Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations D-2
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providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all of the Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered in accordance with the provisions of the Indenture.
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
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APPENDIX F
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
1 $_______
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
BOND PURCHASE AGREEMENT
__________, 2024
Hawthorne Public Financing Authority
4455 West 126th Street
Hawthorne, California 90250
City of Hawthorne
4455 West 126th Street
Hawthorne, California 90250
Ladies and Gentlemen:
Samuel A. Ramirez & Co., Inc. (the “Underwriter”), hereby offers to enter into this Bond Purchase Agreement with you, the City of Hawthorne (the “City”) and the Hawthorne Public Financing Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Authority’s Lease Revenue Bonds Series 2024 (the “Bonds”). The Bonds are being issued to:
(i) pay a portion of the costs of construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvements; (ii) [to purchase a municipal bond insurance policy]; and (iii) pay cost of issuance of the Bonds. This offer is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter.
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority all (but not less than all) of the $________ aggregate principal amount of the Bonds.
The purchase price for the Bonds shall be $_______ (being the principal amount of the Bonds, plus a net original issue premium in the amount of $______ and less an Underwriter’s discount in the amount of $________).
The Bonds will be dated the date of delivery thereof and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Indenture and Official Statement herein described. The Bonds will be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement.
2 [The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy (the “Policy”) to be issued concurrently with the delivery of the Bonds by ________ (the “Insurer”). As an accommodation to the Authority and City, the Underwriter will wire from the Purchase Price the premium for the Policy in the amount of $_____ directly to the Insurer on the date of Closing (defined below).]
2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Authority on August 27, 2024 authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584, et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an Indenture, dated as of September 1, 2024 (the “Indenture”), between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), and shall be as described in the Indenture.
The Bonds are limited obligations of the Authority payable primarily from and secured by certain base rental payments (the “Base Rental Payments”) to be paid by the City pursuant to a Sublease, dated as of September 1, 2024 (the “Sublease”), between the City and the Authority, for certain real property and the improvements thereon (the “Leased Property”).
3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated ________, 2024 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Authority, the City, the Underwriter or its legal counsel in accordance with the provisions of Sections 6(j) and 7(j) hereof or otherwise consented to by the Underwriter pursuant to Section 9(b)(v), are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as they deem necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold.
The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and have not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or is currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Underwriter’s role in the 3 transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any.
4. Delivery of Official Statement. If requested by the Underwriter, the Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Underwriter informs the Authority in writing of a different end of the underwriting period. “End Date” as used herein is that date which is the earlier of:
(a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or
(b) the time when the Official Statement becomes available from the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12) ends.
The Underwriter acknowledges that the “End Date” will be the date of Closing unless the Underwriter otherwise notifies the Authority and the City in writing that the Underwriter still owns some or all of the Bonds.
The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated _______, 2024, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Underwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request.
5. The Closing. At 9:00 A.M., California time, on _______, 2024, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Nossaman LLP, Los Angeles, California (“Bond Counsel”), or another place to be mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer of immediately 4 available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.”
6. City Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that:
(a) The City is a public body, corporate and politic, duly organized and operating pursuant to the laws of the State of California (the “State”) with power and authority to enter into and perform its duties under the Sublease, the Continuing Disclosure Agreement, dated as of September 1, 2024 (the “Continuing Disclosure Agreement”) between the City and U.S. Bank Trust Company, National Association, as dissemination agent, the Lease Agreement, dated as of September 1, 2024 (the “Lease”), between the City and the Authority, the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”).
(b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in a security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents. (c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against cities in the State. (d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement.
(e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Sublease, or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement as of its 5 date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Official Statement, nor is there any basis for any such action, suit, proceeding or investigation.
(f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing, the information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. The Underwriter shall be responsible for all costs relating to such qualification of the Bonds under blue sky or similar laws.
(h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the City’s finances, the Leased Property, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, 6 the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Leased Property, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect.
(l) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Tax Certificate.
(m) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein.
(n) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement.
(o) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal course of its operations, incur any material liabilities, direct or contingent, secured by or payable from the City’s general fund. (p) The City will undertake, pursuant to the Continuing Disclosure Agreement, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Except as disclosed in the Preliminary Official Statement and Official Statement, the City and its related entities have not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years.
(q) The financial statements of, and other financial information regarding the City in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth and the audited financial statements have been prepared in accordance with generally accepted accounting principles applicable to cities.
7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that:
(a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, 7 power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder.
(b) By all necessary official action, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, the Sublease, the Lease and the Assignment Agreement, dated as of September 1, 2024 (the “Assignment Agreement”), between the Authority and the Trustee (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied and will at the Closing, be in compliance in all respects, with the terms of the Authority Documents. (c) The Bonds, when issued in accordance with the Indenture, will be valid and binding limited obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California.
(d) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions thereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents.
(e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been 8 received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect:
(i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Sublease and to pledge the Base Rental Payments for repayment of the Bonds; (iii) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or
(iv) challenging the ability of the Authority to sell the Bonds to the Underwriter.
(f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject.
(g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein.
(h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act.
(i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. 9 (j) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the Authority will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Sublease, as amended from time to time.
(k) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter and Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading.
8. Establishment of Issue Price.
(a) The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds.
(c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto. Exhibit A also sets forth, as of the date of this Bond Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are 10 confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(A) the close of the fifth (5th) business day after the sale date; or (B) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that:
(i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. (ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) 11 comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Authority acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a thirdparty distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The Authority further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds.
(f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
a. “public” means any person other than an underwriter or a related party;
b. “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public); c. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and d. “sale date” means the date of execution of this Bond Purchase Agreement by all parties.
12 9. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Authority and the City of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations hereunder are and shall be subject to the following additional conditions:
(a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing.
(b) Executed Agreements and Performance Thereunder. At the time of the Closing:
(i) the City Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the prior written consent of the Underwriter;
(ii) there shall be in full force and effect such resolutions (the “Authorizing Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions on the part of the Authority and the City contemplated by the City Documents and the Authority Documents;
(iii) the Authority shall perform or have performed its obligations required or specified in the Authority Documents to be performed at or prior to Closing; (iv) the City shall perform or have performed its obligations required as specified in the City Documents to be performed at or prior to Closing; and (v) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraph 6(j) or 7(i), or as otherwise may have been agreed to in writing by the Underwriter.
(c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Authority Documents or the City Documents and neither the Authority nor the City shall be in default in the payment of principal or interest on any of its bonded indebtedness or other obligations payable from the City’s general fund which default shall adversely impact the ability of the Authority to make payments on the Bonds or the City to make payments pursuant to the Sublease. (d) Termination Events. The Underwriter shall have the right to terminate this Bond Purchase Agreement, without liability therefor, by written notification to the Authority and the City if at any time at or prior to the Closing the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter (evidenced by a written notice to the City and the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds) by reason of any of the following:
(i) an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of the Authority Documents or the City Documents in the Congress of the United 13 States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other Federal or State authority materially adversely affecting the Federal or State tax status of the Authority or the City, or the interest on bonds or notes or obligations of the general character of the Bonds; or (ii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the States or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or
(iii) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (iv) the New York Stock Exchange or other national securities exchange, or any governmental or regulatory authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of the Underwriter; or
(v) a general banking moratorium shall have been established by federal or State authorities; or
(vi) there shall have occurred (i) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (ii) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis; or
(vii) the commencement of any action, suit or proceeding described in Paragraphs 6(e) or 7(e) hereof; or
14 (viii) a general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction; or (ix) any event occurring or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or
(x) any rating of the Bonds or other obligations of the City shall have been downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or
(xi) [any rating of the Insurer shall have been downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or] (xii) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Authority or the City; or (xiii) any fact or event shall exist or have existed that requires or has required an amendment of or supplement to the Official Statement in which the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter; or (xiv) there shall have occurred any materially adverse change in the affairs or financial condition of the City; or
(xv) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or
(xvi) the marketability of the Bonds or the market price thereof, in the opinion of the Underwriter, has been materially and adversely affected by disruptive events, occurrences or conditions in the securities or debt markets; or (xvii) a decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Bond Purchase Agreement or by the Official Statement, or any document relating to the issuance, 15 offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds (unless the context otherwise indicates) the following documents:
(1) Bond Opinion. The approving opinions of Bond Counsel dated the date of Closing and substantially in the forms included as APPENDIX B to the Official Statement and a reliance letter(s) thereon dated the date of Closing addressed to the Underwriter and the Trustee. (2) Supplemental Opinion. A supplemental opinion of Bond Counsel dated the date of Closing, addressed to the Underwriter, to the effect that:
(A) the statements on the cover of the Official Statement and in the Official Statement under the captions “INTRODUCTION,” “THE BONDS,” “LEASED PROPERTY,” “SECURITY FOR THE BONDS,” and “TAX MATTERS,” and in “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” and “APPENDIX B – FORM OF BOND COUNSEL OPINION,” excluding any material that may be treated as included under such captions and appendices by any cross-reference, insofar as such statements expressly summarize provisions of the Bonds, the Sublease, the Lease, the Indenture, and Bond Counsel’s final opinion concerning certain federal tax matters relating to the Bonds, are accurate in all material respects as of the date of Closing; provided, that Bond Counsel need not express any opinion with respect to any financial or statistical data contained therein or with respect to DTC or the book-entry system in which the Bonds are initially delivered;
(B) The Sublease, the Lease, the Assignment Agreement, the Continuing Disclosure Agreement and this Bond Purchase Agreement have been duly authorized, executed and delivered by the City and the Authority, as applicable, and are valid, legal and binding agreements of the City and the Authority enforceable in accordance with their terms, except that the rights and obligations under the Sublease, the Lease, the Assignment Agreement, the Continuing Disclosure Agreement and this Bond Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State, and provided that no opinion is expressed with respect to any indemnification or contribution provisions contained therein.
(C) The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended.
(3) Negative Assurance Letter of Disclosure Counsel. A letter of Nossaman LLP, Disclosure Counsel to the Authority and the City, dated the date of Closing and addressed to the Authority, the City, and the Underwriter to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel to the Authority and without having undertaken to determine independently the accuracy or completeness of the contents in the Official Statement, such counsel has no reason to believe that the Preliminary Official Statement (except for the completion of pricing information and any other matters or terms of the Bonds relating thereto) as of its date or as of the date of this Bond Purchase Agreement or the Official Statement as 16 of its date or as of the date of the Closing (except that no opinion need be expressed as to any financial, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, assessed values, market absorption, real estate, ownership, environmental or archaeological matters, Appendices A, B, C, D, or F thereto, or any information about the Insurer, the Policy, the book-entry, The Depository Trust Company, debt service requirements or tax exemption included or referred to therein, which may be expressly excluded from the scope of the opinions), contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (4) Municipal Advisor Certificate. A certificate of CSG Advisors Incorporated (“CSG”), dated the Closing Date and addressed to the Authority, the City and the Underwriter, to the effect that (i) CSG has reviewed the Preliminary Official Statement and the Official Statement and (ii) no information has come to its attention which would lead it to believe that the information contained in the Preliminary Official Statement, as of its date and as of the date of this Bond Purchase Agreement and the Official Statement, as of its date and the Closing Date, is not true or correct in all material respects, or that the Preliminary Official Statement, as of its date and as of the date of this Bond Purchase Agreement and the Official Statement, as of its date and the Closing Date contains any untrue statement of a material fact or omits to state a material fact where necessary to make a statement not misleading.
(5) Opinion of City Attorney. An opinion of the City Attorney, dated the date of the Closing and addressed to the Authority, the Trustee and the Underwriter, to the effect that:
(A) the City is a public body, corporate and politic, duly organized and validly existing under the Constitution and laws of the State of California; (B) the resolution of the City approving and authorizing the execution and delivery of the City Documents and approving and authorizing the issuance of the Bonds and the delivery of the Official Statement and other actions of the City was duly adopted at a meeting of the governing body of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way; (C) the City Documents have been duly authorized, executed and delivered by the City, and (assuming due execution and delivery by parties other than the City) are valid, legal and binding agreements of the City enforceable in accordance with their terms, except that the rights and obligations under the City Documents are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State; (D) the authorization, execution and delivery of the Bonds, the Official Statement, and the City Documents by the City and compliance with the provisions thereof by the City of its obligations thereunder, will not conflict with, or constitute a breach or default under, in any material respect, any law, administrative regulation, court decree, resolution, ordinance or other agreement to which the City is subject or by which it is bound; and 17 (E) there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the City has been served or, to such counsel’s knowledge, threatened against or affecting the City, except as may be disclosed in the Official Statement, which would materially adversely impact the City’s ability to complete the transactions contemplated by the City Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Base Rental Payments with respect to the Sublease, or in any way contesting or affecting the validity of the Bonds, the Official Statement or the City Documents.
(6) Authority Counsel Opinion. An opinion of counsel to the Authority, dated the date of the Closing and addressed to the City, the Trustee and the Underwriter, to the effect that:
(A) the Authority is a joint exercise of powers authority organized and existing under the laws of the State of California; (B) the resolution of the Authority approving and authorizing the execution and delivery of the Authority Documents, the Bonds and the Official Statement and other actions of the Authority was duly adopted at a regular meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way;
(C) the Authority Documents have been duly authorized, executed and delivered by the Authority, and (assuming due execution and delivery by parties other than the Authority) are valid, legal and binding agreements of the Authority enforceable in accordance with their terms, except that the rights and obligations under the Authority Documents are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State;
(D) there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the Authority has been served or, to the such counsel’s knowledge, threatened against or affecting the Authority, except as may be disclosed in the Official Statement, which would materially adversely impact the Authority’s ability to complete the transactions contemplated by the Authority Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Base Rental Payments with respect to the Sublease, or in any way contesting or affecting the validity of the Bonds, the Official Statement, the Authority Documents or the transactions described in and contemplated thereby wherein an unfavorable decision, ruling or finding would materially adversely affect the validity and enforceability of the Bonds or the Authority Documents or in which a final adverse decision could materially adversely affect the operations of the Authority; and (E) the execution and delivery of the Authority Documents and the issuance of the Bonds and compliance with the provisions thereof, do not and will not in any material respect conflict with or constitute on the part of the Authority a breach of or default under any agreement or other instrument to which the Authority is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the Authority is subject, which breach or default 18 has or may have a material adverse effect on the ability of the Authority to perform its obligations under the Authority Documents.
(7) Underwriter’s Counsel Opinion. An opinion of Underwriter’s Counsel, dated the date of the Closing addressed to the Underwriter, in such form as may be acceptable to the Underwriter.
(8) City Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter to the effect that: (a) the representations, warranties and covenants of the City contained in this Bond Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the City has complied with all agreements, covenants and conditions to be complied with by the City at or prior to the Closing under the City Documents; (c) to the best of such official’s knowledge, no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing the statements or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein, in the light of the circumstances under which they were made, not misleading in any material respect. (9) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by a duly authorized officer of the Authority to the effect that (a) the representations, warranties and covenants of the Authority contained herein and in the Authority Documents are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the Authority has complied with all agreements, covenants and conditions to be complied with by the Authority at or prior to the Closing under the Authority Documents and (c) to the best of such official’s knowledge, no event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(10) Trustee’s Certificate. A certificate of the Trustee, dated the Closing Date, in form and substance acceptable to the Authority, Bond Counsel, the Underwriter and Underwriter’s Counsel.
