optional prepayment date, shall deposit in the Prepayment Account moneys to accomplish any such optional prepayment. All money in the Prepayment Account shall be used and withdrawn by the City solely for the purpose of paying the Installment Payment to be optionally prepaid on their respective prepayment dates.

Section 3.05. Receipt and Deposit of Gross Revenues.

The City covenants and agrees that all Gross Revenues, when and as received, will be received and held by the City in trust hereunder and will be deposited by the City with the Finance Officer in the Revenue Fund and will be accounted for through and held in trust in the Revenue Fund; provided, 12 4869-1116-5852.9
that the City may withdraw such amounts in the Revenue Fund as may be necessary to make refunds for amounts paid in advance for services provided by the Enterprise, which such service was not thereafter made available or provided. All Net Revenues, whether held by the City as trustee or deposited with the Finance Officer, shall nevertheless be disbursed, allocated and applied solely to the uses and purposes hereinafter in this Article III set forth, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the City.

Section 3.06. Establishment and Maintenance of Accounts for Gross Revenues; Use and Withdrawal of Gross Revenues.

The City covenants and agrees that all Gross Revenues, when and as received, will be received and held by the City in trust for the benefit of the Lender and payments with respect to Parity Obligations, and will be deposited by the City in the Revenue Fund (which the City hereby covenants and agrees to maintain so long as any Installment Payments are due hereunder) and will be accounted for and held in trust for the benefit of the Lender and for payments with respect to Parity Obligations.

All Gross Revenues shall be disbursed, allocated and applied solely to the uses and purposes set forth in this Article III.

All Gross Revenues in the Revenue Fund shall be set aside by the City or deposited by the City with the purchasers, trustee or fiscal agent with respect to Parity Obligations, as the case may be, as follows and in the following order of priority:
(a) Maintenance and Operation Costs of the Enterprise. In order to carry out and effectuate the pledge and lien contained herein, the City agrees and covenants to pay all Maintenance and Operation Costs of the Enterprise (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs of the Enterprise, the payment of which is not then immediately required) from the Revenue Fund as they become due and payable. (b) Debt Service Funds. Installment Payments payable pursuant to Section 3.01 hereof and all other payments relating to principal and interest on or with respect to Parity Obligations, shall be paid in accordance with the terms hereof and of such Parity Obligations, without preference or priority, and in the event of any insufficiency of such moneys, ratably without any discrimination or preference.
(c) Reserve Funds. Payments required with respect to Parity Obligations to replenish debt service reserve funds, if any, established for such Parity Obligations shall be made in accordance with the terms of such Parity Obligations, without preference or priority, and in the event of any insufficiency of such moneys, ratably without any discrimination or preference. (d) General Expenditures. All Gross Revenues not required to be withdrawn pursuant to the provisions of (a) through (c) above shall be used for expenditure for any lawful purpose of the City, including payment of any rebate requirement or of any obligation subordinate to the payment of all amounts due hereunder or under Parity Obligations.

The City may maintain and hold a separate fund to be known as the “Rate Stabilization Fund.” From time to time the City may deposit in the Rate Stabilization Fund, from remaining Net Revenues described in this Section 3.06(d) or other legally available funds of the City, such amounts as the City shall determine. The City may withdraw amounts from the Rate Stabilization Fund: (i) for transfer to the Revenue Fund for inclusion in Gross Revenues for any Fiscal Year; or (ii) for any other lawful use 13 4869-1116-5852.9
of the City. Amounts so transferred from the Rate Stabilization Fund to the Revenue Fund in any Fiscal Year constitute Gross Revenues for that Fiscal Year and will be applied for the purposes of the Revenue Fund. All interest or other earnings upon deposit in the Rate Stabilization Fund shall be withdrawn therefrom and accounted for as Gross Revenues. Amounts on deposit in the Rate Stabilization Fund are not pledged to and do not secure the Installment Payments or any Parity Obligations.

Although Parity Obligations are secured equally and ratably by applicable Net Revenues, moneys with respect to obligations other than the Installment Payments may be held by trustees under documents and agreements other than this Installment Purchase Contract. The City shall make such transfers from the Revenue Fund necessary to effectuate such obligations’ parity claim on such Net Revenues contemplated hereby.

Section 3.07. [Reserved].

Section 3.08. Investment of Funds.

Amounts on deposit in any fund or account created pursuant to this Installment Purchase Contract shall be invested in Qualified Investments which will, as nearly as practicable, mature on or before the dates when such money is anticipated to be needed for disbursement hereunder. The Lender and any affiliates may act as sponsor, advisor, principal or agent in the acquisition or disposition of any such investment. Interest or profit received on such investments shall be deposited to the Debt Service Fund. In computing the amount in any fund or account, Qualified Investments shall be valued at market value, exclusive of accrued interest.

If at any time after investment therein a Qualified Investment ceases to meet the criteria set forth in the definition of Qualified Investments and such obligation, aggregated with other nonconforming investments, exceeds five percent (5%) of invested funds, such Qualified Investment shall be sold or liquidated.

ARTICLE IV

PARITY OBLIGATIONS
Section 4.01. Parity Obligations.
(a) So long as any Installment Payments are due hereunder, the City shall not issue or incur any obligations payable from Net Revenues or the Revenue Fund senior or superior to the Installment Payments.
(b) The City may at any time issue Parity Obligations payable from Net Revenues on a parity with the Installment Payments to provide financing for the Enterprise in such principal amount as shall be determined by the City. The City may issue or incur any such Parity Obligations subject to the following specific conditions which are hereby made conditions precedent to the issuance and delivery of such Parity Obligations:
(1) No Event of Default shall have occurred and be continuing; (2) The Net Revenues, calculated in accordance with Generally Accepted Accounting Principles, either: (i) as shown by the books of the City for the latest Fiscal Year, as verified by a certificate of the City; or (ii) as shown by the books of the City for any more recent twelve (12) 14 4869-1116-5852.9
consecutive month period selected by the City, as verified by a certificate or opinion of an Independent Financial Consultant employed by the City, plus in either case (at the option of the City) the Additional Revenues, shall be at least equal to one hundred and twenty percent (120%) of the amount of Maximum Annual Debt Service.
(c) Notwithstanding the above, the City may incur debt payable from Net Revenues: (i) to cause a defeasance of the Installment Payments pursuant to Article VI hereof or a defeasance of any outstanding Parity Obligations if, after giving effect to the application of the proceeds of such refunding debt, total Debt Service (including Installment Payments or Parity Obligations outstanding on the date of issuance or incurrence of such refunding debt, but excluding such refunding debt) does not increase in any Fiscal Year; or (ii) which is payable on a basis which is subordinate to the payment of the Installment Payments. (d) The City may at any time execute contracts or issue bonds or other indebtedness payable from Net Revenues or the Revenue Fund payable on a subordinate basis to the payment of the Installment Payments.
(e) In order to maintain the parity relationship of the Installment Payments to all Parity Obligations permitted hereunder, the City covenants that all payments in the nature of principal and interest with respect to any Parity Obligations, except with respect to Governmental Loans, will be structured to occur semi-annually on the Due Dates and in each year as such payments are due with respect to the Installment Payments, and reserve account replenishment with respect to any Parity Obligations, except with respect to Governmental Loans, will be structured to occur monthly, and to otherwise structure the terms of such Parity Obligations to ensure that they are in all respects payable on a parity with the Installment Payments and not prior thereto; provided that the City shall not make a payment on such Governmental Loan to the extent it would have the effect of causing the City to fail to pay Installment Payments on a timely basis. In such event, the City shall make Installment Payments and payments on such Governmental Loan on a pro rata basis.

ARTICLE V

REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 5.01. Compliance With Installment Purchase Contract.

The City will not suffer or permit any material default by it to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by it.

Section 5.02. Observance of Laws and Regulations.

The City will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by it, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired.
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Section 5.03. Prosecution and Defense of Suits.