(11) Trustee Incumbency Certificate. A certified copy of a certificate of an officer of the Trustee certifying as to the incumbency, signature and signing authority of the officers who have executed and delivered the Indenture and agreed to accept the duties of Trustee under the Indenture.
(12) Trustee Counsel’s Opinion. An opinion, dated the date of the Closing addressed to the Authority, the City and the Underwriter, of the Trustee’s Counsel, in form and content satisfactory to the Authority, Bond Counsel, the Underwriter and Underwriter’s Counsel. (13) Title Policy. A copy of a CLTA or ALTA title insurance policy in an amount equal to the principal amount of the Bonds, insuring the City’s leasehold interest in the Leased Property, subject only to Permitted Encumbrances (as defined in the Sublease) or such other acceptable encumbrances.
19 (14) Transcripts. Two CD transcripts of the proceedings prepared by Bond Counsel relating to the authorization and issuance of the Bonds will be delivered in due course after the Closing.
(15) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the Authority and the City by a duly authorized officer of each.
(16) Documents. An original executed or certified copy of each of the Authority Documents, the City Documents and the Joint Exercise of Powers Agreement (the “JPA Agreement”), dated November 23, 1992, between the City and the Community Redevelopment Agency of the City of Hawthorne and any amendments thereto. (17) City Resolution. Certified copy by the City Clerk, of each resolution of the City relating to the City Documents, the actions contemplated thereby, provided that such resolutions may be contained in the transcripts.
(18) Authority Resolution. Certified copy by the Secretary or Assistant Secretary of the Authority, of each resolution of the Authority relating to the Authority Documents, the Bonds and the transactions contemplated thereby, provided that such resolutions may be contained in the transcripts.
(19) IRS Form 8038-G. Evidence that the federal tax information form 8038 G has been prepared for filing.
(20) Tax Certificate. A Tax Certificate in a form satisfactory to Bond Counsel.
(21) Rating. Evidence as of the Closing satisfactory to the Underwriter that the Bonds have received the rating set forth in the Official Statement and that such rating has not been reduced or withdrawn.
(22) CDIAC Statement. A copy of the Notice of Final Sale required to be delivered to the California Debt and Investment Advisory Commission pursuant to section 53583 of the Government Code and section 8855(g) of the Government Code. (23) Policy. The Policy, duly executed by the Insurer.
(24) Insurer Counsel Opinion. An opinion of counsel to the Insurer, dated the Closing Date, addressed to the Authority, the City and the Underwriter, in form and substance satisfactory to the Underwriter and Bond Counsel.
(25) Insurer Certificate. A certificate or certificates of the Insurer, dated the Closing Date, as to the accuracy of the information relating to the Insurer and the Policy included in the Official Statement and such other matters reasonably requested by the Underwriter and Bond Counsel.
(26) Additional Documents. Such additional certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably deem necessary. 20 If the Authority or the City shall be unable to satisfy the conditions contained in this Bond Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be terminated by the Underwriter, and none of the Underwriter, the Authority or the City shall be under further obligation hereunder.
10. Expenses. Except as otherwise provided in this Section, the Underwriter shall be under no obligation to pay, and the Authority or the City shall pay or cause to be paid, the expenses incident to the performance of the obligations of the Authority and the City hereunder including but not limited to:
(a) the costs of the preparation and printing, or other reproduction (for distribution on or prior to the date hereof) of the City Documents and the Authority Documents and the cost of preparing, printing, issuing and delivering the Bonds;
(b) the fees and disbursements of any counsel, municipal advisors, accountants, or other experts or consultants retained by the Authority or the City; (c) the fees and disbursements of Bond Counsel and Disclosure Counsel; (d) the cost of preparation and printing the Preliminary Official Statement and any supplements and amendments thereto and the cost of preparation and printing of the Official Statement, including a reasonable number of copies thereof for distribution by the Underwriter; and (e) charges of rating agencies for the rating of the Bonds.
The Underwriter shall pay all expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds including, but not limited to: (i) the fees and disbursements of Underwriter’s Counsel; and (ii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds (including other expenses, fees of the California Debt and Investment Advisory Commission, CUSIP Service Bureau fees, and any other fees and expenses), except as otherwise provided in the preceding paragraph or otherwise agreed to by the Underwriter, the Authority and the City in writing.
11. Notice. Any notice or other communication to be given to the Underwriter may be given by delivering the same to Samuel A. Ramirez & Co., Inc., 633 West Fifth Street, Suite 2693, Los Angeles, California 90071, Attention: Public Finance. Any notice or other communication to be given to the Authority or the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof.
12. Entire Agreement. This Bond Purchase Agreement, when accepted by the Authority and the City, shall constitute the entire agreement among the Authority, the City and the Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of any Underwriter). Except as provided in Section 16 below, no other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All the Authority’s and the City’s representations, warranties and agreements in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter, until the earlier of (a) delivery of and payment for the Bonds hereunder, and (b) any termination of this Bond Purchase Agreement. 21 13. Definitions. Terms not otherwise defined herein shall have the same meaning as when used in the Indenture or the Sublease.
14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof.
15. State of California Law Governs. The validity, interpretation and performance of the Authority Documents shall be governed by the laws of the State.
16. No Assignment. The rights and obligations created by this Bond Purchase Agreement shall not be subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto.
S-1
17. Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
SAMUEL A. RAMIREZ & CO., INC.
By:
Authorized Officer
The foregoing is hereby agreed to and accepted as of the date first above written:
HAWTHORNE PUBLIC FINANCING AUTHORITY
By:
Title:
Time of Execution: _____________ p.m. California time
CITY OF HAWTHORNE
By:
Title:
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT]
A-1
EXHIBIT A
MATURITY SCHEDULE
$______
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
MATURITY SCHEDULE
Maturity
(November 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-TheOfferingPrice Rule
(T) Term Bond.
(C) Priced to optional call at [par] on November 1, 20__. * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement.
B-1
EXHIBIT B
$______
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
FORM OF ISSUE PRICE CERTIFICATE
[TO COME FROM BOND COUNSEL]
AGENDA ITEM NO. 7
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Planning
City Manager: __________
Vontray Norris
Dir. of Planning: ___________
Gregg McClain
SUBJECT:
Ordinance No. 2253 (2nd Reading) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HAWTHORNE, CALIFORNIA, AMENDING CHAPTERS 17.04, 17.32, AND 17.34 TO UPDATE THE DEFINITIONS OF AUTOMOBILE REPAIR AND THE ZONES WITHIN WHICH THEY ARE PERMITTED.
Motion to Adopt
RECOMMENDED MOTION:
Staff Recommends that the City Council adopt Ord. No. 2253.
DISCUSSION:
Applicant, Jairon Munoz, opened an auto upholstery business at 4611 West Imperial Highway, which previously hosted an automobile repair business. This address is zoned Regional Commercial (CR) but is also within the Downtown Hawthorne Specific Plan (DHSP), which identifies this location as part of the Commercial Zone, which is implemented by the Local Commercial (C-2) and General Commercial (C-3) zones. As such, the Zoning, General Plan, and Specific Plan designations are not in agreement, so the commercial designation found in the DHSP prevails over the zoning.
Currently, automotive upholstery is defined as major automobile repair, which is only permitted in the Heavy Industrial Zone (M-2). For this reason, automobile upholstery is not permitted at this location. The Applicant, his representative, and the property owner filed an application to add auto upholstery to the permitted use list of the CR Zone, which would legalize their use. A straight forward change to permit major automobile repair would permit it in any area that is zoned Regional Commercial, which includes the area along Imperial Highway, the area near I-405 and Rosecrans, and portions of the City along 120th Street near the Airport. While these areas have some nonconforming automobile repair businesses, it is not something that Staff recommends in these areas. Staff proposes, instead, to update and clarify the definitions of major
and minor automobile repair and the zones in which these uses are permitted. This will achieve the same outcome for the applicant and prevent the proliferation of automobile repair throughout the City,
Auto upholstery is currently identified as major automobile repair. The first part of the City’s proposal is to recognize that auto upholstery is actually more akin to minor automobile repair. It does not require large portions of an automobile to be disassembled, nor does it require equipment which poses a risk to public health or safety. This will allow the applicants to continue their business as a nonconforming use. Another update is to correct a long-standing error in the permitted uses of the M-2 zone. Currently, major automobile repair is permitted by-right but minor automobile repair is permitted only with a Conditional Use Permit. This is illogical.
Additionally, automobile body and fender businesses are permitted by-right in both M-1 and M2 Zones, and that is generally accepted as a use with potentially more significant impacts. To fix this mess, Staff proposes to permit minor automobile repair, by-right, in both the M-1 and M-2 Zones.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
Goal 3: Improve development processing and customer service operations Goal 4: Update zoning code for the 21st century
FISCAL IMPACT:
None.
NOTICING PROCEDURES:
A Notice of Public Hearing was published in the Hawthorne Press Tribune on July 31, 2024, for the hearing held on August 13, 2024, at the regular City Council meeting.
ATTACHMENT(S):
1. Ord. No. 2253
ORDINANCE NO. 2253
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
HAWTHORNE, CALIFORNIA, AMENDING CHAPTERS
17.04, 17.32, AND 17.34 TO UPDATE THE DEFINITIONS
OF AUTOMOBILE REPAIR AND THE ZONES WITHIN
WHICH THEY ARE PERMITTED
WHEREAS, on February 29, 2024, the Planning Department received an application from Bruce Kafil, Jason Kafil, and Jairon Munoz to permit auto upholstery in the Regional Commercial Zone by updating Hawthorne Municipal Code (HMC) Section
17.25.020;
WHEREAS, the Application pertains to the property located at 4611 W. Imperial Highway, Hawthorne, California, which is in the Regional Commercial (CR) zone and the Downtown Hawthorne Specific Plan (DHSP);
WHEREAS, HMC Section 17.04.010 provides a list of definitions applicable to the entirety of Title 17 of the HMC, unless otherwise stated; WHEREAS, HMC Section 17.04.010 defines “minor automobile repair” as “a use which services and makes repairs to automobiles and other motorized vehicles limited in intensity to diagnostics, oil changes, filter changes, tuning, tire changes, alignments, battery changes, brake service, exhaust system service, window tinting, and other similar repairs not specifically named as major repairs;”
WHEREAS, HMC Section 17.04.010 defines “major automobile repair” as “a use which services and makes repairs to automobiles and other motorized vehicles, including, but not limited to, engine rebuilding, replacement of major components such as radiators, fuel injectors, pistons and other internal components of internal combustion engines, rebuilding or refurbishing engines, upholstery replacement, and other similar uses that require significant deconstruction and/or immobility of the vehicle;” WHEREAS, the City of Hawthorne proposes to update definitions within HMC Title 17 to accurately reflect the current understanding of how various uses are classified by associated industry standards;
WHEREAS, the City of Hawthorne recognizes that updates and innovations in materials and methods have rendered auto upholstery to be a use with similar impacts and risks as uses identified in “minor automobile repair” rather than “major automobile repair;”
WHEREAS, the Application pertains to a location within the DHSP designated as Commercial, which is implemented by several zones, including the General Commercial (C-3) zone;
WHEREAS, HMC Section 17.28.020 provides a list of permitted uses within the C3 General Commercial Zone; 2 WHEREAS, HMC Section 17.28.020 provides as a permitted use in the C-3 Zone, “Automobile repair—minor, subject to the issuance of a conditional use permit;” WHEREAS, the proposed amendments to the HMC do not permit auto upholstery throughout the Regional Commercial Zone, they still achieve the applicant’s goals as the DHSP requires implementation through several zones, including the C-3 zone. As such the existing use would be classified as legal nonconforming instead of the current determination as an unpermitted use;
WHEREAS, HMC Section 17.32.020 provides a list of permitted uses within the M-1 Limited Industrial Zone;
WHEREAS, HMC Section 17.32.020 provides as a permitted use in the M-1 Zone, “Any use permitted in the C-3 zone; provided that, unless specified below, a conditional use permit shall be required if such a permit is required for the same use in the C-3 zone;” WHEREAS, HMC Section 17.32.020 provides as a permitted use in the M-1 Zone, “Automobile repair—minor, subject to a CUP;”
WHEREAS, HMC Section 17.34.020 provides a list of permitted uses within the M-2 Heavy Industrial Zone;
WHEREAS, HMC Section 17.34.020 provides as a permitted use in the M-2 Zone, “Any use permitted in the C-3 zone or the M-1 zone, subject to the same limitations in those zones, unless otherwise stated;”
WHEREAS, HMC Section 17.34.020 provides as a permitted use in the M-2 Zone, “Automobile repair—major;”
WHEREAS, under the currently permitted uses in the M-2 Zone, major automobile repair is permitted by right, but minor automobile repair requires approval of a CUP; WHEREAS, removing a requirement for a Conditional Use Permit does not change whether a use is considered to be permitted or prohibited; WHEREAS, the update and clarification that “minor automobile repair” is a permitted use in both the M-1 and M-2 Zones without requiring a Conditional Use Permit would best reflect the purpose and intent of both zones as established in HMC Chapters
17.32 and 17.34;
WHEREAS, on April 17, 2024, the Planning Commission of the City of Hawthorne considered the zone text amendment and, after a duly noticed public hearing where all persons in support and in opposition were heard, adopted Resolution No. PC 2024-10 recommending approval of the ordinance to the City Council; WHEREAS, on August 13, 2024, the City Council of the City of Hawthorne considered the zone text amendment and, after a duly noticed public hearing where all persons in support and in opposition were heard, introduced this ordinance; and 3 WHEREAS, the City Council of the City of Hawthorne wishes to now adopt Ordinance No. 2253 in furtherance of the City’s objective pursuant to the Economic Development Strategic Plan adopted by the City Council on April 25, 2023 to update and clarify Title 17 of the HMC.
NOW, THEREORE, THE CITY COUNCIL OF THE CITY OF HAWTHORNE DOES ORDAIN AS FOLLOWS:
SECTION 1. The foregoing recitals are true and correct.
SECTION 2. Section 17.04.010 (Definitions), of Chapter 17.04 (Definitions), of the HMC shall be amended as follows:
Automobile repair—major. “Major automobile repair” means a use which services and makes repairs to automobiles and other motorized vehicles, including, but not limited to, engine rebuilding, replacement of major components such as radiators, fuel injectors, pistons and other internal components of internal combustion engines, rebuilding or refurbishing engines, upholstery replacement, and other similar uses that require significant deconstruction and/or immobility of the vehicle.
Automobile repair—minor. “Minor automobile repair” means a use which services and makes repairs to automobiles and other motorized vehicles limited in intensity to diagnostics, oil changes, filter changes, tuning, tire changes, alignments, battery changes, brake service, exhaust systems service, window tinting, upholstery, and other similar repairs not specifically named as major repairs.
SECTION 3. Section 17.32.020 (Permitted uses), of Chapter 17.32 (M-1 Limited Industrial Classification), of the HMC shall be amended only as far as to remove the requirement for a CUP for minor automobile repair, as follows:
• Automobile repair—minor, subject to a CUP;
SECTION 4. Section 17.34.020 (Permitted uses), of Chapter 17.34 (M-2 Heavy Industrial Classification), of the HMC shall be amended only as far as to add minor to the description of types of automobile repair, as follows:
• Automobile repair— minor or major;
SECTION 5. CEQA. This project is exempt from the California Environmental Quality Act (CEQA) under CEQA State Guidelines Section 15305, Class 5. A Class 5 exemption is for minor alterations in land use limitations in areas with an average slope less than 20% which do not result in any changes in land use or density. The project, as proposed, would occur throughout the City which has an average slope less than 20%.