The City will promptly, upon request of the Lender, take such action from time to time as may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Enterprise or any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits or other proceedings as may be appropriate for such purpose and will indemnify and save the Lender harmless from all cost, damage, expense or loss, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the Lender’s in-house counsel to the extent permissible), which they or any of them may incur by reason of any such cloud, defect, action, suit or other proceeding.

Section 5.04. Accounting Records and Statements.

The City will keep proper accounting records in which complete and correct entries shall be made of all transactions made by the City relating to the receipt, deposit and disbursement of the Gross Revenues and Net Revenues, and such accounting records shall be available for inspection by the Lender or its agent duly authorized in writing on any Business Day upon reasonable notice at reasonable hours and under reasonable conditions prescribed by the City.

Section 5.05. Further Assurances.

Whenever and so often as requested to do so by the Lender, the City will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Lender all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon them by this Installment Purchase Contract.

Section 5.06. Against Encumbrances.

The City hereby represents that there is no pledge of or lien on Net Revenues senior to the pledge and lien securing the Installment Payments. The City will not make any pledge of or place any lien on the Net Revenues, provided that the City may at any time, or from time to time, pledge or encumber the Net Revenues in connection with the issuance or execution of Parity Obligations in accordance with Section 4.01 or other obligations permitted hereby, or subordinate to the pledge of Net Revenues herein.

Section 5.07. Against Sale or Other Disposition of Property.

The City will not sell, lease, encumber or otherwise dispose of the Enterprise or any part thereof in excess of one-half of one percent of the book value of the Enterprise in any Fiscal Year, unless a Finance Officer certifies that such sale, lease, encumbrance or disposition will not materially adversely affect the operation of the Enterprise or the Net Revenues; provided that, any real or personal property which has become non-operative or which is not needed for the efficient and proper operation of the Enterprise, or any material or equipment which has become worn out, may be sold or exchanged at not less than the fair market value thereof and the proceeds (if any) of such sale or exchange shall be deposited in the Revenue Fund.
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The City will not enter into any agreement or lease which would impair the ability of the City to meet the covenant set forth in Section 5.16 hereof or which would otherwise impair the rights of the Lender or the operation of the Enterprise.

Section 5.08. Against Competitive Facilities.

Except for any utility system existing as of the date hereof, the City will not, to the extent permitted by law, acquire, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, authority, city or political subdivision or any person whomsoever to acquire, maintain or operate within the City any utility system competitive with the Enterprise; provided, that the City may, with the prior written consent of the Lender, assign all or a portion of the Enterprise to another entity upon delivery to the Lender of an opinion of nationally recognized bond counsel that such assignment will not adversely affect the taxexempt status of the Installment Payments, and provided that such entity assumes the obligations of the City hereunder.

Section 5.09. Tax Covenants.

The City shall not take any action or permit to be taken any action within its control which would cause or which, with the passage of time if not cured would cause, the interest with respect to the Installment Payments to become includable in gross income for federal income tax purposes. To that end, the City hereby makes the following specific covenants:
(a) The City hereby covenants that it shall not make or permit any use of the proceeds of the Installment Payments that may cause this Installment Purchase Contract to be “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended.
(b) The City covenants that the proceeds of this Installment Purchase Contract will not be used as to cause the proceeds of this Installment Purchase Contract to satisfy the private business tests of Section 141(b) of the Code or the private loan financing test of Section 141(c) of the Code. (c) The City hereby designates this Installment Purchase Contract as a “qualified tax-exempt obligation” under Section 265(b)(3) of the Code. (d) The City covenants not to take any action or permit or suffer any action to be taken if the result of the same would be to cause this Installment Purchase Contract to be “federally guaranteed” within the meaning of Section 149(b) of the Code.

In furtherance of the covenants stated in this Section, the City shall comply with the requirements of the Tax Compliance Certificate executed in connection with this Installment Purchase Contract.

Section 5.10. Maintenance and Operation of the Enterprise; Budgets.

The City will maintain and preserve the Enterprise in good repair and working order at all times and will operate the Enterprise in an efficient and economical manner. The City will pay all Maintenance and Operation Costs of the Enterprise as they become due and payable. 17 4869-1116-5852.9
Section 5.11. Payment of Claims.

The City will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Net Revenues or any part thereof or on any funds in the control of the City prior or superior to the lien of the Installment Payments or which might impair the security of this Installment Purchase Contract; provided that the City shall not be obligated to make such payment so long as the City contests such payment in good faith.

Section 5.12. Compliance With Contracts.

The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, expressed or implied, required to be performed by it contained in all contracts for the use of the Enterprise and all other contracts affecting or involving the Enterprise to the extent that the City is a party thereto.

Section 5.13. Insurance.
(a) The City will procure and maintain insurance on the Enterprise with commercial insurers or through participation in a joint powers insurance authority, in such amounts, with such deductibles and against such risks (including accident to or destruction of the Enterprise) as are usually insurable in accordance with industry standards with respect to similar enterprises and consistent with the City’s current coverage.

In the event of any damage to or destruction of the Enterprise caused by the perils covered by such insurance, the proceeds of such insurance shall be applied to the repair, reconstruction or replacement of the damaged or destroyed portion of the Enterprise. The City shall cause such repair, reconstruction or replacement to begin promptly after such damage or destruction shall occur and to continue and to be properly completed as expeditiously as possible, and shall pay out of the proceeds of such insurance all costs and expenses in connection with such repair, reconstruction or replacement so that the same shall be completed and the Enterprise shall be free and clear of all liens and claims.

If the proceeds received by reason of any such loss shall exceed the costs of such repair, reconstruction or replacement, the excess shall be applied to the prepayment of Installment Payments as provided in Section 6.01.

Alternatively, if the proceeds of such insurance are sufficient to enable the City to retire all outstanding Parity Obligations and the Installment Payments and all other amounts due hereunder, the City may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Enterprise, and thereupon such proceeds shall be applied to the prepayment of Installment Payments as provided in Section 6.01 and to the payment of all other amounts due hereunder, and as otherwise required by the documents pursuant to which such Parity Obligations were issued. (b) The City will procure and maintain commercial general liability insurance covering claims against the City for bodily injury or death, or damage to property, occasioned by reason of the ownership or operation of the Enterprise, such insurance to afford protection in such amounts and against such risks as are usually covered in connection with similar enterprises. (c) The City will procure and maintain workers’ compensation insurance against liability for compensation under the Workers’ Compensation Insurance and Safety Act of California, 18 4869-1116-5852.9
or any act hereafter enacted as an amendment or supplement or in lieu thereof, such insurance to cover all persons employed in connection with the Enterprise. (d) In lieu of obtaining insurance coverage as required by this Section, such coverage may be maintained by the City in the form of self-insurance so long as the City certifies that:
(i) the City has segregated amounts in a special insurance reserve meeting the requirements of this Section; (ii) an Insurance Consultant certifies annually, on or before December 1 of each year in which self-insurance is maintained, in writing that the City’s general insurance reserves are actuarially sound and are adequate to provide the necessary coverage; and (iii) such reserves are held in a separate trust fund by an independent trustee. The City shall pay or cause to be paid when due the premiums for all insurance policies required hereby.

Section 5.14. Books and Accounts; Financial Statements.

The City shall keep proper books of record and accounts of the Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Enterprise. Said books shall be subject to the inspection by the Lender, or its representatives authorized in writing, upon not less than five (5) Business Days’ prior notice to the City.

The City shall cause the books and accounts of the Enterprise, which shall include a statement of revenues and expenditures and changes in fund balances, a balance sheet and a statement of cash flow, to be audited annually by an Independent Certified Public Accountant or firm of certified public accountants, not more than two hundred and seventy (270) days after the close of each Fiscal Year.

The City shall send a copy of such report and all related financial statements and notes to the Lender.

Such audit may be part of an audit of the City’s financial statements as a whole. The City shall send to the Lender a copy of the annual budget of the Enterprise and any amendment or supplement thereto and the City’s internal financial statements by each August 31 following the end of each Fiscal Year and any other financial information reasonably requested by the Lender. The annual audited report, budget and other financial information may be sent to the Lender at the following email address (or such other address as the Lender supplies to the City in writing): [email protected].

Section 5.15. Payment of Taxes and Compliance With Governmental Regulations.

The City will pay and discharge all taxes, assessments and other governmental charges, if any, which may hereafter be lawfully imposed upon the Enterprise or any part thereof or upon the Net Revenues when the same shall become due. The City will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Enterprise or any part thereof, but the City shall not be required to make such payments, or to comply with any regulations or requirements, so long as the payment or validity or application thereof shall be contested in good faith.

Section 5.16. Amount of Rates and Charges.
(a) The City will, at all times while any of the Installment Payments remain outstanding, fix, prescribe and collect, at the commencement of each Fiscal Year, rates, fees and charges in connection with the Enterprise which are reasonably expected, at the commencement of each Fiscal Year, to yield Gross Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts in the order below set forth:
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(1) All Maintenance and Operation Costs of the Enterprise; (2) The Installment Payments and all payments (including payments of interest and under reimbursement agreements) with respect to related Parity Obligations issued or incurred after the date hereof as they become due and payable; (3) Amounts necessary if any, to replenish Parity Obligation reserve funds to their required levels (or to reimburse any draws under any reserve surety or policy held for the account of any such Parity Obligation reserve fund, and to pay any costs associated therewith, in accordance with the terms of such reserve surety or policy); and (4) All payments required to meet any other obligations of the City which are charges, liens, encumbrances upon or otherwise payable from the Gross Revenues during such Fiscal Year.
(b) Furthermore, the City shall fix, prescribe, revise and collect, at the commencement of each Fiscal Year, rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year which are reasonably expected, at the commencement of such Fiscal Year, to yield estimated Net Revenues which are at least equal to one hundred and twenty percent (120%) of the aggregate amount of the Installment Payments, and principal of and interest on any Parity Obligations issued or incurred after the date hereof payable from Net Revenues coming due and payable during such Fiscal Year. The City may make adjustments, from time to time, in its rates, fees and charges as it deems necessary, but shall not reduce its rates, fees and charges below those in effect unless the Net Revenues resulting from such reduced rates, fees and charges shall at all times be sufficient to meet the requirements set forth in this paragraph. For purposes of this calculation, amounts held by the City in the Rate Stabilization Fund as of the beginning of any Fiscal Year may, at the election of the City, be treated as Net Revenues which are received during such Fiscal Year, in an amount not exceeding 20% of the amount of Debt Service payable from Net Revenues coming due and payable during such Fiscal Year.
(c) If the City violates the covenants set forth in subsections (a) and (b) above, such violation shall not, in and of itself, be a default under this Installment Purchase Contract and shall not give rise to a declaration of an Event of Default if, within 120 days after the date that such violation is discovered, the City hires an Independent Financial Consultant or an Independent Engineer to review the revenues and expenses of the Enterprise and abides by such consultant’s recommendations to revise the schedule of rates, fees and charges, to revise any Maintenance and Operation Costs of the Enterprise insofar as practicable and to take such other actions as are necessary so as to produce Net Revenues to cure such violation for future compliance; provided, however, that if the City does not cure such violation within twelve (12) months succeeding the date that such violation is discovered, an Event of Default shall be deemed to have occurred under Section 7.01(b).

Section 5.17. Collection of Rates and Charges.

The City will have in effect at all times rules and regulations requiring all users of the Enterprise to pay the assessments, rates, fees and charges applicable to the Enterprise provided or made available to such users. Such rules and regulations shall also provide for the billing thereof and for a due date and a delinquency date for each bill.
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Section 5.18. Eminent Domain Proceeds.

If all or any part of the Enterprise shall be taken by eminent domain proceedings, the Net Proceeds thereof shall be applied as follows:
(a) If: (1) the City certifies: (i) the estimated loss of annual Net Revenues, if any, suffered or to be suffered by the City by reason of such eminent domain proceedings; (ii) a general description of the additions, betterments, extensions or improvements to the Enterprise proposed to be acquired by the City from any Net Proceeds; and (iii) an estimate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements; and (2) on the basis of such certificate, determines that the estimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the City to meet its obligations hereunder will not be substantially impaired (which determination shall be final and conclusive); then the City shall promptly proceed with the acquisition of such additions, betterments, extensions or improvements substantially in accordance with such certification and such Net Proceeds shall be applied for the payment of the costs of such acquisition, and any balance of such Net Proceeds not required by the City for such purpose shall be applied to prepay the Installment Payments, and any Parity Obligations, on a pro rata basis in the manner provided herein and in the instruments authorizing such Parity Obligations. (b) If the foregoing conditions are not met, then such Net Proceeds shall be applied to prepay the Installment Payments, and any Parity Obligations, on a pro rata basis in the manner provided herein and in the instruments authorizing such Parity Obligations.

Section 5.19. Release and Indemnification Covenants.

To the extent permitted by law, the City shall and hereby agrees to indemnify and save the Lender, its officers, directors, agents, employees, successors or assigns harmless from and against all claims, losses and damages, including legal fees and expenses (to include outside counsel fees and all allocated costs of the Lender’s in-house counsel to the extent permissible), arising out of: (i) the use, maintenance, condition or management of, or from any work or thing done on, the Enterprise or the Project by the City; (ii) any breach or default on the part of the City in the performance of any of the City’s obligations under this Installment Purchase Contract or the Conveyance Agreement; (iii) any act of negligence of the City or of any of its contractors, servants, employees or licensees with respect to the Enterprise or the Project; (iv) any act of negligence of any assignee or sublessee of the City, or of any agents, contractors, servants, employees or licensees of the assignee or sublessee of the City with respect to the Enterprise or the Project; (v) any environmental claims or issues; (vi) the Acquisition of the Enterprise or the Project or authorization of payment of the costs of the Acquisition of the Enterprise or the Project, to the extent permitted by law; or (vii) the preparation, negotiation, execution, delivery and administration of this Installment Purchase Contract and the other related documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated). Indemnification for any tort mentioned in this Section shall exclude those arising from the willful misconduct or gross negligence hereunder or under the Conveyance Agreement by the Lender, its officers and employees.

To the extent permitted by law, the City further covenants and agrees to indemnify and save the Lender harmless against any claim, loss, expense, advance, and liabilities which it may incur arising out of or in the exercise and performance of their powers and duties hereunder and under the Conveyance Agreement, including the costs and expenses (including attorneys’ fees and disbursements 21 4869-1116-5852.9
(to include outside counsel fees and all allocated costs of the Lender’s in-house counsel to the extent permissible)) of defending against any claim of liability or enforcing any remedies, and which are not due to their gross negligence or willful misconduct. The City further covenants and agrees to advance to the Lender the amounts requested as the costs and expenses of such defense. Any and all special obligations of the City under this Section shall be and remain valid and binding special obligations of the City notwithstanding the payment in full of the Installment Payments and the termination of this Installment Purchase Contract.

Section 5.20. Further Representations, Covenants and Warranties of the City.