The project would not change land use or density. Instead, it would clarify the definitions of uses and when discretionary approvals are appropriate. Further, no exceptions, as identified in CEQA State Guidelines Section 15300.2 are applicable and there are no unusual circumstances.
4 SECTION 6. SEVERABILITY. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of any competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance, and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional.
SECTION 7. AUTHORIZATION TO PUBLISH SUMMARY OF ORDINANCE.
Pursuant to Government Code Section 36933(c)(1), the City Attorney is authorized to prepare a summary of this ordinance. The City Clerk is also authorized to publish a summary of the text of this ordinance in the Hawthorne Press Tribune at least five days prior to the adoption of this ordinance. Within 15 days after adoption of the ordinance, the City Clerk is directed to publish a summary of this ordinance in the Hawthorne Press Tribune.
SECTION 8. EFFECTIVE DATE. This ordinance shall take effect 30 days after passage thereof.
PASSED, APPROVED AND ADOPTED this 27th day of August, 2024.
ALEX VARGAS, Mayor
City of Hawthorne, California
ATTEST:
DAYNA WILLIAMS-HUNTER, City Clerk
City of Hawthorne, California
APPROVED AS TO FORM
ROBERT KIM,
City Attorney
City of Hawthorne, California
AGENDA ITEM NO. 8
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Public Works
City Manager: __________
Vontray Norris
Dir. of Public Works: ___________
Akbar Farokhi
SUBJECT:
Construction of Speed Humps on Eucalyptus Ave from 118th St to 120th St RECOMMENDED MOTION:
Staff recommends that the City Council approve the installation of speed humps on Eucalyptus Ave from 118th St to 120th St.
DISCUSSION:
Per the direction of City Council, Staff has prepared an agenda bill to install speed humps on Eucalyptus Ave from 118th St to 120th St.
Three speed humps will be installed on Eucalyptus Ave from 118th St to 120th St. The traffic volume for this area is 867 vehicles. This portion of Eucalyptus Ave is one block away north of Eucalyptus Elementary School, which has a high volume of students.
Speed hump installation is recommended to reduce speed and collisions and increase safety.
The work will consist of cold-planing, asphalt paving, construction of speed humps, pavement markings, and installation of warning signs.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
The installation of these speed humps will enhance the quality of life for residents and visitors when traveling on City streets.
FISCAL IMPACT:
None. Funds for the construction and installation of three speed humps in the amount of $9,000 are available in the adopted Fiscal Year 2024-2025 budget and will be paid for with approved and allocated Gas Tax Funds.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Speed Hump Location Maps
D05
W. 118 ST.
52.59' 50' 50' 50' 50' 50' 145' 179'
50' TRACT NO 8879 50' 60' 50' MB 111-44-45 1 180'
1 3
Por.
4 5
6 Por.
7 Por. 2 Por. 20
Por.
1 Por.
Por. Por. Por. Por.
11 10
31 2
3 Por. 11815 11818
11811
11825
11819
11822 A-D 11823 A-D 11826-30 11825
A-F
36 11822 A-G 11827
9 11835
19 9
11828 A-D30 Por.
)
11829 A-D 12 2 4
5 Por. Por.
11833 A-B 11830
11841 A-B
11845 A-B
11834 11835 11831
11855
11834 A-D
11840 A-D
11835 A-D
11841 A-D
35 34
A-B
11841
8 11846 A-C 11844 A-B 11844 11845
1185 A-F
6 7
8 11846 A-D29 11847 A-D
Por. 11849 18 3
13 11853 A-D 11854 A-CPor. 11852 A-D 11853 A-G Por. 11854 A-C 11855 A-B 11854 A-I 11864 11861
11869
11875
11863
7 5) 11860 A-C 11860 A-D 11864
11876
17 11863 A-H 11863 (10U)
14 Por. A-D 4
-B
B
28 11870 A-D 11871 9
Por. 197.58' Por. 11873 11875 33 11874 A-C 11877
(1-16) 11876 A-D 11877 BLK.(1-10) 11876 T 10
883
-5)
11880 A-C
11886
11882
15 11885 A-B 11883 A-B
6 11882
11888
11894
11883 A-C 11884 A-D 11885
(1-15)
5 S 16 11
Por.
BLK
27 Por.
A-D Por. 11893 11889 A-C
(1-11)
11888 A-B 11890 A-D
11896 A-D
32 31
3 11894 A-C 11895
A-C
12 13
11894 11895 A-D 11895 A-F
11902
16 11903 D 11904 A-B
11916 26
11903 11901
5 11907-17
INC
11900 A-C
11910 A-C
11901 A-B
11911 A-D
11904 A-B 11905 (1-10)
-B 15
Por. 11911
11917
14 11909
11917
11908 A-D
11916
Por. (1-20) D 11914
11924
11916 A-CP
6 or. 11917 A-D 11915 A-F
11921 A-E
1192115
16 11924
17 11932 A-C
11924 A-H
11930 A-H
-C 25
Por.
11925 A-C 30
29 11922 11925
11935
14 11925 (1-10)
Por. A-G 7
-C
-B
Por. 4 11930 11929 A-D
11937
11934
A-E
11933
(1-10)
11937 A-B 17
11939 11938 11932 (1-10) 11936 A-B 11936 A-G
11944 (1-24)
11943 A-C
11949
11944 11943 18 11942 A-C
11946 A-C 11941 A-F 11942 A-C
11952 A-G
11943 (10U) 18
11950
3 11948 A-C24
13 Por.
11956
119571911949
11961 11953
20 8 Por. 11949 Por.
53 -B
11954 A-C 11954 (1-18)
119642(18-18)
11955 11956 11955 11955 (1-4) 11951 A-F
11963 A-B
11965
21 11969
11963
A-C
11962
19 11970
11976
11960 A-B
23 11963 A-C
2 11964 11962 A-D 11963 A-C
11969
Por.
11970 A-B 1197012 71
E
11968 A-D
11976 A-D
11973
11975
11977
9 Por.
Por. 11970 (1-14) 11975 A-E 11973
145'
27 22 11976 A-B
11976
11984
11977
155' 11982 A-H 11982 23
11983 50' 102.55'
11983 11983 11982 (25U)
20 11983 102.55' 100'
22 Por.
21 Por. 1
Por.
3 2 1Por. 24 11
Por.
10 Por.
26 Por.
Por. Por. Por. 50' 60' 50' 50' TRACT NO 9498
MB128-10-11
180' 25
Por.
4503½ T5 TH W. 120 ST.
60' TRACT NO 3945 44' 12006 50' 50' 50' 1
´
D07
SCALE: 1" = 200'
DATA AS OF: CITY OF HAWTHORNE
JUNE 2009 Feet Parcel Base Atlas Map 0 50 100 200 300 TILE:D06
AGENDA ITEM NO. 9
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Finance
City Manager:
Vontray Norris
City Treasurer:
SUBJECT:
City of Hawthorne’s Investment Report for the quarter ended June 30, 2024.
RECOMMENDED MOTION:
Staff recommends that the City Council receive, approve and file the City of Hawthorne’s Investment Report for the quarter ended June 30, 2024 of FY 23-24.
DISCUSSION:
Investment Report for the quarter ended June 30, 2024 is attached. This report indicates the cash and investments held by the reporting entity and the rate of return on the investments.
Because of the seasonal nature of the city’s revenues (thus making short-term availability and liquidity of funds being extremely important), the city has for many years invested its funds with the State of CA administered Local Agency Investment Fund (LAIF). Multi Bank Securities (MBS) are invested in CD’s using a ladder strategy. The City Treasurer shall continue this strategy, reinvesting funds that come due into new 3-5 year CD’s. Cash held by the fiscal agents are for future debt service on bonds, and these funds are invested pursuant to investment agreements entered into when the bonds were originally issued.
Investment report summary June 30, 2024
• Funds held at LAIF $74.2 million with a rate of return @ 4.55% • Funds held at BOW $61.1 million with rate of return @ 3.67% • Funds held at MBS totaled $14.9 million with yields of 0.66% - 4.95% Marie Hornback
• Funds held by the fiscal agents totaled $4.9 million
• Funds held in Trust totaled $5.2 million
Investment report summary March 31, 2024
• Funds held at LAIF $73.4 million with a rate of return @ 4.30% • Funds held at BOW $55.6 million with rate of return @ .14% - 3.67% • Funds held at MBS totaled $14.9 million with yields of 0.67% - 4.88% • Funds held by the fiscal agents totaled $3.7 million
• Funds held in Trust totaled $4.1 million
Investment report summary December 31, 2023
• Funds held at LAIF $72.7 million with a rate of return @ 4.00% • Funds held at BOW $46.6 million with rate of return @ .14% - 3.67% • Funds held at MBS totaled $9.3 million with yields of 0.65% - 4.92% • Funds held by the fiscal agents totaled $3.2 million
• Funds held in Trust totaled $3.9 million
Investment report summary September 30, 2023
• Funds held at LAIF $72 million with a rate of return @ 3.59% • Funds held at BOW $47.5 million with rate of return @ .14% - 3.67% • Funds held at MBS totaled $9.2 million with yields of 0.60% - 5.05% • Funds held by the fiscal agents totaled $4.7 million
• Funds held in Trust totaled $3.6 million
Investment report summary June 30, 2023
• Funds held at LAIF $71.5 million with a rate of return @ 3.15% • Funds held at BOW $59.6 million with rate of return @ 3.56% - 5.02% • Funds held at MBS totaled $9.1 million with yields of 0.30% - 5.05% • Funds held by the fiscal agents totaled $3.7 million
Investment report summary March 31, 2023
• Funds held at LAIF $71 million with a rate of return @ 2.74% • Funds held at BOW $50.1 million with rate of return @ 2.62% - 4.57% • Funds held at MBS totaled $9.1 million with yields of 0.30% - 4.96% • Funds held by the fiscal agents totaled $3 million
Investment report summary December 31, 2022
• Funds held at LAIF $70.6 million with a rate of return @ 2.07% • Funds held at BOW $28.5 million with rate of return @ 2.35% -3.90% • Funds held at MBS totaled $9.1 million with yields of 0.30% - 4.73% • Funds held by the fiscal agents totaled $2.3 million
Investment report summary September 30, 2022
• Funds held at LAIF $70.4 million with a rate of return @ 1.35%
• Funds held at BOW $32.3 million with rate of return @ 1.45% - 2.34% • Funds held at MBS totaled $8.8 million with yields of 0.31% - 3.41% • Funds held by the fiscal agents totaled $3.7 million
Investment report summary June 30, 2022
• Funds held at LAIF $70.3 million with a rate of return @ 0.75% • Funds held at BOW $36.6 million with rate of return @ 0.00% - 0.62% • Funds held at MBS totaled $9 million with yields of 0.30% - 3.27% • Funds held by the fiscal agents totaled $4.7 million
Investment report summary March 31, 2022
• Funds held at LAIF $70.2 million with a rate of return @ 0.32% • Funds held at BOW $25.1 million with rate of return @ 0.08% - 0.14% • Funds held at MBS totaled $9.2 million with yields of 0.30% - 2.39% • Funds held by the fiscal agents totaled $4.1 million
Investment report summary December 31, 2021
• Funds held at LAIF $13.2 million with a rate of return @ 0.23% • Funds held at BOW $70 million with rate of return @ 0.01% - 0.10% • Funds held at MBS totaled $8.7 million with yields of 0.30% - 2.38% • Funds held by the fiscal agents totaled $3.2 million
Investment report summary September 30, 2021
• Funds held at LAIF $13.2 million with a rate of return @ 0.24% • Funds held at BOW $67.5 million with rate of return @ 0.01% - 0.10% • Funds held at MBS totaled $7 million with yields of 0.30% - 2.36% • Funds held by the fiscal agents totaled $4 million
Investment report summary June 30, 2021
• Funds held at LAIF $13.2 million with a rate of return @ 0.33% • Funds held at BOW $57.8 million with rate of return @ 0.01% - 0.10% • Funds held at MBS totaled $7.1 million with yields of 0.63% - 2.99% • Funds held by the fiscal agents totaled $4.1 million
Investment report summary March 31, 2021
• Funds held at LAIF $13.2 million with a rate of return @ 0.44% • Funds held at BOW $52.3 million with rate of return @ 0.01% - 0.10% • Funds held at MBS totaled $7.1 million with yields of 0.63% - 2.97% • Funds held by the fiscal agents totaled $3.5 million
Investment report summary December 31, 2020
• Funds held at LAIF $13.1 million with a rate of return @ 0.63% • Funds held at BOW $39.3 million with rate of return @ 0.01% - 0.15%
• Funds held at MBS totaled $7.1 million with yields of 0.64% - 2.95% • Funds held by the fiscal agents totaled $3.1 million
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
.
FISCAL IMPACT:
None. The report describes the City’s investments and rate of return on these investments as of June 30, 2024.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Investment Report June 30, 2024
2. Bank Statements
Printed 8/5/2024 at 9:46 AM
CITY OF HAWTHORNE
INVESTMENT REPORT
Current Quarter Prior Quarter Quarter Change
6/30/2024 3/31/2024
Investment Type Issuer Cost Market Value Rate Cost Market Value Rate Change % Change State Investment Pool State of California - LAIF 1) 74,215,702 74,215,702 4.55% 73,431,109 73,431,109 4.30% 784,593 1.07% Certificates Of Deposit/U.S Bonds Multi-Bank Securities, Inc. 2) 14,994,149 14,994,149 0.66% to 4.95% 14,908,743 14,908,743 0.67% to 4.88% 85,406 0.57% Commercial Money Market BMO 3) 61,093,815 61,093,815 3.67% 55,564,090 55,564,090 3.67% 5,529,725 9.95% Total Funds Held By City 150,303,667 150,303,667 143,903,943 143,903,943 6,399,724 4.45% Funds Held By Fiscal Agent:
Money Market Funds U.S. Bank 4) 3,334,260 3,334,260 0.00% to 4.78% 2,752,597 2,752,597 0.00% to 4.78% 581,664 21.13% Money Market Funds - Mogul Partners Western Alliance 5) 1,650,291 1,650,291 0.01% 1,017,302 1,017,302 0.01% 632,990 62.22% Total Funds Held By Fiscal Agent 4,984,552 4,984,552 3,769,898 3,769,898 1,214,654 32.22% Funds Held In Trust
OPEB Balanced Highmark Plus PARS 6) 5,196,553 5,196,553 1.48% 4,114,625 4,114,625 5.05% 1,081,928 26.29% Total Funds Held In Trust 5,196,553 5,196,553 4,114,625 4,114,625 1,081,928 26.29% In accordance with California Government Code Section 53646, the Treasurer of the City of Hawthorne hereby certifies that the investments reported above comply with the City's adopted Investment Policy and that sufficient investment liquidity and anticipated revenues are available to meet the City's budgeted expenditures for the six months.
Printed 8/5/2024 at 9:46 AM
Multi - Bank Securities, Inc.