The City represents, covenants and warrants to the Lender as follows:
(a) The City is a duly organized and validly existing municipal corporation and general law city of the State of California.
(b) The Constitution and the laws of the State of California authorize the City to enter into this Installment Purchase Contract and the Conveyance Agreement and to enter into the transactions contemplated thereby and to carry out its obligations under each of the aforesaid agreements, and the City has duly authorized and executed each of the aforesaid agreements in accordance with the laws of the State of California.
(c) Neither the execution and delivery of this Installment Purchase Contract or the Conveyance Agreement nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under either of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City. (d) The City has duly authorized and executed this Installment Purchase Contract and the Conveyance Agreement in accordance with the laws of the State of California. (e) Subject to the applicable provisions of the California Constitution, the City is empowered to set rates and charges for services provided by the Enterprise provided to the users of the Enterprise without review or approval by any state or local governmental agency. (f) This Installment Purchase Contract and the pledge of Net Revenues is a first lien and pledge on Net Revenues.
(g) The City acknowledges that: (i) the Lender is acting solely for its own loan account and not as a fiduciary for the City or in the capacity of broker, dealer, placement agent, municipal securities underwriter or municipal advisor; (ii) the Lender has not provided, and will not provide, financial, legal (including securities law), tax, accounting or other advice to or on behalf of the City or with respect to this Installment Purchase Contract and the financing related thereto; and (iii) the Lender has expressed no view regarding the legal sufficiency of its representations for purposes of compliance with any legal requirements applicable to any other party, or the correctness of any legal interpretation made by counsel to any other party with respect to any such matters. 22 4869-1116-5852.9
(h) The financial information concerning the City heretofore delivered to the Lender is complete and correct and fairly presents the financial condition of the City for the period(s) referred to and has been prepared in accordance with Generally Accepted Accounting Principles applied on a consistent basis throughout the period(s) involved. There are no liabilities (of the type required to be reflected on balance sheets prepared in accordance with Generally Accepted Accounting Principles), direct or indirect, fixed or contingent, of the City as of the date of such financial information which are not reflected therein. There has been no material adverse change in the financial condition or operations of the City since the date of such information (and to the City’s knowledge no such material adverse change is pending or threatened), and the City has not guaranteed the obligations of, or made any investment in or loans to, any person except as disclosed in such information. The City has good and marketable title to all of its properties and assets related to the Project, and all of such properties and assets are free and clear of encumbrances, except as reflected in such financial information. To the best of the City’s knowledge, no document furnished nor any representation, warranty or other written statement made to the Lender in connection with the negotiation, preparation or execution of this Installment Purchase Contract contains any untrue or misleading statement of a material fact.
(i) The City has never non-appropriated or defaulted under any of its payment or performance obligations or covenants, either under any financing contract of the same general nature as this Installment Purchase Contract, or under any of its bonds, notes, or other debt obligations. (j) The City is in full compliance with all Laws and Regulations, including Environmental Regulations, and the City shall remain in compliance with such Laws and Regulations, including Environmental Regulations.
(k) The City shall further provide to the Lender: (i) within three (3) Business Days after the City obtains knowledge thereof, notice by telephone, promptly confirmed in writing, of any event that constitutes an Event of Default under this Installment Purchase Contract, together with a statement of the City of the steps being taken by the City to cure such Event of Default; (ii) within ten (10) days after the City obtains knowledge thereof, written notice of any Material Adverse Effect; (iii) within ten (10) days after receipt of request therefor by the Lender, updates, if any, of the information described in Section 5.14 of this Installment Purchase Contract; and (iv) within ten (10) days after receipt of request therefor by the Lender, such additional information as the Lender may reasonably request.
(l) The City reasonably believes that sufficient funds can be obtained to make all Installment Payments and all other amounts required to be paid pursuant to this Installment Purchase Contract.
(m) All information, reports and other papers and data furnished by the City to the Lender, at the time the same were so furnished, complete and accurate in all material respects and insofar as necessary to give the Lender a true and accurate knowledge of the subject matter and were provided in expectation of the Lender’s reliance thereon in entering into the transactions contemplated by this Installment Purchase Contract. No fact is known to the City which has had or, so far as the City can now reasonably foresee, may in the future have a Material Adverse Effect, which has not been set forth in the financial statements previously furnished to the Lender or in other such information, reports, papers and data or otherwise disclosed in writing to the Lender prior to the Closing Date. Any financial, budget and other projections furnished to the Lender by the City or its or their agents were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair and 23 4869-1116-5852.9
reasonable in light of the conditions existing at the time of delivery of such financial, budget or other projections, and represented, and as of the date of this representation, represent the City’s best estimate of its future financial performance. No document furnished nor any representation, warranty or other written statement made to the Lender in connection with the negotiation, preparation or execution of this Installment Purchase Contract contains or will contain any untrue statement of a material fact or omits or will omit to state (as of the date made or furnished) any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were or will be made, not misleading.
(n) The City does not enjoy any rights of immunity on the grounds of sovereign immunity in respect of its obligations under this Installment Purchase Contract or otherwise with respect to the Installment Payments. To the extent that the City has or hereafter may acquire under any applicable law any rights to immunity from legal proceedings on the grounds of sovereignty, the City hereby waives, to the extent permitted by law, such rights to immunity for itself in respect of its obligations arising under or related to this Installment Purchase Contract or otherwise with respect to the Installment Payments.

Section 5.21. Representations, Covenants and Warranties of the Lender.

The Lender represents, covenants and warrants to the City as follows:
(a) The Lender is a national banking association; has power to enter into this Installment Purchase Contract and the Conveyance Agreement; and to sell the same; and has duly authorized the execution and delivery of the aforesaid agreements. (b) The Lender will not assign this Installment Purchase Contract or its right to receive Installment Payments from the City, or its duties and obligations under this Installment Purchase Contract to any other person, firm or corporation, except to an affiliate of the Lender or to banks, insurance companies or other financial institutions or their affiliates, including participation arrangements with such entities, which are Qualified Institutional Buyers (as such term is defined in 17 C.F.R. § 230.144A(a)(1)); provided that no such assignment shall be made that would cause there to be more than 15 such assignees or any interest in the Installment Payments of less than $250,000.

ARTICLE VI

PREPAYMENT OF INSTALLMENT PAYMENTS
Section 6.01. Prepayment.
(a) The City may or shall, as the case may be, prepay on any Installment Payment Date from the Net Proceeds of insurance or condemnation awards, as provided herein, all or any part, in integral multiples of $5,000, of the principal amount of the unpaid Installment Payments, in inverse order of maturity among the remaining Installment Payments, at a prepayment price equal to the sum of the principal amount prepaid plus accrued and unpaid interest thereon to the date of prepayment, without premium.
(b) The City may prepay the unpaid principal balance of the Installment Payments in whole (but not in part), on September 1, 2028 or any Installment Payment Date thereafter, by paying a prepayment price equal to the principal amount of the Installment Payments to be prepaid, plus accrued interest to the date of prepayment, plus a prepayment premium as follows:
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Prepayment Date Prepayment Premium
Any Installment Payment Date from September 1, 2028 to
August 31, 2031 2%
Any Installment Payment Date from September 1, 2031 to
August 31, 2034 1
September 1, 2034 and any Installment Payment Date
thereafter 0
Except in connection with a security deposit as set forth in Section 6.03 hereof, the City shall be required to give the Lender written notice of its intention to prepay the Installment Payments or any portion thereof, as applicable, under subsections (a) or (b) above at least thirty (30) days prior to the proposed prepayment date.

In the event that the Installment Payments shall have been prepaid by the City pursuant to subsections (a) or (b) above, the total amount of all future payments set forth in the schedule attached hereto as Exhibit A shall be reduced by the aggregate amount of such Installment Payment so prepaid, as agreed to by the Lender. The Lender shall provide a revised schedule of Installment Payments to the City, which revised schedule shall be deemed to be an amendment to this Installment Purchase Contract.

Notwithstanding any such prepayment, the City shall not be relieved of its obligations hereunder, including its obligations under Article III hereof, until the entire principal amount of the unpaid Installment Payments together with the interest accrued thereon, if any, and together with the ordinary and extraordinary fees, costs and expenses of the Lender, shall have been fully paid and the Installment Payments are no longer due hereunder (or provision for payment thereof shall have been made pursuant to Section 6.03 hereof).

Section 6.02. Method of Prepayment.

Before making any prepayment pursuant to Section 6.01(a), the City shall, give written notice to the Lender describing such event and specifying the date on which the prepayment will be made, which date shall be not less than thirty (30) days from the date such notice is given.

Section 6.03. Security Deposit.

Notwithstanding any other provision of this Installment Purchase Contract, the City may secure the payment of all or a portion of Installment Payments by a deposit with the Lender or, at the Lender’s sole option, a bank or trust company acceptable to the Lender, as escrow holder under an escrow deposit and trust agreement, of either: (i) cash in an amount which is sufficient to pay such unpaid Installment Payments, including the principal and interest components thereof, in accordance with the Installment Payment schedule set forth in Exhibit A attached hereto; or (ii) non-callable Federal Securities or pre-refunded non-callable municipal obligations rated “AAA” and “Aaa” by S&P Global Ratings and Moody’s Investor’s Service, respectively, together with cash if required, in such amount as will, without re-investment, in the opinion of an Independent Certified Public Accountant (which opinion shall be addressed to the Lender), together with interest to accrue thereon, be fully sufficient to pay such unpaid Installment Payments on their payment dates so that such Installment Payments shall be defeased; provided, that prior to any such deposit or defeasance, the City must provide an opinion of nationally recognized bond counsel addressed to the Lender to the effect that such deposit and defeasance will not cause the interest component of the Installment Payments to be included in 25 4869-1116-5852.9
gross income for federal income tax purposes. In the event of any shortfall, the City shall deposit from legally available funds such amounts as is necessary to make up such shortfall.

In the event of a deposit pursuant to this Section 6.03, and provided that all other amounts payable by the City hereunder have been paid in full, all obligations of the City under this Installment Purchase Contract shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all Installment Payments from the deposit made by City pursuant to this Section 6.03 and the obligation to pay amounts due the Lender. Said deposit shall be deemed to be and shall constitute a special fund that may be used solely for the payment of Installment Payments in accordance with the provisions of this Installment Purchase Contract, and pending such application shall be held in trust and pledged to and for the sole benefit of the Lender and any assignee or transferee of the Lender. The City hereby grants to the Lender a first priority security interest in any amounts so deposited.

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default and Events of Mandatory Acceleration; Acceleration of Maturities.

If one or more of the following Events of Default shall happen:
(a) default shall be made in the due (whether at maturity, by reason of acceleration or otherwise) and punctual payment by the City of any Installment Payment or any other amount payable hereunder or under the Conveyance Agreement when and as the same shall become due (whether at maturity, by reason of acceleration or otherwise) and payable; or (b) default shall be made by the City in the performance of any of the agreements or covenants contained herein (other than those referenced in Section 7.01(a) hereof) required to be performed by it, and such default shall have continued for a period of thirty (30) days after the earlier of: (i) the City’s knowledge of such default; and (ii) receipt by the City of written notice from the Lender of such default; or
(c) any financial statement or certificate furnished to the Lender in connection with this Installment Purchase Contract, or any representation or warranty made by the City shall prove to be incorrect, false or misleading in any material respect when furnished or made; or (d) the City shall file a petition seeking arrangement or reorganization under federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with the consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the City or of the whole or any substantial part of its property, or the City shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition, or the City shall be adjudicated a bankrupt, or an order for relief shall be entered against the City by any court of competent jurisdiction under the United States Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors; or 26 4869-1116-5852.9
(e) the entry or filing of any final, nonappealable judgment or any similar process in an amount in excess of $500,000 against the City or against any of its property and failure by the City to stay the enforcement of such judgment or other process for a period of 60 days or failure to pay or satisfy the same within 60 days; or
(f) the City shall in writing claim, or repudiate its obligations under, or initiate any legal proceedings to seek an adjudication that, any of the provisions that provide for the payment of the Installment Payments is not valid or binding on the City, or any court of competent jurisdiction or other governmental authority with jurisdiction to rule on the validity of this Installment Purchase Contact shall find or rule that any of the provisions that provide for the payment of Installment Payments is not valid or binding on the City, or any provision of this Installment Purchase Contact shall cease to be valid and binding or shall be declared null and void; or the City or any governmental authority shall contest any such provision, or the City or any agent or trustee on behalf of the City shall deny that it has any further liability under any provision of this Installment Purchase Contact, or the City shall: (A) claim that this Installment Purchase Contact is not valid or binding on it; (B) repudiate its obligations under this Installment Purchase Contact; and/or (C) initiate any legal proceedings to seek an adjudication that this Installment Purchase Contact or the City’s obligation to repay any Parity Obligation is not valid or binding on it; or
(g) the adoption of any resolution of the City to authorize any action or event that would constitute an Event of Default; or
(h) an event of default shall have occurred with respect to any Parity Obligations; then and in each and every such case during the continuance of such Event of Default the Lender may invoke the Default Rate and may, by notice in writing to the City declare the principal amount of the unpaid Installment Payments, and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding.

This provision, however, is subject to the condition that, except with respect to an Event of Default under subsection (d) above, if at any time after such principal amount of the unpaid Installment Payments and the accrued interest thereon shall have been so declared due and payable and before the acceleration date or the date of any judgment or decree for the payment of the money due shall have been obtained or entered, the City shall deposit with the Lender a sum sufficient to pay such unpaid principal amount of the Installment Payments due prior to such date and the accrued interest thereon, with any interest due on such overdue installments, and the reasonable expenses of the Lender, and any and all other defaults known to the Lender (other than in the payment of such principal amount of the unpaid Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Lender or provision deemed by the Lender to be adequate shall have been made therefor, then and in every such case the Lender, by written notice to the City, may (but shall be under no obligation to) rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. 27 4869-1116-5852.9
Section 7.02. Application of Funds Upon Default.

All moneys and investments in the funds and accounts held hereunder upon the date of the declaration of an Event of Default as provided in Section 7.01 and all Gross Revenues thereafter received shall be applied as follows:
(a) Unless the principal of all Installment Payments shall have become or shall have been declared due and payable, all such moneys shall be applied:

First: To the payment to the persons entitled thereto of the interest portion of all Installment Payments, with interest on overdue installments, if lawful, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment of interest, then to the payment ratably according to the amounts due on such installment, to the persons entitled thereto without any discrimination or privilege; and Second: To the payment to the persons entitled thereto of the unpaid principal of any of the Installment Payments which shall have become due, with interest at their rate from the respective dates upon which they became due, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full Installment Payments due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal and interest due on such date, to the persons entitled thereto without any discrimination or privilege. (b) If all of the Installment Payments shall have become due or shall have been declared due and payable, all such moneys shall be applied to the payment of the Installment Payments, with interest on overdue interest and principal, as aforesaid, without preference or priority over interest or of interest over principal or of any installment of interest over any other installment of interest, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or privilege.

Section 7.03. Other Remedies of the Lender.

The Lender may:
(a) by mandamus or other action or proceeding or suit at law or in equity enforce its rights against the City and compel the City to perform and carry out its duties under applicable law and the agreements and covenants contained herein required to be performed by it; (b) by suit in equity enjoin any acts or things which are unlawful or violate the rights of the Lender;
(c) by suit in equity upon the happening of an Event of Default require the City and its board members, officers and employees to account as the trustee of an express trust; or (d) by suit in equity, to seek the appointment of a receiver or other third party to operate the Enterprise and collect the Gross Revenues.

Section 7.04. Non-Waiver.

Nothing in this Article VII or in any other provision hereof shall affect or impair the obligation of the City, which is absolute and unconditional, to pay the Installment Payments to the Lender at the 28 4869-1116-5852.9
respective due dates or upon prepayment from the Gross Revenues, or, except as expressly provided herein, shall affect or impair the right of the Lender, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein.

A waiver of any default or breach of duty or contract by the Lender shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Lender to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Lender by applicable law or by this Article VII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Lender.

If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Lender, the City and the Lender shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Section 7.05. Remedies Not Exclusive.

No remedy herein conferred upon or reserved to the Lender is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any other law.

ARTICLE VIII

MISCELLANEOUS
Section 8.01. Liability of City Limited.

Notwithstanding anything contained herein, the City shall not be required to advance any moneys derived from any source of income other than the Net Revenues legally available therefor in the Revenue Fund, and the other funds provided herein for the payment of the Installment Payments or for the performance of any agreements or covenants contained herein required to be performed by it. The City may, however, but shall not be required to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose.