Current Quarter
6/30/2024
Date of Accrued Cash/Bank Estimated Ending
Purchase Maturity Date Quantity Market Price Market Value Interest Deposits Yield Market Value Capital One Bank , McLean, VA 7/31/2019 7/31/2024 247,000 99.7050 246,271.35 2,299.13 2.25% Mountain Amer Fed Cr Un, West Jordan, UT 10/14/2022 10/15/2024 248,000 99.8190 247,551.12 935.95 4.75% Kemba Finl Credit Union, SH 10/18/2019 10/18/2024 247,000 98.9000 244,283.00 142.11 1.76% Capital One Bk, Glenn Allen, VA 11/24/2021 11/25/2024 221,000 98.1420 216,893.82 179.22 0.81% Live Oak Bkg Co., Wilmington, NC 1/24/2020 1/20/2025 247,000 98.0940 242,292.18 363.06 1.88% State Bk India, New York, NY 1/22/2020 1/22/2025 247,000 98.1590 242,452.73 2,165.48 2.03% Enerbank USA, Salt Lake City, UT 3/13/2020 3/13/2025 247,000 97.1110 239,864.17 126.55 1.13% HSBC Bank Nat'l Association 5/7/2020 5/7/2025 247,000 96.6980 238,844.06 475.05 1.34% Flagstar Bank, Troy, MICH 5/29/2020 5/9/2025 247,000 96.0410 237,221.27 173.24 0.83% Morgan Stanley, Salt Lake City, UT 6/19/2020 6/19/2025 247,000 95.8110 236,653.17 59.55 0.83% Bank Baroda, NY 7/22/2020 7/22/2025 247,000 95.4060 235,652.82 757.92 0.73% Bank Vy Bellwood Neb 1/27/2022 1/27/2026 249,000 94.0700 234,234.30 22.51 1.16% GreenState Cr Un, Iowa SH 3/30/2021 3/30/2026 249,000 93.0390 231,667.11 158.27 0.85% Sallie Mae Bank, Salt Lake City, UT 7/8/2021 7/8/2026 247,000 92.5980 228,717.06 1,177.48 1.07% UBS Bank Salt Lake City, UT 7/8/2021 7/8/2026 247,000 92.3400 228,079.80 133.99 0.97% Toyota Finl Svgs Bank, Hend, NV 7/22/2021 7/22/2026 247,000 92.3650 228,141.55 1,028.60 1.02% Medallion Bk, Salt Lake City, UT 8/30/2021 8/31/2026 100,000 91.7180 91,718.00 0.00 0.92% Texas Exchange Bk, SSB Crowley 10/29/2021 10/29/2026 247,000 91.6740 226,434.78 7.44 1.19% Dept of Comm Fed Cr Un, Wash, DC 5/13/2022 5/13/2027 247,000 95.6370 236,223.39 373.88 3.39% First Natl Bank Amer East Lansing, MICH 5/17/2022 5/17/2027 245,000 95.3530 233,614.85 274.87 3.30% Discover Bk, Greenwood Del 3/22/2023 3/21/2028 243,000 100.9380 245,279.34 3,328.77 4.95% Liberty First Cr Un Lincoln 8/7/2023 8/7/2028 247,000 100.9950 249,457.65 922.36 4.65% Valleystar Cr Un Martinsville 8/30/2023 8/30/2028 100,000 102.8320 102,832.00 0.00 4.71% Wells Fargo Bk, Sioux Falls, SD 12/12/2023 12/12/2028 249,000 99.4420 247,610.58 546.44 4.47% BNY Mellon Dep Program 12/18/2023 12/18/2028 245,000 97.6140 239,154.30 322.19 4.09% City Fed Cr Un Amarillo Tex SH CTF 1/12/2024 1/12/2029 249,000 97.4330 242,608.17 485.04 4.05% Financial Plus Cr Un Flint Mich ST CTF 1/17/2024 1/17/2029 249,000 97.8430 243,629.07 359.17 4.13% A+ Fed Cr Un Austin Tex SH CTF 1/29/2024 1/29/2029 247,000 98.0420 242,163.74 27.75 4.18% SCE Fed Cr Un Irwindale Calif SH CTF 3/14/2024 3/14/2029 125,000 98.7080 123,385.00 232.88 4.30% Total Certificates of Deposit 6,724,000.00 6,502,930.38 17,078.90 - United States Treas Bills 3/21/2024 9/19/2024 5,630,000 98.8420 5,564,804.60 0.00 Total U.S Treasury Securities 5,630,000.00 5,564,804.60 - - Federal Home LN MTG Corp 7/21/2020 7/21/2025
Federal Home LN Bks 12/10/2021 12/10/2024 500,000 97.9990 489,995.00 305.56 1.12% Federal Home LN Bks Cons 12/30/2021 12/30/2024 500,000 97.8830 489,415.00 0.00 1.12% Federal National MTG Assn 7/15/2020 7/15/2025 247,000 95.2740 235,326.78 826.42 0.76% Federal Home LN Bks Cons 1/22/2021 1/22/2026 245,000 93.4210 228,881.45 672.05 0.66% Federal Home LN Bks 9/17/2021 9/17/2026 1,000,000 92.1360 921,360.00 3,004.17 1.13% Total U.S Government Bonds 2,492,000.00 2,364,978.23 4,808.20 - Bank of America Corp 10/30/2020 10/30/2025 500,000 93.0010 465,005.00 833.33 1.07% Total Corporate Bonds 500,000.00 465,005.00 833.33 -
Total Portfolio Holdings 15,346,000.00 14,897,718.21 22,720.43 96,430.57 14,994,148.78 Printed 8/5/2024 at 9:46 AM
Summary of Cash with Fiscal Agent
Current Quarter
Date of Maturity Investment
Purchase Date Coupon Cost Market Value Agreement Rate
City 2016 Certificates of Participation
Money Market Various Daily liquid 0.00% 0.90 0.90 0.00% Total 0.90 0.90 0.00
City 2019 Pension Obligation Bond
Money Market Various Daily liquid 0.00% 4.57 4.57 0.00% Money Market Various Daily liquid 0.00% 0.26 0.26 0.00% Money Market Various Daily liquid 0.00% 0.39 0.39 0.00% Total 5.22 5.22 0.00
S.A 2016 Tax Allocation Refunding Bonds
Money Market Various Daily liquid 4.78% 407.25 407.25 4.78% Money Market Various Daily liquid 4.78% 1,645.96 1,645.96 4.78% 2,053.21 2,053.21 0.00
CFD 1999-1 2000 Gateway Center Special Fund
Money Market Various Daily liquid 4.76% 43,671.01 43,671.01 4.76% Money Market Various Daily liquid 4.76% 0.03 0.03 4.76% Money Market Various Daily liquid 4.76% 891,412.99 891,412.99 4.76% Money Market Various Daily liquid 4.76% 308,948.54 308,948.54 4.76% Money Market Various Daily liquid 4.76% 275,066.96 275,066.96 4.76% Money Market Various Daily liquid 4.76% 0.05 0.05 4.76% Money Market Various Daily liquid 4.76% 111,030.54 111,030.54 4.76% Money Market Various Daily liquid 4.76% 4,460.84 4,460.84 4.76% Total 1,634,590.96 1,634,590.96 0.00
CFD 1999-1 2010 Gateway Center
Money Market Various Daily liquid 4.76% 14,361.71 14,361.71 4.76% Money Market Various Daily liquid 4.76% 85,243.10 85,243.10 4.76% Money Market Various Daily liquid 4.76% 1,309,615.17 1,309,615.17 4.76% Total 1,409,219.98 1,409,219.98 0.00
CFD 2004-1 2005 Fusion at South Bay
Money Market Various Daily liquid 4.76% 20,523.26 20,523.26 4.76% Money Market - Reserve Fund Various Daily liquid 4.76% 242,865.65 242,865.65 4.76% Total 263,388.91 263,388.91 0.00
6/30/2024
Printed 8/5/2024 at 9:46 AM
Summary of Cash with Fiscal Agent
Current Quarter
Date of Maturity Investment
Purchase Date Coupon Cost Market Value Agreement Rate
6/30/2024
CFD 2006-1 2020 360 Degrees at South Bay
Money Market Various Daily liquid 0.00% 0.00 0.00 0.00% Money Market Various Daily liquid 0.00% 0.81 0.81 0.00% Money Market Various Daily liquid 0.00% 25,000.42 25,000.42 0.00% Total 25,001.23 25,001.23 0.00
Total 3,334,260.41 3,334,260.41 0.00
Printed 8/5/2024 at 9:46 AM
Western Alliance - Mogul Partners
Current Quarter
6/30/2024
Unrealized Accrued Net Interest Ending Market Estimated Cost Value Market Value Gain/Loss Income Collected Value Yield Western Alliance Bank 1,650,291.39 1,650,291.39 0.00 0.00 94.87 1,017,301.57 Total Cash Investments 1,650,291.39 1,650,291.39 0.00 0.00 94.87 1,017,301.57 0.01% Local Agency Investment Fund
P.O. Box 942809
Sacramento, CA 94209-0001
(916) 653-3001
July 19, 2024
LAIF Home
PMIA Average Monthly
Yields
CITY OF HAWTHORNE
CITY TREASURER
4455 W. 126TH STREET
HAWTHORNE, CA 90250
June 2024 Statement
Tran Type Definitions
Account Summary
Total Deposit: 0.00 Beginning Balance: 74,215,702.41
Total Withdrawal: 0.00 Ending Balance: 74,215,702.41
BMO Bank N.A.
P.O. Box 755
Chicago, IL 60690
Toll Free: 1-877-895-3278
STATEMENT PERIOD
06/01/24 TO 06/30/24
PAGE: 1 OF 2
CITY OF HAWTHORNE
ATTN - DIRECTOR OF FINANCE
CASH MANAGEMENT
4455 W 126TH ST
HAWTHORNE CA 90250-4421
ITEMS ENCLOSED 0
___________________________________________________________________________________________________
CORPORATE MMDA - PUBLIC FUNDS
___________________________________________________________________________________________________
ACCOUNT SUMMARY
YOUR PREVIOUS BALANCE WAS 60,910,584.45
YOUR TRANSACTIONS THIS PERIOD INCLUDED: AVERAGE COLLECTED BALANCE USED FOR ACCRUING 0 DEPOSITS .00 INTEREST WAS 60,916,692.15
0 WITHDRAWALS .00 (MINIMUM DAILY BALANCE NECESSARY TO ACCRUE INTEREST PAID WAS 183,231.02 INTEREST IS .00)
YOUR ENDING BALANCE WAS 61,093,815.47
YTD INTEREST PAID IS 982,057.02
YTD INTEREST WITHHELD IS .00
___________________________________________________________________________________________________
NO ACTIVITY FOR THIS STATEMENT PERIOD
JUN 28 IOD INTEREST PAID 183,231.02
___________________________________________________________________________________________________
CLOSING DAILY BALANCES AND DEBIT TOTALS
DATE BALANCE DEBITS DATE BALANCE DEBITS
JUN 28 61,093,815.47 0
___________________________________________________________________________________________________
TRANSACTION SUMMARY INFORMATION
DESCRIPTION NUMBER AMOUNT DESCRIPTION NUMBER AMOUNT
IOD INTEREST PAID 1 183,231.02
___________________________________________________________________________________________________
AGENDA ITEM NO. 10
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Public Works
City Manager: __________
Vontray Norris
Dir. of Public Works: ___________
Akbar Farokhi
SUBJECT:
Progress Payment #13 in the amount of $71,174.00 due to Elecnor Belco Electric of Chino, CA for Highway Safety Improvement Project Traffic Signal Upgrade and Reconstruction 120th St Improvement Project – Prairie Ave to Felton Ave (Project # 21-06) RECOMMENDED MOTION:
Staff recommends that the City Council approve this Progress Payment #13 to Elecnor Belco Electric of Chino, CA
DISCUSSION:
This project includes upgrading the existing traffic signals at nine different locations on 120th St between Prairie Ave and Felton Ave, at the intersections of: Prairie Ave, York Ave, Freeman Ave, Birch Ave, Grevillea Ave, Ramona Ave, Eucalyptus Ave, Inglewood Ave and Felton Ave.
The work consists of traffic signal upgrades, trenching and installing conduits, construction of curb and gutter, sidewalks, and ADA ramps, striping and adjustment of utilities and all other work necessary to complete the improvements in accordance with the Plans and Specifications.
Traffic signal poles and accessories have been installed and completed.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
This project is a result of the City working closely with funding and regulatory agencies to support and improve our infrastructure.
FISCAL IMPACT:
None. Funds for this progress payment in the amount of $71,174.00 are available in the adopted Fiscal Year 2024-2025 budget and will be paid for with approved and allocated Highway Safety Improvement Program (HSIP) Grant, Measure R and Development Impact Fees.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Progress Payment #13
AGENDA ITEM NO. 11
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Public Works
City Manager: __________
Vontray Norris
Dir. of Public Works: ___________
Akbar Farokhi
SUBJECT:
Progress Payment #03 in the amount of $218,210.92 due to Best Contracting Services, Inc of Gardena, CA for Betty Ainsworth Gymnasium Roof Replacement (Project #23-03) RECOMMENDED MOTION:
Staff Recommends that the City Council approve this Progress Payment #03 to Best Contracting Services Inc of Gardena, CA
DISCUSSION:
This project includes providing all services, labor, materials, permits, insurance, tools and equipment needed, in accordance with the Plan and Specifications to successfully and safely complete the replacement of the roof over the Gymnasium at Betty Ainsworth Sports Center located at 3851 W. El Segundo Blvd., Hawthorne, CA 90250.
As of August 1st, 2024, Best Contracting Services has completed ~98% of the projects scope of work: removed existing metal panels, underlayment, dens board and replaced damaged plywood. Installed new underlayment and gypsum cover board applied to roof deck. Preparing the roof for the new panels by chalking lines to guide the installation of new panels. Metal panels fabricated on site and being installed from west side to east side of the roof. New Gutters installed and properly secured with nails and clips. All equipment removed properly disposed of.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
This roof rehabilitation project at our community center gym can contribute to our economic strategic plan in several ways. For example, a functional and well-maintained roof ensures the uninterrupted use of the community center gym for various activities such as dance classes, youth sports, karate, gymnastics, and non-profit meetings. This contributes to the continuity of
these services, which are essential for the community's well-being and engagement. By maintaining a reliable facility, the community center can continue to attract participants and generate revenue from program fees or facility rentals.
A roof rehabilitation project demonstrates the commitment to maintaining a safe and inviting space for activities. This can enhance the overall appeal of the community center gym, potentially increasing its utilization. As more individuals and groups utilize the facility, it can lead to increased participation and revenue generation. The increased foot traffic can also have a positive impact on local businesses, such as nearby restaurants, cafes, or shops, as visitors may utilize these services before or after their activities at the community center.
By investing in a roof rehabilitation project at a community center gym, the city can contribute to its economic strategic plan by ensuring the continuity of services, increasing facility utilization, enhancing reputation, supporting non-profit organizations, and fostering partnerships. These efforts can have a positive impact on revenue generation, community engagement, and the overall economic well-being of our City FISCAL IMPACT:
None. Funds for this progress payment in the amount of $218,210.92 will be funded through a Specified Grant from the Budget Act of 2022 from the State of California Department of Parks and Recreation
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Progress Payment #03
2. Contractors Invoice
AGENDA ITEM NO. 12
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Public Works
City Manager: __________
Vontray Norris
Dir. of Public Works: ___________
Akbar Farokhi
SUBJECT:
Progress Payment #6 in the amount of $1,102,849.21 due to Klassic Engineering & Construction, Inc of Orange, CA for Hawthorne Housing Rehabilitation of City Owned Properties 2023 (Project #23-09)
RECOMMENDED MOTION:
Staff recommends that the City Council approve this Progress Payment #6 to Klassic Engineering & Construction Inc of Orange, CA.
DISCUSSION:
This project includes providing all services, labor, materials, permits, insurance, tools and equipment needed, in accordance with the Specifications to successfully and safely complete the interior renovations to all units at six (6) City of Hawthorne owned buildings located at 11605 Gale Ave, 12720 - 12726 Grevillea Ave, 11529 Gale Ave, 11537 Gale Ave and 12529 Truro Ave, Hawthorne, CA 90250. The work to be done includes but is not limited to: removal of all carpet and installing vinyl flooring, removal and replacement of all water heaters, wall heaters, heating vents, new windows/window screens, interior and entry doors, garage doors upgrade, restroom remodels, electrical, mechanical and plumbing upgrades, painting, patch work, etc.
As of June 30th, 2024, Klassic engineering & Construction (KEC) has completed ~50% of the projects scope of work. KEC has continued remodeling 8 units: 2 units at 11529 Gale Ave, 2 Units at 11537 Gale Ave, 4 units at 11605 Gale Ave and 2 unit at 12720-12726 Grevillea Ave.
Remodeling consist of but not limited to: removing/replacing carpet to vinyl flooring, remove/replace kitchen cabinet, sink, range and stove, installing new light fixtures through the units, patch and stucco walls, removing/replacing windows and all doors. Work also consist of
removing/replacing bath tub, toilet, faucet, flooring and new tile for bathtub.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
Implementing this rehabilitation project on city-owned properties contributes to our economic strategic plan in several ways. For example, by stimulating local economy. Housing rehabilitation projects require hiring contractors, suppliers, and laborers, which injects money into the local economy and creating job opportunities. This project will also increase property value. By having well-maintained properties with functional, aesthetically pleasing, and modern amenities, the properties tend to have higher market value. By investing in these housing rehabilitations, the city can improve the condition of its properties and attract more potential tenants. City owned properties with well-maintained units and structures contribute to the overall livability and attractiveness of the community. This can help attract businesses, residents, and investors, boosting economic growth and revitalizing neighborhoods. A visually appealing and structurally sound housing can create a positive impression of the city's commitment to infrastructure maintenance and development.
In addition, by addressing housing unit’s issues promptly, the City can avoid more extensive structure repairs, which can be significantly costlier. This proactive approach to maintenance helps save public funds and ensures efficient use of resources. By investing in housing rehabilitation on city owned properties, we contribute to our economic strategic plan by fostering economic activity, increasing property values, saving costs, and attracting investment.
FISCAL IMPACT:
None. Funds for this progress payment in the amount of $1,102,849.21 will be funded through the allocated and approved Home Funds, CPF, and ARPA
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Progress Payment #6
2. KEC Invoice
Honorable Mayor and City Council Council Date
City of Hawthorne 8/27/2024
Hawthorne, CA 90250
RE: PROGRESS PAYMENT NO. 6 FOR HAWTHORNE HOUSING REHABILITATION OF CITY OWNED PROPERTIES 2023 (#23-09) The following is a detailed breakdown of Progress Payment No.6 due to Klassic Engineering & Construction Inc, 250 S. Tustin St., Orange, CA, 92866 for work done on the subject project through June, 2024.
Contract Unit Contract Qty or % Qty or % Amount Total Qty Total Amount Quantity Price Amount Previous This estimate This Estimate or % to Date to Date 1 Exterior Staircase Railing Paint and Install new 2”
wide safety walk step tape contrast to existing step
color on all steps on outside staircases.
LS 1 $3,500.00 $ 3,500.00 0.00 0.00 $0.00 0.00 $ -
2 Replace All Entry Door Assembly EA 28 $350.00 $ 9,800.00 0.00 0.29 $2,800.00 0.29 $ 2,800.000 3 Replace All Water Heater Enclosure Doors EA 8 $100.00 $ 800.00 0.00 0.13 $100.00 0.13 $ 100.000 4 Replace All Individual Mailboxes EA 8 $50.00 $ 400.00 0.00 0.13 $50.00 0.13 $ 50.000 5 Pest Control LS 1 $1,000.00 $ 1,000.00 0.00 0.20 $200.00 0.20 $ 200.000 6 Clean Building Drain and Waste Piping LS 1 $1,500.00 $ 1,500.00 0.27 0.00 $0.00 0.27 $ 400.000 7 Smoke Detectors and Monoxide Detectors EA 13 $100.00 $ 1,300.00 0.15 0.00 $0.00 0.15 $ 200.000 8 Disconnect Existing Old Wall Gas/Floor Heater EA 7 $750.00 $ 5,250.00 0.14 0.14 $750.00 0.29 $ 1,500.000 9 Install Wall Heater – Dual Wall 50,000 BTU, Update
Water Heater Connections EA 4 $3,000.00 $ 12,000.00 0.46 0.25 $3,000.00 0.708 $ 8,500.000 10 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 0.10 0.10 $14,000.00 0.20 $ 28,000.000 11 Replace Doorbell EA 4 $100.00 $ 400.00 0.00 0.25 $100.00 0.25 $ 100.000 12 Repair Electrical Wiring, Install New Electrical
Receptacles & Switches, and Ground Fault Circuit
Interrupter
LS 1 $16,000.00 $ 16,000.00 0.31 0.25 $4,000.00 0.56 $ 9,000.000 13 Replace Light Fixture with New Ceiling Fan and
Replace Ceiling Light Fixtures EA 17 $650.00 $ 11,050.00 0.36 0.36 $4,000.00 0.72 $ 8,000.000 14 Install New Water Heater EA 6 $1,000.00 $ 6,000.00 0.33 0.17 $1,000.00 0.50 $ 3,000.000 15 Kitchen – Drywall, Painting, Patch Work, Removal of
Kitchen Cabinets, Countertops, Backsplash, Faucet,
Sink, Garbage Disposal, Flooring, Under Sink
Plumbing, Electrical System Wiring, Exhaust Range
Hood, New Gas Range, Appliances and Accessories
EA 4 $15,000.00 $ 60,000.00 0.13 0.38 $22,500.00 0.50 $ 30,000.000 16 Bathroom – Drywall, Exhaust Fan,
Vanity/Mirror/Medicine Cabinet, Countertop, Faucet,
Toilet, Tub/Shower, Shower Fixture, Flooring,
Accessories, Light Fixture, Electrical System Wiring,
Painting.
EA 4 $7,500.00 $ 30,000.00 0.10 0.40 $12,000.00 0.50 $ 15,000.000 17 Remove/Dispose all existing interior passage doors
and Install New Passage Doors EA 10 $250.00 $ 2,500.00 0.20 0.20 $500.00 0.40 $ 1,000.000 18 Interior Paint – All Rooms SF 20000 $2.00 $ 40,000.00 0.18 0.18 $7,000.00 0.35 $ 14,000.000 19 Install New Vinyl Plank Flooring and Carpet
Replacement SF 20000 $12.00 $ 240,000.00 0.25 0.06 $15,000.00 0.31 $ 75,000.000 Description Unit
K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page1 20 Install New Windows: Windows, Window Frames,
and Window Coverings Replacement EA 35 $750.00 $ 26,250.00 0.32 0.32 $8,500.00 0.65 $ 17,000.000 21 No Work Necessary for this Unit NA 0 $0.00 $ - 0.00 0.00 $0.00 0.00 $ - 22 Pest Control LS 1 $2,000.00 $ 2,000.00 0.25 0.00 $0.00 0.25 $ 500.000 23 Clean Building Drain and Waste Piping LS 1 $3,000.00 $ 3,000.00 0.20 0.00 $0.00 0.20 $ 600.000 24 Smoke Detectors and Monoxide Detectors EA 13 $100.00 $ 1,300.00 0.38 0.00 $0.00 0.38 $ 500.000 25 Disconnect Existing Old Wall Gas/Floor Heater EA 7 $750.00 $ 5,250.00 0.14 0.00 $0.00 0.14 $ 750.000 26 Install Wall Heater – Dual Wall 50,000 BTU, Update
Water Heater Connections EA 4 $3,000.00 $ 12,000.00 0.06 0.00 $0.00 0.06 $ 750.000 27 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 0.02 0.00 $0.00 0.02 $ 3,000.000 28 Replace Doorbell EA 4 $100.00 $ 400.00 0.25 0.00 $0.00 0.25 $ 100.000 29 Repair Electrical Wiring, Install New Electrical
Receptacles & Switches, and Ground Fault Circuit
Interrupter
LS 1 $20,000.00 $ 20,000.00 0.25 0.00 $0.00 0.25 $ 5,000.000 30 Replace Light Fixture with New Ceiling Fan and
Replace Ceiling Light Fixtures EA 17 $650.00 $ 11,050.00 0.14 0.00 $0.00 0.14 $ 1,500.000 31 Install New Water Heater EA 4 $1,000.00 $ 4,000.00 0.25 0.00 $0.00 0.25 $ 1,000.000 32 Kitchen – Drywall, Painting, Patch Work, Removal of
Kitchen Cabinets, Countertops, Backsplash, Faucet,
Sink, Garbage Disposal, Flooring, Under Sink
Plumbing, Electrical System Wiring, Exhaust Range
Hood, New Gas Range, Appliances and Accessories
EA 4 $15,000.00 $ 60,000.00 0.25 0.00 $0.00 0.25 $ 15,000.000 33 Bathroom – Drywall, Exhaust Fan,
Vanity/Mirror/Medicine Cabinet, Countertop, Faucet,
Toilet, Tub/Shower, Shower Fixture, Flooring,
Accessories, Light Fixture, Electrical System Wiring,
Painting.
EA 4 $7,500.00 $ 30,000.00 0.25 0.00 $0.00 0.25 $ 7,500.000 34 Remove/Dispose all existing interior passage doors
and Install New Passage Doors EA 9 $250.00 $ 2,250.00 0.22 0.00 $0.00 0.22 $ 500.000 35 Interior Paint – All Rooms SF 20000 $2.00 $ 40,000.00 0.08 0.00 $0.00 0.08 $ 3,000.000 36 Install New Vinyl Plank Flooring and Carpet
Replacement SF 20000 $12.00 $ 240,000.00 0.02 0.00 $0.00 0.02 $ 3,600.000 37 Install New Windows: Windows, Window Frames,
and Window Coverings Replacement EA 20 $750.00 $ 15,000.00 0.33 0.00 $0.00 0.33 $ 4,999.995 38 Repair Handrails EA 1 $1,500.00 $ 1,500.00 0.00 0.00 $0.00 0.00 $ - 39 Replace Doorbell EA 3 $100.00 $ 300.00 0.00 0.00 $0.00 0.00 $ - 40 Paint Exterior Plaster Surfaces for Detached Car
Garage SF 150 $15.00 $ 2,250.00 0.00 0.00 $0.00 0.00 $ - 41 Repair PCC Concrete Slab to Drain Away From
Structure by Gas Meters SF 100 $55.00 $ 5,500.00 0.00 0.00 $0.00 0.00 $ - 42 Repair Rear and Side PCC Steps LS 1 $1,500.00 $ 1,500.00 0.00 0.00 $0.00 0.00 $ - 43 Repair Wrought Iron Gate and Railing LS 1 $2,500.00 $ 2,500.00 0.00 0.00 $0.00 0.00 $ - 44 Install New Entry Doors and Install New Security
Screen Door & Door Lock EA 5 $2,500.00 $ 12,500.00 0.00 0.00 $0.00 0.00 $ - 45 Install New Windows: Windows, Window Frames,
and Window Coverings Replacement EA 30 $250.00 $ 7,500.00 0.00 0.00 $0.00 0.00 $ - K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page2 46 Install New Exterior Security Light Fixtures, Replace Light Fixture with New Ceiling Fan, and Replace
Ceiling Light Fixtures
EA 22 $250.00 $ 5,500.00 0.00 0.00 $0.00 0.00 $ -
47 Pest Control LS 1 $2,500.00 $ 2,500.00 0.00 0.00 $0.00 0.00 $ - 48 Replace Wood Garage Door with Steel Sectional
Garage Door. Replace Garage Door with Steel
Sectional Garage Door and Hardware into Dwelling
EA 4 $4,500.00 $ 18,000.00 0.00 0.00 $0.00 0.00 $ -
49 Front Detached Garage – Replace Side Entry Door
Assembly EA 1 $2,500.00 $ 2,500.00 0.00 0.00 $0.00 0.00 $ - 50 Install New Electrical Receptacles & Switches LS 1 $2,500.00 $ 2,500.00 0.00 0.00 $0.00 0.00 $ - 51 Clean Building Drain and Waste Piping LS 1 $3,500.00 $ 3,500.00 0.00 0.00 $0.00 0.00 $ - 52 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 0.00 0.00 $0.00 0.00 $ - 53 Installation of Heating and Air-Conditioning System EA 3 $4,500.00 $ 13,500.00 0.00 0.00 $0.00 0.00 $ - 54 Basement Acoustic Suspended Ceiling Repairs LS 1 $2,500.00 $ 2,500.00 0.00 0.00 $0.00 0.00 $ - 55 Apply New Interior Paint SF 20000 $2.00 $ 40,000.00 0.00 0.00 $0.00 0.00 $ - 56 Smoke Detectors and Monoxide Detectors EA 16 $100.00 $ 1,600.00 0.00 0.00 $0.00 0.00 $ - 57 Repair Electrical Wiring, Install New Electrical
Receptacles & Switches, and Ground Fault Circuit
Interrupter
LS 1 $8,500.00 $ 8,500.00 0.00 0.00 $0.00 0.00 $ -
58 All Bathrooms -- New Exhaust Fan, Remove/Replace
Drywall and Tile From Walls and Ceiling with New
Moisture Resistant Drywall and Will Match Existing
Walls. New Paint, New Shower/Tub, New Shower
Fixtures, New Vanity/Mirror/Medicine Cabinet, New
Countertops, New Sink, New Faucet, New
Accessories/Towel Bar, New Water Saving Toilet
Including New Pump/Seat/Wax Ring, New Energy
Star Light Fixtures and Remove/Replace Flooring.
EA 6 $7,500.00 $ 45,000.00 0.00 0.00 $0.00 0.00 $ -
59 Basement Bathroom – Remove and Dispose of
existing ceramic tile, backing, shower pan,
remove/replace any dry rotted studs, remove/dispose
existing bath/shower valve and fixtures, and shower
door/shower door enclosure.
EA 1 $7,500.00 $ 7,500.00 0.00 0.00 $0.00 0.00 $ -
60 1st Floor Bathroom – replace tub door, install new
water closet, install new vanity, vanity top, faucet, and under sink plumbing
EA 1 $7,500.00 $ 7,500.00 0.00 0.00 $0.00 0.00 $ -
61 Kitchen – Drywall, Painting, Patch Work,
Removal/Install of Kitchen: Cabinets, Countertops,
Backsplash, Faucet, Sink, Garbage Disposal, Floor
Tile remain and properly protected, Dishwasher,
Under Sink Plumbing, Electrical System Wiring,
Exhaust Range Hood, New Gas Range, Install New
Recessed Light Fixtures, Appliances and Accessories
EA 3 $15,000.00 $ 45,000.00 0.00 0.00 $0.00 0.00 $ -
K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page3 62 Basement Den – will remain and properly protected LS 1 $250.00 $ 250.00 0.00 0.00 $0.00 0.00 $ - 63 Carpet – remove and dispose of all existing carpet,
padding, and strips. Install new carpet. LS 1 $5,500.00 $ 5,500.00 0.00 0.00 $0.00 0.00 $ - 64 Install New Vinyl Plank Flooring SF 20000 $7.00 $ 140,000.00 0.00 0.00 $0.00 0.00 $ - 65 Replace Front Entry Door Assembly EA 6 $350.00 $ 2,100.00 0.00 0.00 $0.00 0.00 $ - 66 Master Bathroom -- Install New Bath/Shower Valve
& Fixtures, Remove Existing Caulking Sealant at All
Joints Inside the Tub/Shower and Prepare for New
Caulking. Paint to Match Existing Shower Tile Color.