The obligation of the City to make the Installment Payments and the other amounts due hereunder is a special obligation of the City payable solely from Net Revenues and does not constitute a debt or pledge of the faith and credit of the City or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction.

Section 8.02. Benefits of Installment Purchase Contract Limited to Parties.

Except as provided in Section 8.03, nothing contained herein, express or implied, is intended to give to any person other than the City or the Lender any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the City or the Lender shall be for the sole and exclusive benefit of the other party. 29 4869-1116-5852.9
Section 8.03. Successor Is Deemed Included in All References to Predecessor.

Whenever the City or the Lender is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the City or the Lender, and all agreements and covenants required hereby to be performed by or on behalf of the City or the Lender shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.

Section 8.04. Waiver of Personal Liability.

No board member, officer, employee or agent of the City shall be individually or personally liable for the payment of the Installment Payments, but nothing contained herein shall relieve any board member, officer or employee of the City from the performance of any official duty provided by any applicable provisions of law or hereby.

Section 8.05. Article and Section Headings, Gender and References.

The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to “Articles,” “Sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to this Installment Purchase Contract as a whole and not to any particular article, section, subdivision or clause hereof.

Section 8.06. Partial Invalidity.

If any one or more of the agreements or covenants or portions thereof contained herein required to be performed by or on the part of the City or the Lender shall be contrary to the law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The City and the Lender hereby declare that they would have executed this Installment Purchase Contract, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.

Section 8.07. Assignment.

This Installment Purchase Contract and any rights hereunder, and any participation of the Installment Payments by the Lender, may be assigned by the Lender with notice to the City, subject to the provisions of Section 5.21(b) hereof. The City may not assign any of its rights hereunder, except as otherwise provided in Section 5.08 hereof.

Section 8.08. California Law.

This Installment Purchase Contract shall be construed and governed in accordance with the laws of the State of California.
30 4869-1116-5852.9
Section 8.09. Notices.

All written notices to be given hereunder shall be given by certified mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other party in writing from time to time namely:

If to the City: City of Grover Beach
154 S. 8th Street
Grover Beach, CA 93433
Attention: City Manager
If to the Lender: Webster Bank, National Association
200 Elm Street
Stamford, CT 06901
Attention: Public Sector Finance
Section 8.10. Judicial Reference.

TO THE EXTENT PERMITTED BY APPLICABLE LAWS, EACH OF THE PARTIES

HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF

ACTION BASED UPON OR ARISING OUT OF THIS INSTALLMENT PURCHASE CONTRACT

OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING

CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. IF AND TO THE EXTENT THAT THE

FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY

REASON IN SUCH FORUM, EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE

ADJUDICATION OF ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE

SHALL BE EMPOWERED TO HEAR AND DETERMINE ALL ISSUES IN SUCH REFERENCE, WHETHER FACT OR LAW. EACH OF THE PARTIES HERETO REPRESENTS THAT EACH

HAS REVIEWED THIS WAIVER AND CONSENT AND EACH KNOWINGLY AND

VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING CONSULTATION WITH LEGAL COUNSEL ON SUCH MATTERS.

IN THE EVENT OF LITIGATION, A COPY OF THIS INSTALLMENT PURCHASE CONTRACT

MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN.

Section 8.11. Effective Date.

This Installment Purchase Contract shall become effective upon its execution and delivery, and shall terminate when all Installment Payments shall have been fully paid (or provision for the payment thereof shall have been made to the written satisfaction of the Lender pursuant to Article VI hereof); provided, that the obligation of the City to indemnify the Lender shall survive the termination of this Installment Purchase Contract.
31 4869-1116-5852.9
Section 8.12. Execution in Counterparts.

This Installment Purchase Contract may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.

Section 8.13. Amendments.

The City may at any time amend or modify the definition of Project as set forth in this Installment Purchase Contract to provide for the designation of an Alternate Project as provided for in Section 2.01 hereof with the consent of the Lender, which shall not be unreasonably withheld. This Installment Purchase Contract may be amended in writing as may be mutually agreed by the City and the Lender. Any amendment made in violation of this Section 8.13 shall be a nullity and void.

Section 8.14. Restrictions.

The City and the Lender understand that this Installment Purchase Contract shall not be, and the City and the Lender shall not cause this Installment Purchase Contract to be: (a) assigned a rating by any credit rating agency; (b) registered with The Depository Trust Company or any other securities depository; (c) offered pursuant to any type of offering document or official statement; (d) assigned a CUSIP number by Standard & Poor’s CUSIP Service; or (e) listed on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website.

Section 8.15. Website Disclosure.

If the City elects or is required to post this Installment Purchase Contract and related documentation on a national public market repository, the City may do so with certain information redacted pursuant to this Section. With respect to any such posting, the City shall provide such documentation to the Lender for review with reasonable advance notice prior to any posting deadline imposed by applicable law and shall consider in good faith reasonable redaction requests of the Lender Sensitive Data (defined below) that are provided within a reasonable period prior to such posting deadline. The City shall redact such Bank Sensitive Data as directed by the Lender. For the purpose of this Section, “Bank Sensitive Data” means signatures/names, account numbers, wire transfer and payment instructions and any other data that could be reasonably construed as sensitive information. [Signatures on the following page]
4869-1116-5852.9
IN WITNESS WHEREOF, the parties hereto have executed and attested this Installment Purchase Contract by their officers thereunto duly authorized as of the day and year first written above.

CITY OF GROVER BEACH
By:

Kassi Dee
Mayor
ATTEST:

By:

Wendi Sims
City Clerk

WEBSTER BANK, NATIONAL ASSOCIATION
By:

Authorized Officer
4869-1116-5852.9

EXHIBIT A

INSTALLMENT PAYMENT SCHEDULE
Due Date (3rd Business Day Prior to)
Amount Attributable to
Principal
Amount Attributable
to Interest1 Total
03/01/2026 $[__ - $ $
09/01/2026 -
03/01/2027 -
09/01/2027
03/01/2028 -
09/01/2028
03/01/2029 -
09/01/2029
03/01/2030 -
09/01/2030
03/01/2031 -
09/01/2031
03/01/2032 -
09/01/2032
03/01/2033 -
09/01/2033
03/01/2034 -
09/01/2034
03/01/2035 -
09/01/2035
03/01/2036 -
09/01/2036
03/01/2037 -
09/01/2037
03/01/2038 -
09/01/2038
03/01/2039 -
09/01/2039
03/01/2040 -
09/01/2040
03/01/2041 -
09/01/2041
03/01/2042 -
09/01/2042
03/01/2043 -
09/01/2043
03/01/2044 -
09/01/2044
03/01/2045 -
09/01/2045
TOTAL $ $ $__]
1 Assumes no Event of Default or Event of Taxability has occurred at the time of such Installment Payments. 4869-1116-5852.9

EXHIBIT B

FORM OF ACQUISITION FUND REQUISITION
$_____
Installment Purchase Contract, dated as of September 1, 2025 by and between
the City of Grover Beach and Webster Bank, National Association REQUISITION NO. __ FOR

DISBURSEMENT FROM ACQUISITION FUND
The undersigned hereby states and certifies to the Director of Administrative Services of the City of Grover Beach, a municipal corporation and general law city that is duly organized and existing under the laws of the State of California (the “City”):
(i) that the undersigned is the duly appointed, qualified and acting [Assistant] City Manager of the City, and as such, is familiar with the facts herein certified and is authorized to certify the same;
(ii) that, pursuant to Section 2.05 of that certain Installment Purchase Contract, dated as of September 1, 2025 (the “IPC”), by and between the City and Webster Bank, National Association, the undersigned hereby requests the Director of Administrative Services of the City to disburse this date the following amounts from the Acquisition Fund established under the IPC to the payees designated on the attached Exhibit A;
(iii) that each obligation mentioned herein has been incurred by the City and is a proper charge against the Acquisition Fund;
(iv) that any approval required under the California Environmental Quality Act, as amended (Division 13 of the California Public Resources Code), prior to the expenditure of such amount for the purpose set forth on the attached Exhibit 1 has been received and is final; and (v) that there has not been filed with or served upon the City notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on the attached Exhibit 1, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law.

Dated: , 20__

CITY OF GROVER BEACH
By:
[Assistant] City Manager
B-2
4869-1116-5852.9
EXHIBIT 1

ACQUISITION FUND DISBURSEMENTS
Item
Number Payee Name and Address Purpose of Obligation Amount $
4869-1116-5852.9

EXHIBIT C

DESCRIPTION OF THE PROJECT
Construction of approximately:
- 719 feet of 8-inch sewer pipe;
- 2,465 feet of 10-inch diameter sewer pipe;
- 2,932 feet of 12-inch diameter sewer pipe; and
- 301 feet of 18-inch diameter sewer pipe.

Approximately 4,905 feet of pipe will be installed using pipe bursting methods.

Work will also include installation of seven new manholes, installation of two cleanouts and the coating of four manholes.

Work locations:

C-101 MANHATTAN AVENUE - STA. 1+01.77 to STA. 4+17.51
C-102 SOUTH 4th ST. - STA. 4+17.51 to STA. 8+50.00
C-105 ROCKAWAY AVE. - STA. 16+00.00 to STA. 19+50.00
C-106 ROCKAWAY AVE. - STA. 19+50.00 to STA. 23+50.00
C-107 ROCKAWAY AVE. - STA. 23+50.00 to STA. 27+50.00
C-108 ROCKAWAY AVE. - STA. 27+50.00 to STA. 31+50.00
C-109 ROCKAWAY AVE. - STA. 31+50.00 to STA. 34+50.98
C-110 NORTH 8th ST. - STA. 35+00.00 to STA. 38+84.13
C-111 RAMONA AVE. - STA. 38+84.13 to STA. 42+52.93
C-112 NORTH 9th ST. - STA. 42+52.93 to STA. 46+50.00
C-113 NORTH 9th ST. - STA. 46+50.00 to STA. 51+00.00
C-114 NORTH 9th ST. - STA. 51+00.00 to STA. 55+50.00
C-115 NORTH 9th ST. - STA. 55+50.00 to STA. 59+96.92
C-116 HIGHLAND WAY - STA. 60+00 to STA. 63+43.27
C-117 GRIFFIN STREET - STA. 70+00 to STA. 73+87.23
4895-9552-0412.6
__________________________________________________________________________

CONVEYANCE AGREEMENT
between the

CITY OF GROVER BEACH
and

WEBSTER BANK, NATIONAL ASSOCIATION
Dated as of September 1, 2025
___________________________________________________________________________ Attachment 5
4895-9552-0412.6

CONVEYANCE AGREEMENT
THIS CONVEYANCE AGREEMENT, dated as of September 1, 2025 (as amended and supplemented hereafter, the “Conveyance Agreement”), is entered into by and between the CITY OF GROVER BEACH, a general law city and municipal corporation that is duly organized and validly existing under the Constitution and laws of the State of California (the “City”), and Webster Bank, National Association (including its successors and permitted assigns hereunder, the “Lender”).

RECITALS
WHEREAS, the City and the Lender desire to provide funds to finance the Project (as defined in the Installment Purchase Contract), to be repaid by installment purchase payments to be made by the City, as purchaser of the Project, to the Lender, as seller, pursuant to that certain Installment Purchase Contract, dated as of September 1, 2025 (the “Installment Purchase Contract”); NOW, THEREFORE, in consideration of receipt of the amount of $5,000,000 by the City as the purchase price of the Project and of the foregoing and the mutual covenants and conditions contained herein, the parties hereto agree as follows:

Section 1. The City hereby sells, conveys and transfers to the Lender all of its right, title and interest in and to the Project, but only to the extent that the components of the Project may be legally transferred by the City, and the Lender hereby purchases, acquires and accepts from the City, the Project, subject to the obligation of the Lender to resell the Project to the City pursuant to the Installment Purchase Contract.

Section 2. The City hereby agrees to cooperate and provide further assurances to the Lender in order to accomplish the purposes of this Conveyance Agreement. The City hereby agrees to indemnify and hold the Lender harmless against any and all claims, losses, costs or damages as a result of the City’s conveyance and acquisition of the Project to the Lender as provided herein, or the acquisition of the Project pursuant to the Installment Purchase Contract. (Signatures on the following page)
2 4895-9552-0412.6
IN WITNESS WHEREOF, the parties hereto have executed this Conveyance Agreement by their officers as of the date first above written.

CITY OF GROVER BEACH
By: ___________________________________
Kassi Dee
Mayor

WEBSTER BANK, NATIONAL
ASSOCIATION, as Lender
By: ___________________________________
Authorized Officer

CITY OF GROVER BEACH

CITY COUNCIL STAFF REPORT
Agenda Item No. 6
Placement: Business
Meeting Date: September 8, 2025
TO: Honorable Mayor and City Council
FROM: Matthew Bronson, City Manager
PREPARED BY: Greg Ray, Public Works Director/City Engineer Matthew Bronson, City Manager
SUBJECT: Water System Update

RECOMMENDATION
Receive a report on the status and overview of the City’s water system including water infrastructure needs, water supply conditions, and Water Enterprise Fund financial issues and provide direction to staff regarding a proposed water supply alternatives study.

BACKGROUND
This report provides an update on the status and overview of the City’s water system including water infrastructure needs, water supply, and Water Enterprise Fund financial issues. The report also provides information about a proposed water resiliency study funded in this year’s Water Fund budget. Staff is seeking Council direction on the scope of this study to evaluate the necessity and options for future alternative water supply sources to meet the City’s long-term needs before requesting proposals for the study. This agenda item is consistent with the FY 2025-27 Council Priority of Water and Sewer Infrastructure and Needed Resources.

Water Infrastructure Needs
The City's water system is comprised of approximately 48 miles of water mains, 1,600 valves, 440 fire hydrants, three 1-million-gallon water reservoirs, four wells of which three have water treatment plants, a single booster station, and 2,530 water meters. The system is predominately over 40 years old and some components as old as 60 years. For example, approximately 13 miles of water mains were constructed in the 1960s with asbestos cement pipe that has recently seen numerous failures as a result of its age. In the last fiscal year 2024-25, staff recorded 31 unexpected service interruptions due to leaks and main failures compared with a goal of no more than five.

Historically, due to a lack of sufficient funding historically in the Water Fund over many years, major maintenance of the water system has been deferred with infrastructure replacement and upgrades only occurring after system components failed. In 2010, staff developed a Water Master Plan and a 10-year Capital Improvement Program (CIP) for the water system to begin maintenance and replacement of aging system components which were long overdue. In addition, given the recommendations in this Water Master Plan to upsize certain water mains, valves and pumps for existing and future development, staff also proposed capital projects for water system capacity upgrades. However, to minimize impacts to ratepayers at the time, the 10-year CIP was modified and spread across a 20-year period resulting in greater risk of system failures and loss Staff Report: Water System Update Page 2
September 8, 2025
of service. An updated Water Master Plan and 10-year CIP was developed in 2019 which provided additional information about the condition of the City’s water system and identified the need for further upgrades and improvements to water infrastructure. Following issuance of a water revenue bond in 2020, the City made some progress in addressing these infrastructure needs but similar to 2010, the 10-year CIP was spread over a 20-year period to minimize ratepayer costs which has delayed implementation of needed projects.