Remove All Damaged, Cracked or Crumbling Grout
and Prepare/Apply New Grout.
EA 1 $7,500.00 $ 7,500.00 0.00 0.00 $0.00 0.00 $ -
67 2
nd Bathroom – Remove/Replace Existing
Tub/Shower Enclosure including All Fixtures and
Hardware, Repair/Replace Any
Deteriorated/Damaged Wood Components, Replace
All Deteriorated/Damaged Drain Lines and Furnish
and Install a New “Moen – Chateau” (or approved
equal)
EA 3 $7,500.00 $ 22,500.00 0.00 0.00 $0.00 0.00 $ -
68 North Side Metal Carport – Remove All Peeling
Paint, Dirt, Dust, Etc., Prep and Paint All Metal
Components on Existing Carport.
SF 500 $25.00 $ 12,500.00 0.40 0.00 $0.00 0.40 $ 5,000.000 69 West Side Carport Re-Roofing - Membrane Roofing:
Remove and Dispose of All Existing Roof Covering
Layers on Residence and Carport. Remove and
Replace Any Damaged Sheathing, and Damaged
Roof and Carport Wood Members, Trim, and Fascia.
SF 500 $25.00 $ 12,500.00 0.00 0.00 $0.00 0.00 $ -
70 West Side Carport Exterior Wood Paint and Exterior
Plaster Surface SF 500 $12.00 $ 6,000.00 0.00 0.00 $0.00 0.00 $ - 71 Pest Control LS 1 $10,000.00 $ 10,000.00 0.40 0.00 $0.00 0.40 $ 4,000.000 72 Clean Building Drain and Waste Piping LS 1 $12,500.00 $ 12,500.00 0.48 0.24 $3,000.00 0.72 $ 9,000.000 73 Smoke Detectors and Monoxide Detectors EA 20 $100.00 $ 2,000.00 0.30 0.30 $600.00 0.60 $ 1,200.000 74 Replace Wall Heater – Dual Wall 50,000 BTU EA 10 $1,000.00 $ 10,000.00 0.50 0.10 $1,000.00 0.60 $ 6,000.000 75 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 1.00 0.00 $0.00 1.00 $ 140,000.000 76 Replace Doorbell EA 10 $100.00 $ 1,000.00 0.10 0.00 $0.00 0.10 $ 100.000 77 Repair Electrical Wiring, Install New Electrical
Receptacles & Switches and Ground Fault Circuit
Interrupter
LS 1 $55,000.00 $ 55,000.00 0.91 0.00 $0.00 0.91 $ 50,000.000 78 Replace Light Fixture with New Ceiling Fan and
Replace Ceiling Light Fixtures EA 40 $750.00 $ 30,000.00 0.4883 0.2467 $7,400.00 0.74 $ 22,050.150 79 Kitchen – Replace Fluorescent Light Bulbs and
Fixtures, If Necessary. Replace Cabinets, Countertops
and Backsplashes, Faucet, Sink, Garbage Disposal,
Under Sink Plumbing and All Appliances, New
Exhaust Range Hood, New Gas Range
EA 10 $15,000.00 $ 150,000.00 0.5333 0.1333 $20,000.00 0.67 $ 99,999.999 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page4 80 Bathroom – New Exhaust Fan, Remove and Replace
Drywall and Tile From Walls and Ceiling, New
Tub/Shower, New Shower Fixtures,, New
Vanity/Mirror/Medicine Cabinet, New Countertops,
New Faucet, New Toilet Including New Pump, Seat,
and Wax Ring, New Light Fixtures, New Paint and
New Flooring.
EA 12 $7,500.00 $ 90,000.00 0.5278 0.2778 $25,000.00 0.81 $ 72,500.000 81 Install New Passage Doors EA 24 $250.00 $ 6,000.00 0.63 0.00 $0.00 0.63 $ 3,800.000 82 Interior Paint – All Rooms SF 20000 $2.00 $ 40,000.00 0.87 0.00 $0.00 0.87 $ 34,600.000 83 Install New Vinyl Plank Flooring SF 20000 $7.00 $ 140,000.00 0.5000 0.2500 $35,000.00 0.75 $ 105,000.000 84 Remove and dispose of all of the existing carpet,
padding, and strips from areas of dwelling that
currently have carpet
LS 1 $7,500.00 $ 7,500.00 0.47 0.33 $2,500.00 0.80 $ 6,000.000 85 Window Coverings Replacement EA 24 $150.00 $ 3,600.00 0.6111 0.1389 $500.00 0.75 $ 2,700.000 86 Install New Windows: Windows, Window Frames,
and Window Coverings Replacement EA 24 $1,000.00 $ 24,000.00 0.7083 0.2083 $5,000.00 0.92 $ 22,000.000 87 Replace All Entry Door Assembly EA 20 $250.00 $ 5,000.00 0.40 0.40 $2,000.00 0.80 $ 4,000.000 88 Security Window Screens Compliance EA 24 $350.00 $ 8,400.00 0.00 0.00 $0.00 0.00 $ - 89 Laundry Room: Inspect Electrical System and Making
All Needed Replacement/Repairs, Remove/Replace
Existing Washers and Dryers
LS 1 $3,500.00 $ 3,500.00 0.00 0.00 $0.00 0.00 $ -
90 Pest Control LS 1 $12,000.00 $ 12,000.00 0.3500 0.2083 $2,500.00 0.56 $ 6,700.000 91 Clean Building Drain and Waste Piping LS 1 $12,000.00 $ 12,000.00 0.2500 0.2083 $2,500.00 0.46 $ 5,500.000 92 Smoke Detectors and Monoxide Detectors EA 44 $100.00 $ 4,400.00 0.4091 0.1136 $500.00 0.52 $ 2,300.000 93 Replace Wall Heater – Dual Wall 50,000 BTU EA 12 $3,000.00 $ 36,000.00 0.5000 0.1667 $6,000.00 0.67 $ 24,000.000 94 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 0.725 0.214 $30,000.00 0.94 $ 131,500.000 95 Repair Electrical Wiring, Install New Electrical
Receptacles & Switches, and Ground Fault Circuit
Interrupter
LS 1 $12,000.00 $ 12,000.00 0.53 0.33 $4,000.00 0.87 $ 10,400.000 96 Replace Light Fixture with New Ceiling Fan and
Replace Ceiling Light Fixtures EA 32 $650.00 $ 20,800.00 0.50 0.11 $2,300.00 0.61 $ 12,600.000 97 Kitchen – Drywall, Painting, Patch Work, Removal of
Kitchen Cabinets, Countertops, Backsplash, Faucet,
Sink, Garbage Disposal, Under Sink Plumbing,
Electrical System Wiring, Exhaust Range Hood, New
Gas Range, Appliances and Accessories
EA 12 $15,000.00 $ 180,000.00 0.4722 0.2500 $45,000.00 0.72 $ 130,000.000 98 Bathroom/Half Bath – Drywall, Exhaust Fan,
Vanity/Mirror/Medicine Cabinet, Countertop, Faucet,
Toilet, Tub/Shower, Shower Fixture, Flooring,
Accessories, Light Fixture, Electrical System Wiring,
Painting.
EA 24 $7,500.00 $ 180,000.00 0.4306 0.2667 $48,000.00 0.70 $ 125,500.000 99 Interior Paint – All Rooms SF 20000 $2.00 $ 40,000.00 0.800 0.000 $0.00 0.80 $ 32,000.000 100 Install New Vinyl Plank Flooring and Carpet
Replacement SF 20000 $12.00 $ 240,000.00 0.52 0.25 $60,000.00 0.77 $ 185,000.000 101 Window Coverings Replacement EA 30 $250.00 $ 7,500.00 0.4667 0.2667 $2,000.00 0.73 $ 5,500.000 102 Install New Passage Doors EA 44 $250.00 $ 11,000.00 0.3636 0.0000 $0.00 0.36 $ 4,000.000 103 Repair Trash Enclosure Metal Doors LS 1 $2,500.00 $ 2,500.00 0.20 0.00 $0.00 0.20 $ 500.000 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page5 104 Water Heater Room Drywall Repairs EA 1 $1,000.00 $ 1,000.00 0.00 0.00 $0.00 0.00 $ - 105 Install New Windows and Replace All Entry Door
Assembly EA 40 $1,000.00 $ 40,000.00 0.475 0.275 $11,000.00 0.75 $ 30,000.000 106 Replace All Entry Door Assembly EA 48 $550.00 $ 26,400.00 0.3239 0.3788 $10,000.00 0.70 $ 18,550.000 107 Repair/Replace Vinyl Fence LS 1 $1,500.00 $ 1,500.00 0.00 0.00 $0.00 0.00 $ - 108 Laundry Room Electrical repairs and Laundry Room
Washer and Dryer LS 1 $5,500.00 $ 5,500.00 0.00 0.00 $0.00 0.00 $ - 109 Pest Control LS 1 $4,000.00 $ 4,000.00 0.25 0.00 $0.00 0.25 $ 1,000.000 110 Clean Building Drain and Waste Piping LS 1 $2,000.00 $ 2,000.00 0.50 0.28 $550.00 0.78 $ 1,550.000 111 Smoke Detectors and Monoxide Detectors EA 21 $100.00 $ 2,100.00 0.3333 0.3571 $750.00 0.69 $ 1,450.000 112 Replace Radiant Ceiling Heaters EA 5 $2,500.00 $ 12,500.00 0.44 0.20 $2,500.00 0.64 $ 8,000.000 113 General Drywall Repairs SF 20000 $7.00 $ 140,000.00 0.41 0.21 $30,000.00 0.62 $ 87,000.000 114 Replace Doorbell EA 5 $100.00 $ 500.00 0.00 0.00 $0.00 0.00 $ - 115
Repair Electrical Wiring, Install New Electrical
Receptacles & Switches, and Ground Fault Circuit
Interrupter
LS 1 $8,000.00 $ 8,000.00 0.63 0.25 $2,000.00 0.88 $ 7,000.000 116 Electric Water Heater Replacement EA 2 $1,000.00 $ 2,000.00 1.0 0.00 $0.00 1.00 $ 2,000.000 117
Kitchen – Drywall, Painting, Patch Work, Flooring,
Removal/Replace Cabinets, Countertops, Backsplash,
Faucet, Sink, Garbage Disposal, Under Sink
Plumbing, Electrical System Wiring, Exhaust Range
Hood, New Gas Range, New Electrical Range,
Appliances and Accessories
EA 5 $15,000.00 $ 75,000.00 0.467 0.11 $8,500.00 0.58 $ 43,500.000 118
Bathroom/Half Bath – Drywall, Tile, Exhaust Fan,
Vanity/Mirror/Medicine Cabinet, Countertop, Faucet,
Toilet, Tub/Shower, Shower Fixture, Flooring,
Accessories, Light Fixture, Electrical System Wiring,
Painting.
EA 5 $7,500.00 $ 37,500.00 0.92 0.00 $0.00 0.92 $ 34,500.000 119 Install New Passage Doors EA 16 $250.00 $ 4,000.00 0.750 0.000 $0.00 0.75 $ 3,000.000 120 Interior Paint – All Rooms SF 20000 $2.00 $ 40,000.00 0.50 0.00 $0.00 0.50 $ 20,000.000 121 Install New Vinyl Plank Flooring and Carpet
Replacement SF 20000 $12.00 $ 240,000.00 0.60 0.27 $65,000.00 0.87 $ 210,000.000 122 Install New Windows: Windows, Window Frames,
and Window Coverings Replacement EA 40 $1,250.00 $ 50,000.00 0.64 0.24 $12,000.00 0.88 $ 44,000.000 123
Laundry Room – Electrical System Inspection,
Electrical System repair/replace, Drywall, Patchwork,
Electric Water Heater Replacement and Washer and
Dryer Replacement.
LS 1 $4,500.00 $ 4,500.00 0.00 0.00 $0.00 0.00 $ -
124 Repair/Replace Vinyl Fence LS 1 $1,500.00 $ 1,500.00 0.00 0.00 $0.00 0.00 $ - 125 Install Exterior Lighting with Timer System at All
Properties LS 1 $3,000.00 $ 3,000.00 0.17 0.00 $0.00 0.17 $ 500.000 126 Remove and Dispose of All Existing Equipment and
Material LS 1 $4,000.00 $ 4,000.00 0.00 0.00 $0.00 0.00 $ - 127
3-Year Maintenance Program Covering All Properties
Exterior and Interior Repairs As Well As Any
Emergency Repairs
LS 1 $24,000.00 $ 24,000.00 0.08 0.00 $0.00 0.08 $ 2,000.000 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page6 128
COR #1: Removal ceiling at two (2) bedrooms and
living room. Two (2) Foot of wall at four sides of
rooms at 11537 Unit C.
LS 1 $17,815.08 $ 17,815.08 1.00 0.00 $0.00 1.00 $ 17,815.080 129
COR#2: PER UNIT AND INCLUDES REMOVAL
OF GYP BOARD AND INSTALL LIGHT
FIOXTURE AT THE LIVING ROOM AND
BEDROOM
LS 1 $17,272.45 $ 17,272.45 1.00 0.00 $0.00 1.00 $ 17,272.450 130
COR#3: REMOVAL OF THE EXISITING CARPET
AT THE INTERIOR STARCASES AND
INSTALLATION OF VINYL PLANK FLOORING
AND NOSING AT THE STAIRS
LS 1 $49,191.80 $ 49,191.80 1.00 0.00 $0.00 1.00 $ 49,191.800 131
COR#4: WATER PRROFING ABOVE THE
WINDOWS AT 11605 GALE (UNITS 6 & 10) AND
11529 UNITS (6 AND 12
LS 1 $19,088.19 $ 19,088.19 1.00 0.00 $0.00 1.00 $ 19,088.190 132
COR#5: BASEBOARD PLACED AT 11605 GALE
(UNITS 6 & 10), 11529 GALE (UNITS 6 & 12)
AND 11537 GALE (UNIT C)
LS 1 $16,055.04 $ 16,055.04 1.00 0.00 $0.00 1.00 $ 16,055.040 133
COR#6: REMOVAL OF EXISTING STIPPLE
("POPCORN") CEILING FINSIH. REPLACING
DEMOLISHED CEILING FINISH WITH TOPPING
COMPOUND AND TEXTURE FOR THE NEW
FINISH OF THE CEILING AT UNITS 6&10 AT
11605 GALE AND UNITS 6&12 AT 11529 GALE
LS 1 $14,921.74 $ 14,921.74 1.00 0.00 $0.00 1.00 $ 14,921.740 134 COR#7: CABINETS SIZE AND COUNTER TOPS
(5 UNITS) LS 1 $29,214.23 $ 29,214.23 1.00 0.00 $0.00 1.00 $ 29,214.230 135 COR#8: WINDOW SIZE CHANGE OF
DIMENSIONS LS 1 $24,510.91 $ 24,510.91 1.00 0.00 $0.00 1.00 $ 24,510.910 136 COR#9: SUBFLOORING REPLACEMENT AT
ALL 5 UUNITS LS 1 $5,729.71 $ 5,729.71 1.00 0.00 $0.00 1.00 $ 5,729.710 137 COR#10: GUTTER INSTALLED AT 11605 GALE
AVE 2ND FLOOR LS 1 $4,190.25 $ 4,190.25 1.00 0.00 $0.00 1.00 $ 4,190.250 138 COR#11: CUSTOM LARGE WINDOWS AT 11537
GALE LS 1 $11,561.86 $ 11,561.86 1.00 0.00 $0.00 1.00 $ 11,561.860 139
COR#12: RENOVATE EXISITNG DOOR FRAME
OPENING BY RESHAPING, WATERPROOFING
AND ADDING MOULDING PIECE TO FILL IN
THE VOID. RESTUCCO AND PAINT.
LS 1 $4,403.15 $ 4,403.15 1.00 0.00 $0.00 1.00 $ 4,403.150 140 COR#13: Electrical heaters installed at 11537 Unit C LS 1 $6,178.00 $ 6,178.00 1.00 0.00 $0.00 1.00 $ 6,178.000 141
COR#15: Apartments 11605, 11537, 11529 had 8
(eight) locations to remove the existing closets and
their respective tracks Replaced with new closet
doors.
LS 1 $11,216.88 $ 11,216.88 1.00 0.00 $0.00 1.00 $ 11,216.880 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page7 142
COR#16: 11529 Gale Ave unit 6 & 12 interior light
above the entrance door to the apartment, light at the
bottom of the stairs, top of stairs, and the hallway
leading to the bedrooms from the top of the
stairs.11537 Gale Ave Unit C at kitchen area (6
lights), hallway at 2nd floor, exterior of 1/2 bathroom at 1st floor. 11605 Gale unit 6 & 10, light at the
corridor. For all listed light fixtures it was required to patch and repair at the opening to ceiling.
LS 1 $9,682.45 $ 9,682.45 1.00 0.00 $0.00 1.00 $ 9,682.450 143
COR#17: removal and disposal the ceiling at
bathrooms unit C bldg 11537 and installation of
gypboard and mud, texture apply.
LS 1 $2,916.45 $ 2,916.45 1.00 0.00 $0.00 1.00 $ 2,916.450 144
COR#18: includes removal and disposal of the ceiling
at the parking garage at unit 12 as well as relocating
the Gas pipe and electrical conduit to install the stove range of bldg 11529 Gale Ave.
LS 1 $688.66 $ 688.66 1.00 0.00 $0.00 1.00 $ 688.660
145
COR#19: Unit C at bldg 11537 Gale Ave - works
include the removal of the existing handrail and
reinstalling it at lower part of steps, removal and
disposal of the existing backing for the existing
handrail, installation of new backing for the railing
LS 1 $1,414.37 $ 1,414.37 1.00 0.00 $0.00 1.00 $ 1,414.370 146 COR#20: Temporary fix with patching and painting
of 2nd floor deck at 11605 Gale Ave LS 1 $1,370.07 $ 1,370.07 1.00 0.00 $0.00 1.00 $ 1,370.070 147
COR#21: Support required and nailers to the new
flooring to adhered to the subflooring (tied with
COR#09)
LS 1 $1,847.71 $ 1,847.71 1.00 0.00 $0.00 1.00 $ 1,847.710 148
COR#22: (1 unit only) Removal of existing
thermostat on unit #6 at 11605 Gale Ave and moved
to 6 ft away from wall heater.
LS 1 $2,191.54 $ 2,191.54 1.00 0.00 $0.00 1.00 $ 2,191.540 149
COR#23: Installation of flashing on the bottom of
exterior doors on 27 units at 11605, 11537 and 11529
Gale Ave
LS 1 $27,549.03 $ 27,549.03 0.00 0.00 $0.00 0.00 $ -
150 COR#24: 3 additional water heaters for 11537 Gale
Ave LS 1 $7,608.08 $ 7,608.08 1.00 0.00 $0.00 1.00 $ 7,608.080 151
COR#25: (4 unit price) Installation of new
thermostats at units with older thermostats. 4 units at 11605, 11537, and 11529 Gale Ave
LS 1 $3,022.89 $ 3,022.89 1.00 0.00 $0.00 1.00 $ 3,022.890 152
COR#26: Lifting up the 2 existing staircases at the
2nd floor (floor above subterranean parking lot) of the 11529 Gale Ave. property and water proofing with
temporary rapid set and providing new blocking and
backing for reinforcement of staircases
LS 1 $13,665.06 $ 13,665.06 1.00 0.00 $0.00 1.00 $ 13,665.060 153
COR#27: 11537 Gale Ave - all windows that require
waterproofing and the installation of foam, paint, and
plaster at all required windows
LS 1 $10,531.06 $ 10,531.06 1.00 0.00 $0.00 1.00 $ 10,531.060 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page8 154
COR#28: 11529 Gale Ave - all windows that require
waterproofing at 10 units and the installation of foam, paint and plaster at all required windows for 12 units
LS 1 $49,259.11 $ 49,259.11 1.00 0.00 $0.00 1.00 $ 49,259.110 155
COR#29: 11605 Gale Ave - all windows that require
waterproofing and the installation of foam, paint, and
plaster at all required windows
LS 1 $5,176.40 $ 5,176.40 1.00 0.00 $0.00 1.00 $ 5,176.400 156
COR#30: 2 units at 11529 Gale Ave, 1 unit at 11537
Gale Ave, 2 units at 11605 Gale Ave. Back splash in
bathrooms at request of LDM inspector
LS 1 $4,861.54 $ 4,861.54 1.00 0.00 $0.00 1.00 $ 4,861.540 157 COR#31: Changing of baseboards at unit 7 at 11605
Gale Ave and Unit C at 12720 Grevillea Ave LS 1 $5,897.48 $ 5,897.48 1.00 0.00 $0.00 1.00 $ 5,897.480 158
COR#32: Removal of the existing Gyp Board and
installation of Light Fixtures at the Living Rooms and
Bedrooms. Completed at 2 units, price is per unit and
then multiplied by units towards the bottom of the
COR. Unit 7 at 11605 Gale Ave and Unit C at 12720
Grevillea
LS 1 $6,908.98 $ 6,908.98 1.00 0.00 $0.00 1.00 $ 6,908.980 159
COR#33: Pop corn removal and skim coad the ceiling
with knock down texture. Unit 7 at 11605 Gale Ave
and Unit C at 12720 Grevillea Ave
LS 1 $4,731.91 $ 4,731.91 1.00 0.00 $0.00 1.00 $ 4,731.910 160
COR#34: Delta between Cost and Credit for different
Cabinet sizes (cost) and less cabinets (credit) at unit 7 at 11605 Gale Ave and unit C at 12720 Grevillea Ave
LS 1 $13,600.44 $ 13,600.44 1.00 0.00 $0.00 1.00 $ 13,600.440 161
COR#35: unit 7 at 11605 Gale Ave and unit C at
12720 Grevillea - existing door and frames that were
removed per project agreement also removed the
existing stucco that was placed on the existing door
frame. Renovated the existing opening to make the
opening square, add additional waterproofing Sealant
and a moulding piece to fill in the void left by the
existing door frame and stucco. Paint the moulding to
match the frame and bldg color
LS 1 $1,361.64 $ 1,361.64 1.00 0.00 $0.00 1.00 $ 1,361.640 162
COR#36: (2 unit only) removal of existing thermostat
at unit 7 at 11605 Gale Ave and unit C at 12720
Grevillea Ave and moved to 6 feet away from wall
heater
LS 1 $2,239.27 $ 2,239.27 1.00 0.00 $0.00 1.00 $ 2,239.270 163 COR#37: (unit price only) installation of new
thermostats at units with older thermostats LS 1 $1,511.45 $ 1,511.45 1.00 0.00 $0.00 1.00 $ 1,511.450 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page9 164
COR #38-Change Order per RFI #21, this work is for
providing 2 new breakers for 1 unit at the Grevillea
Apartment site location. There is also the Electrical
Subcontractors work which is attached to this change
order and has been calculated into the grand total of
this Change Order.
LS 1 $14,732.26 $ 14,732.26 1.00 0.00 $0.00 1.00 $ 14,732.260 165
COR#39: Per the Asbestos & Lead Report Unit B of
11537 Gale Ave will have to be Abated by an
Abatement Subtractor. (an environmental consultant
provided by the owner to achieve final air clearances.
This COR does not account for this separate cost)
LS 1 $24,076.47 $ 24,076.47 1.00 0.00 $0.00 1.00 $ 24,076.470 166
COR#40: Unit C at 12720, Units 3 & 7 at 11605 Gale
Ave, Units 2 & 10 at 11529 Gale Ave, and Unit B at
11537 Gale Ave - per unit and includes the removal of
Gyp board and install light fixture at the living room
and bedroom (ref. COR#2)
LS 1 $20,726.94 $ 20,726.94 1.00 0.00 $0.00 1.00 $ 20,726.940 167
COR#41: At units 2,10 at 11529 and unit B at 11537 -
per unit and includes removal of carpet at the stairs
and install of vinyl plank flooring with nosing
material and wood molding on stairs.
LS 1 $23,108.37 $ 23,108.37 1.00 0.00 $0.00 1.00 $ 23,108.370 168
COR#42: Pop Corn removal and skim coad the
ceiling with knock down texture at 4 units total -
11605 units 7,3 and 11529 units 2, 10
LS 1 $14,921.74 $ 14,921.74 1.00 0.00 $0.00 1.00 $ 14,921.740 169
COR#43: Cabinets size and counter tops-6 units-unit
B-11537, Unit 3 and 7 - 11605, unit 2 and 10 -
11529, Unit C - 12720
LS 1 $40,801.32 $ 40,801.32 1.00 0.00 $0.00 1.00 $ 40,801.320 170
COR#44: Bigger Window Size-6 Units-Unit B11537, Unit #3 and #7-11605, Unit#2 and #10- 11529, Unit C-12720
LS 1 $30,546.73 $ 30,546.73 1.00 0.00 $0.00 1.00 $ 30,546.730 171
COR#45: Entire Subfloor to be replaced due to water
damage and mold @ unit B at 11537 Gale Ave. and
Unit C 12720 Grevillea
LS 1 $11,459.42 $ 11,459.42 1.00 0.00 $0.00 1.00 $ 11,459.420 172
COR#46: Apartments 8 locations @ 6 Units-Unit B11537, Unit #3 and #7-11605, Unit #2 and #10- 11529, Unit C-12720 has 8 (eight) locations with
existing Closets that KEC was directed to remove the
existing closets and their respective tracks. KEC
completed the removal of these 8 closets and their
respective tracks. KEC then placed new tracks and
installed new closet doors at 11605, 11537, 11529
Gale Ave and 12720 Grevillea-UnitC
LS 1 $11,216.88 $ 11,216.88 1.00 0.00 $0.00 1.00 $ 11,216.880 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page10 173
COR#47: 11529 Gale Ave-Unit #2 and #10-interior
light above the entrance door to the apartment, light at the bottom of the stairs, top of stairs and the hallway leading to the bedrooms from the top of the stairs.
11537 Gale Ave-Unit B- at kitchen area (6 lights),
hallways at 2nd floor, exterior of 1/2 bathroom at 1st
floor. 11605 Gale Unit #3 and #7, light at the corridor.
For all listed light fixtures it was required to patch and repair at the opening to ceiling and also Unit C 12720
Grevillea
LS 1 $14,582.83 $ 14,582.83 1.00 0.00 $0.00 1.00 $ 14,582.830 174
COR#48: 2 Units - 1st Unit - 11537-Unit B-After
removal of existing subfloor (refer to COR #09) the
existing floor joist was missing nailers and support for the wall under the staircase. KEC provided the
support required and nailers so that the new flooring
could be properly adhered to the subflooring. 2nd
unit: 12720-Unit C-After removal of existing subfloor
(COR#09) the existing floor joist was missing nailers
and support for the adjacent wall. KEC provided the
support required and nailers so that the new flooring
could be properly adhered to the subflooring.
LS 1 $3,695.42 $ 3,695.42 1.00 0.00 $0.00 1.00 $ 3,695.420 175
COR#49: Unit B at Building 11537 Gale Ave-The
work includes the removal of the existing handrail and
reinstalling it at lower part of steps, removal and
disposal of the existing backing for the existing
handrail, installation of new backing for the railing
LS 1 $1,414.37 $ 1,414.37 1.00 0.00 $0.00 1.00 $ 1,414.370 176
COR#50: 11605-Unit 3 & 7-11537-Unit B and 11529
#2 and #10 and 12720-Unit C. 6 Units the work
includes back splash in bathrooms at request of LDM
inspector
LS 1 $9,149.87 $ 9,149.87 1.00 0.00 $0.00 1.00 $ 9,149.870 177
COR#51: 4 Unit Price - The work includes per the
request by city inspector, the installation of new
thermostats at units with older thermostats. 11529-
Unit #2 and #10, 11605 Gale Ave Unit #3 and #7
LS 1 $3,022.89 $ 3,022.89 1.00 0.00 $0.00 1.00 $ 3,022.890 178
COR#52: Base board installed at 6 units (price based
on COR #05) -6units-unit B-11537, Unit #3 & #7-
11605, Unit #2 & #10011529, Unit C-12720
LS 1 $19,572.48 $ 19,572.48 1.00 0.00 $0.00 1.00 $ 19,572.480 179
COR#53: The work includes placement of insulation
and install gypboard on ceiling and all walls in unit B at 11537 gale ave that was abated for asbestos and
lead
LS 1 $26,727.18 $ 26,727.18 1.00 0.00 $0.00 1.00 $ 26,727.180 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page11 180
COR#54: Electric Heaters for 12720 Grevillea AveUnit C and patching existing hole in floor and wall that was left behind by previous (existing dual wall
heater)
LS 1 $6,391.36 $ 6,391.36 1.00 0.00 $0.00 1.00 $ 6,391.360 181 COR#55: Electric Heaters for 11537 Gale Ave-Unit B
and patching as needed LS 1 $6,178.00 $ 6,178.00 1.00 0.00 $0.00 1.00 $ 6,178.000 182
COR#56: Water Damage and uneven sub flooring
replacement at 11605 Gale units -2,6,10,12 & 11537
Gale-Unit C-2nd floor. The water damage to the
subflooring caused it to warp and create an uneven
surface. Removed existing subflooring, underlaying
issues w/the joists and nailers that the subfloor was
attached to.
LS 1 $25,828.84 $ 25,828.84 1.00 0.00 $0.00 1.00 $ 25,828.840 183
COR#57: Demolition and removal of almost all walls
and ceiling existing gypboard panels due to extensive
water damage placement of insulation and installation
of gypboad on ceiling and all walls in unit#10 at
11529 Gale Ave
LS 1 $15,021.42 $ 15,021.42 1.00 0.00 $0.00 1.00 $ 15,021.420 184
COR#58: Demolition and removal of almost all walls
and ceiling existing gypboard panels due to extensive
water damage placement of insulation and installation
of gypboad on ceiling and all walls in unit#2 at 11529
Gale Ave
LS 1 $6,631.99 $ 6,631.99 1.00 0.00 $0.00 1.00 $ 6,631.990 185
COR#59: Removal and dispose of the existing sewer
pipe at unit #10 and unit #4 at 11605 Gale Ave.