At the June 10, 2024 Council meeting, staff presented information on the status of the Water Enterprise Fund and lack of funding available to complete necessary capital improvements. Below is a list of identified water projects delayed as a result of insufficient revenue shared with the Council in June 2024 and remain delayed at this time:
• Water Main Zone Valves - Replacement of existing zone valves and installation of additional zone valves are necessary in order to reduce the scope of water shutdowns for water repairs. Currently the system has a number of valves that have failed and with a relatively small number of valves, most shutdowns involve multiple blocks. • Well Facility Improvements - The City's aging well field and well field components need to be updated in order to deliver their original capacity and to assure a continuous supply of groundwater to the City.
• 16th Street Booster Station Pump and Equipment Upgrades – This project ensures approximately 25% of residential water accounts (approximately 1,300 accounts) including Grover Heights Elementary School have adequate water pressure and flow at their water meters and fire hydrants for fire suppression. • Water Meter Replacement Program - More than 50% of the City’s existing water meters are older than 10 years old. As water meters approach 10 years of age, they begin failing and underreporting the amount of water used. The result is a loss in income to the water system further depleting revenue needed for operations, maintenance and upgrades. • Automated Meter Reading - The current manual read system allows system errors such as failed meters and significant leaks to remain undetected for up to two months resulting in either significant costs to residents or significant loss of revenue to the water system.

The automated read system would provide instantaneous feedback regarding errors and improved service to the City's water customers.
• Upsizing Water Mains – There are a number of water main segments that require upsizing in order to provide adequate fire flow to certain areas of the City. Without these upgrades, there could be insufficient pressure or flow to provide adequate fire suppression. • Nitrate Plant De-commissioning - The City’s existing nitrate treatment plant is no longer needed and should be decommissioned and removed.
• Reservoir Maintenance – Significant coating maintenance and other upgrades are needed in order to keep the City’s water reservoirs in service. The City carried out a maintenance project on reservoir 3 in FY 2024-25 but similar work needs to be carried out on the other two reservoirs.

The FY 2025-26 CIP includes funding for one project (Well 1 automatic transfer switch) that is necessary for minimizing power supply disruptions during a power outage. This project needed to be done now to maintain safe functioning of the groundwater well.

Staff Report: Water System Update Page 3
September 8, 2025
Water Supply Conditions
The City currently has two water sources: Lopez Lake (Lopez) and the Santa Maria Groundwater Basin (groundwater). The total amount of water legally available to the City is 2,207 acre-feet per year (AFY) comprised of 800 AFY of Lopez water and 1,407 AFY of groundwater. In response to declining groundwater elevations observed in the late 2000s, the City and neighboring agencies also using groundwater took action to significantly reduce groundwater pumping and the City currently only pumps 500 AFY of the 1,407 AFY allocation.

Due to above-average rainfall in 2023 and 2024 and near-normal rainfall in 2025, Lopez water is currently in good condition as the Lopez Lake is approximately 85% full. As a result, the City is expected to receive its full 800 AFY allocation this year along with sufficient storage to provide the City’s full allocation for the next few years. Recent groundwater monitoring results also indicate that groundwater levels in the basin are sufficient at this time and the City should be able to rely on current levels of groundwater pumping (approximately 500 AFY) for the next few years even if an extended drought were to begin this year. Based on these conditions, there is sufficient water supply available to the City over the next few years to meet the City’s projected demand.

However, the City could be impacted by both short and long-term supply reductions given various factors. During times of extended drought, current water supply could be insufficient to serve existing customers resulting in a need for significant water use cutbacks. With incremental population growth expected, the City's long-term water demand may exceed available supply even during normal rainfall years with no supply buffer available to address drought or water system emergencies. The pending federal litigation against the County of San Luis Obispo by environmental groups claiming the County’s operation of Lopez Lake including the level of downstream releases harms endangered steelhead trout could significantly affect the long-term reliability and cost of Lopez water to the City and other agencies. In addition, building permits and development projects which have been approved but not built would result in additional demand for water which would further strain long-term supplies unless additional water was secured.

As a result of these uncertainties, staff has begun working on a number of efforts related to future water supply. First, the City currently has development impact fees for the cost of water system installations and upgrades, but there is no impact fee in place for development of future water supplies. Staff is researching the feasibility of such an impact fee and will provide further information on an impact fee study and implementation at a future Council meeting. Staff is also researching the concept of an ordinance that would implement a temporary development stay to address water supply shortage conditions in cases of extended drought conditions. Staff would also plan to provide further information on this at a future meeting.

On a broader level, a comprehensive study of potential water supply reduction scenarios and their likelihood of occurrence is valuable to inform the City on the necessity, timing and scale of additional water supply sources to meet the City’s long-term needs. This water resiliency study by an outside consultant would provide an in-depth evaluation of supply resiliency and risks compared to estimated demand and present an analysis of available alternative water supply sources with recommendations on the most feasible sources to consider along with recommendations on the timing and scale of a future water supply source(s). Below is a draft scope of work for this study:

Staff Report: Water System Update Page 4
September 8, 2025
• Develop and conduct public information and engagement program for community involvement in the study process to inform the Council’s deliberation and decision-making. • Review previous estimates of water supply and demand and provide additional analysis including recommended water supply buffer amount and policy. • Develop cost estimate and cost-benefit analysis of the following list of water supply alternatives available to the City (shown below in alphabetical order):
o Conservation
o Desalination
o Lopez Lake spillway modifications and downstream releases o Purchase of State Water
o Recycled water
o Storm water retention
o Other emerging water supply solutions
• Provide a recommendation to the Council on a short list of water supply alternatives recommended for in-depth research and consideration and seek Council direction on which alternatives to further pursue.
• Prepare preliminary design, cost estimates and estimated schedules for permitting, design, approval and construction of the selected alternatives or peer review, value engineering and recommendations on existing designs related to the recommended shortlist of alternatives selected by the Council.
• Prepare a final report and recommendation to the Council identifying the most cost effective and feasible water supply alternative and recommendations on future actions related to the recommended alternative.

Staff is seeking Council input and direction on this draft scope of work prior to releasing a Request for Proposals (RFP) process for a qualified consultant to carry out this study. The study would be led by the Public Works Department with involvement from the Community Development Department and the City Manager’s Office and funding for the study is included in this year’s Water Fund budget. The RFP process would begin this month with a consultant agreement brought to the Council by the end of the calendar year and the study report brought to the Council by the end of FY 2025-26.

Water Enterprise Fund Status
Currently, the Water Fund has an operating budget of $4.6 million with a budgeted deficit of $145,404. Following adoption of an updated water and wastewater rate structure in December 2023, the Council in May 2024 reverted water rates to the previous rate structure adopted in 2021.

Subsequently, Measure G-24 was passed by voters which repealed the adopted December 2023 rate structure and restricted the Council from increasing rates beyond the 2021 rate structure.

The City is in the final year of the 2021 rate structure and thus water rates will remain flat after FY 2025-26 until a Proposition 218 process is carried out to adopt a new rate structure. The current rate structure is insufficient to fund increased operations and maintenance costs over the long run or carry out needed capital projects needed to maintain the aging infrastructure of the system. As part of the work program for the Council Priority of Water and Sewer Infrastructure and Needed Resources, staff would plan to initiate a water rate study following the completion of the water resiliency study and bring this rate study to the Council in FY 2026-27.

Staff Report: Water System Update Page 5
September 8, 2025
Multi-Year Goals
☐ Public Safety and Community Services ☐ Economic Development and Housing ☒ Community Infrastructure ☒ Financial and Organization Sustainability Council Priorities
☒ Water and Wastewater Infrastructure ☐ Community Engagement Staff notes that there are other billing considerations that must be addressed in any future rate structure, including the City’s current use of tiered rates in light of recent case law affecting the use of tiered rates in the state as well as the City’s practice of billing for multi-family residences.

Potential changes in the City’s rate structure will have fiscal impacts to the Water Fund and staff would recommend considering changes as part of a future comprehensive review and discussion about water rates.

FISCAL IMPACT
The FY 2025-26 budget provides funding for a water resiliency study and a necessary capital project related to groundwater Well 1 along with existing operations and maintenance needs.

ALTERNATIVES
The Council has the following alternatives to consider:

1. Receive a report on the status of the City’s water system including water infrastructure needs, water supply conditions, and Water Enterprise Fund financial issues and provide direction to staff regarding a proposed water supply alternatives study; or

2. Provide alternative direction to staff.

PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.