Emergency work performed due to the plbg below the
floor had a complete failure and required to be
accessed through the ceiling of the 1st floor of the
bldg
LS 1 $12,111.61 $ 12,111.61 1.00 0.00 $0.00 1.00 $ 12,111.610 186
COR#60: Refer to COR#6 * popcorn removal
and skim coat the ceiling with knock down texture. (1
unit at 11605 Gale Ave - Unit 4)
LS 1 $2,843.83 $ 2,843.83 1.00 0.00 $0.00 1.00 $ 2,843.830 187
COR#61: Refer to COR#7 & #43 extra work for the
cabinets and countertops that were shown on the
jobwalk, different to required in other units. 11605
Gale-unit #4 and is a Delta bet ween the per contract
(credit) total & the additional work (cost) total
LS 1 $6,800.22 $ 6,800.22 1.00 0.00 $0.00 1.00 $ 6,800.220 188
COR#62: Refer to COR#15 & #46 removal and
replacement of closets and tracks at unit #4 at 11605
Gale
LS 1 $1,402.11 $ 1,402.11 1.00 0.00 $0.00 1.00 $ 1,402.110 189
COR#63: refer to COR#16 & #47 11605 Gale unit
#4, lights at the corridor and kitchen. All listed light fixtures it was required to patch and repair at the
opening to ceiling
LS 1 $3,245.62 $ 3,245.62 1.00 0.00 $0.00 1.00 $ 3,245.620 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page12 190
COR#64: refer to COR#30 & #50 the installation of
the backsplash at the bathroom per LDM's request
(not required per contract) at unit #4 of 11605 gale
ave
LS 1 $1,284.34 $ 1,284.34 1.00 0.00 $0.00 1.00 $ 1,284.340 191
COR#65: 11605 Gale Unit #4 (refer to COR #37/51)
work includes per the request by city inspector,
installation of new thermostats at units w/older
thermostats
LS 1 $755.72 $ 755.72 1.00 0.00 $0.00 1.00 $ 755.720
192
COR#66: base board installed at 1 unit (refer to
COR#5 & #52) 11605 gale ave unit #4 new
baseboards installed
LS 1 $3,262.08 $ 3,262.08 1.00 0.00 $0.00 1.00 $ 3,262.080 193
COR#67: (refer to COR#44 & #8) for bigger size
windows than windows shown on jobwalk for 11605
Gale unit #4
LS 1 $5,091.12 $ 5,091.12 1.00 0.00 $0.00 1.00 $ 5,091.120 194 COR#68 procurement and installation of shelves and
brackets at 11537 gale ave LS 1 $4,274.62 $ 4,274.62 0.00 1.00 $4,274.62 1.00 $ 4,274.620 195
COR#69 11537 gale unit #8 the work includes the
installation of vapor/moisture barrier (visqueenplastic) LS 1 $1,263.86 $ 1,263.86 0.00 1.00 $1,263.86 1.00 $ 1,263.860 196 COR#70 water damaged subfloor at 11529 gale ave
unit #2 & #10 LS 1 $6,809.47 $ 6,809.47 0.00 1.00 $6,809.47 1.00 $ 6,809.470 197 COR#71 11605 gale ave #4 water damaged gyp board
and installation LS 1 $11,125.56 $ 11,125.56 0.00 1.00 $11,125.56 1.00 $ 11,125.560 198 COR#72 11529 gale ave unit #10 moisture test LS 1 $569.20 $ 569.20 0.00 1.00 $569.20 1.00 $ 569.200 199
COR#73 11537 gale ave unit #B & #C removal and
disposal of waste line and installation of new waste
line. (emergency request from City)
LS 1 $5,253.01 $ 5,253.01 0.00 1.00 $5,253.01 1.00 $ 5,253.010 200 COR#74 11605 gale #1 & #8 replacement of old
thermostats with new ones LS 1 $1,511.45 $ 1,511.45 0.00 1.00 $1,511.45 1.00 $ 1,511.450 201
COR#75 11605 gale ave unit #4 the work includes
removal of the damaged floor and installation of the
visqueen
LS 1 $2,136.15 $ 2,136.15 0.00 1.00 $2,136.15 1.00 $ 2,136.150 202
COR#76 11529 #12 the work includes purchase and
installation of damage 2 in sewer line in garage on
building 11529 #12. also the bracing and seismic
straps for the newer sewer line
LS 1 $8,835.00 $ 8,835.00 0.00 1.00 $8,835.00 1.00 $ 8,835.000 203
COR #77 11605 gale #1 & #8 removal of
stipple/popcorn ceiling finish with a skim coat; apply
knock down texture
LS 1 $7,914.24 $ 7,914.24 0.00 1.00 $7,914.24 1.00 $ 7,914.240 204 COR#78 11537 gale ave #E repair & texture of the
gypboard LS 1 $104,989.50 $ 104,989.50 0.00 1.00 $104,989.50 1.00 $ 104,989.500 205
COR#79 11537 gale ave #E removal of the ceiling at
2 bedrooms & living room; also 2 ft of wall for the
length of the wall at all 4 sides of the room
LS 1 $17,815.08 $ 17,815.08 0.00 1.00 $17,815.08 1.00 $ 17,815.080 206
COR#80 11537 gale #E removal of the existing
gypboard; installation of light fixtures at the living
rooms 7 bedrooms
LS 1 $3,502.85 $ 3,502.85 0.00 1.00 $3,502.85 1.00 $ 3,502.850 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page13 207
COR#81 11537 gale #E removal of existing carport at
the interior staircases; installation of vinyl plank and flooring
LS 1 $7,775.33 $7,775.33 0.00 1.00 $7,775.33 1.00 $ 7,775.330 208 COR#82 11537 gale #E waterproofing above the
windows LS 1 $5,279.39 $5,279.39 0.00 1.00 $5,279.39 1.00 $ 5,279.390 209 COR#83 11537 gale #E baseboard installation LS 1 $3,333.01 $3,333.01 0.00 1.00 $3,333.01 1.00 $ 3,333.010 210
COR#84 11537 gale #E removal of stipple/popcorn
ceiling; finish with a skim coat; apply knock down
texture
LS 1 $3,957.12 $3,957.12 0.00 1.00 $3,957.12 1.00 $ 3,957.120 211 COR#85 11537 gale #E cost of custom; large single
pane window LS 1 $7,890.67 $7,890.67 0.00 1.00 $7,890.67 1.00 $ 7,890.670 212 COR#86 11537 gale #E removal, disposal &
replacing of subfloor LS 1 $1,761.32 $1,761.32 0.00 1.00 $1,761.32 1.00 $ 1,761.320 213 COR#87 11605 gale #1 & #8 installation of new
interior light fixtures LS 1 $6,442.40 $6,442.40 0.00 1.00 $6,442.40 1.00 $ 6,442.400 214 COR#88 11537 Gale ave repair & texture of the
gypboard LS 1 $143,167.50 $143,167.50 0.00 1.00 $143,167.50 1.00 $ 143,167.500 215
COR#89 11605 gale #1 & #8 existing stucco around
door frame after it was removed had to be reworked
and reinforced for new stucco and new door frame
LS 1 $1,361.34 $1,361.34 0.00 1.00 $1,361.34 1.00 $ 1,361.340 216 COR#90 11529 gale #1 & #9 for the removal of the
existing gypboard & installation of light fixture LS 1 $7,005.69 $7,005.69 0.00 1.00 $7,005.69 1.00 $ 7,005.690 217
COR#91 11529 gale #1 & #9 removal of carpeting at
stairs; installation of vinyl plank flooring, with nosing material and wooden moulding on stairs
LS 1 $15,709.74 $15,709.74 0.00 1.00 $15,709.74 1.00 $ 15,709.740 218 COR#92 11529 gale #1 	 new baseboard
installation LS 1 $6,625.63 $6,625.63 0.00 1.00 $6,625.63 1.00 $ 6,625.630 219
COR#93 11529 gale #1 & #9 removal of
stipple/popcorn ceiling; finish with a skim coat; apply knock down texture
LS 1 $7,715.39 $7,715.39 0.00 1.00 $7,715.39 1.00 $ 7,715.390 220 COR#94 11529 gale #1 & #9 delta between cost and
credit of counter tops and cabinets LS 1 $13,600.44 $13,600.44 0.00 1.00 $13,600.44 1.00 $ 13,600.440 221
COR#95 11529 Gale #1 & #9 installation of bigger
sized windows than what was shown on jobwalk and
in other units
LS 1 $2,574.98 $2,574.98 0.00 1.00 $2,574.98 1.00 $ 2,574.980 222 COR#96 11529 Gale #1 & #9 installation of new
light fixture LS 1 $6,442.40 $6,442.40 0.00 1.00 $6,442.40 1.00 $ 6,442.400 223
COR#97 11529 gale #1 & #9 removing the garage
ceiling to fix plumbing and adjust electrical and gas
pipe
LS 1 $1,377.31 $1,377.31 0.00 1.00 $1,377.31 1.00 $ 1,377.310 224 COR#98 11529 gale #1 & #9 changing and moving
thermostat LS 1 $3,321.36 $3,321.36 0.00 1.00 $3,321.36 1.00 $ 3,321.360 225 COR#99 11529 gale #1 & #9 installation of
backsplash per LDM inspector LS 1 $2,494.44 $2,494.44 0.00 1.00 $2,494.44 1.00 $ 2,494.440 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page14 226 COR#100 11537 gale ave unit #E existing thermostat
removal and relocation of new thermostat LS 1 $1,416.67 $1,416.67 0.00 1.00 $1,416.67 1.00 $ 1,416.670 227 COR#101 11529 gale ave unit #1 and #9 installation
of new closets LS 1 $3,374.55 $3,374.55 0.00 1.00 $3,374.55 1.00 $ 3,374.550 228
COR#102 11529 gale #1 & #9 existing stucco around
door frame after it was removed had to be removed
and reinforced for new stucco and new door frame
LS 1 $1,361.34 $1,361.34 0.00 1.00 $1,361.34 1.00 $ 1,361.340 229 COR#103 11605 gale #1 & #8 bathroom backsplash
per LDM inspector request LS 1 $2,494.44 $2,494.44 0.00 1.00 $2,494.44 1.00 $ 2,494.440 230 COR#104 11529 gale #1 & #9 removal, disposal &
replacing of subfloor LS 1 $6,969.03 $6,969.03 0.00 1.00 $6,969.03 1.00 $ 6,969.030 231 COR#105 12720 Grevillea #B removal of existing
gypboard; installation of light fixtures LS 1 $3,502.85 $3,502.85 0.00 1.00 $3,502.85 1.00 $ 3,502.850 232
COR#106 11537 Unit #B removal of stipple/popcorn
ceiling; finish with a skim coat; apply knock down
texture
LS 1 $2,521.05 $2,521.05 0.00 1.00 $2,521.05 1.00 $ 2,521.050 233 COR#107 12720 grevillea #B delta for kitchen
cabinets and countertops LS 1 $6,800.22 $6,800.22 0.00 1.00 $6,800.22 1.00 $ 6,800.220 234
COR#108 12720 grevillea 3B cost of existing door
and frames removing existing stucco creating a larger
void then door opening
LS 1 $680.67 $680.67 0.00 1.00 $680.67 1.00 $ 680.670
235
COR#109 12720 grevillea #B the work includes per
the request by city inspector, the relocation of
thermostats, 6 ft away from wall units
LS 1 $1,416.67 $1,416.67 0.00 1.00 $1,416.67 1.00 $ 1,416.670 236 COR#110 11537 gale ave #E abatement of asbestos
& lead by the abatement contractor LS 1 $1,402.11 $1,402.11 0.00 1.00 $1,402.11 1.00 $ 1,402.110 237 COR#111 12720 grevillea #B providing 2 new
breakers per unit LS 1 $14,765.95 $14,765.95 0.00 1.00 $14,765.95 1.00 $ 14,765.950 238 COR#112 11537 gale #E abatement of asbestos &
lead by the abatement contractor LS 1 $24,076.67 $24,076.67 0.00 1.00 $24,076.67 1.00 $ 24,076.670 239
COR#113 11537 gale #E installation of the
backsplash at the bathroom per the LDM inspector's
request
LS 1 $1,247.22 $1,247.22 0.00 1.00 $1,247.22 1.00 $ 1,247.220 240
COR#114 11605 gale #1 & #8 removal of
stipple/popcorn ceiling; finish with a skim coat; apply knock down texture
LS 1 $7,914.24 $7,914.24 0.00 1.00 $7,914.24 1.00 $ 7,914.240 241
COR#115 12720 grevillea #B removal of
stipple/popcorn ceiling; finish with a skim coat; apply knock down texture
LS 1 $5,233.62 $5,233.62 0.00 1.00 $5,233.62 1.00 $ 5,233.620 242 COR#116 11529 unit #11 purchase and installation of damage 2 in sewer line LS 1 $8,864.21 $8,864.21 0.00 1.00 $8,864.21 1.00 $ 8,864.210 243 COR #117 12720 Grevillea #B installation of bigger
sized windows LS 1 $1,358.86 $1,358.86 0.00 1.00 $1,358.86 1.00 $ 1,358.860 244 COR#118 12720 Grevillea #B removal, disposal &
replacing of subfloor LS 1 $5,899.39 $5,899.39 0.00 1.00 $5,899.39 1.00 $ 5,899.390 K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page15 245 COR#119 12720 Grevillea #B removal and
replacement of closets & tracks LS 1 $1,402.11 $1,402.11 0.00 1.00 $1,402.11 1.00 $ 1,402.110 246 COR#120 12720 Grevillea #B installation of new
interior light fixtures throughout unit LS 1 $3,221.20 $3,221.20 0.00 1.00 $3,221.20 1.00 $ 3,221.200 247 COR#12112720 Grevillea #B adding "nailer" backing
to floor joists LS 1 $2,043.00 $2,043.00 0.00 1.00 $2,043.00 1.00 $ 2,043.000 248 COR#122 11605 gale #1 & #8 installation of cabinets & countertops LS 1 $13,600.44 $13,600.44 0.00 1.00 $13,600.44 1.00 $ 13,600.440 249
COR#123 12720 grevillea #B installation of the
backsplash at the bathroom per the LDM inspectors
request
LS 1 $1,535.62 $1,535.62 0.00 1.00 $1,535.62 1.00 $ 1,535.620 250 COR#124 11605 Gale #1 & #8 removal and
replacement of closets & tracks LS 1 $2,804.22 $2,804.22 0.00 1.00 $2,804.22 1.00 $ 2,804.220 251 COR#125 12720 Grevillea #B baseboard installation LS 1 $3,333.01 $3,333.01 0.00 1.00 $3,333.01 1.00 $ 3,333.010 252
COR#126 - 12720 Grevillea#B: installation of
insulation & gypboard onto the ceiling and walls,
which was abated for asbestos and lead.
LS 1 $26,731.42 $26,731.42 0.00 1.00 $26,731.42 1.00 $ 26,731.420 253 COR#127 - 12720 Grevillea #B: installation of
electrical heater (2 total: 1 living room, 1 bedroom) LS 1 $6,391.36 $6,391.36 0.00 1.00 $6,391.36 1.00 $ 6,391.360 254 COR#128 - 11605 Gale #1 & #8: removal of existing
gyp board; installation of light fixtures LS 1 $7,005.69 $7,005.69 0.00 1.00 $7,005.69 1.00 $ 7,005.690 255
COR#129 - 11605 Gale #1 & #8: removal of existing
carpet at the interior staircases; installation of vinyl plank and flooring
LS 1 $15,890.02 $15,890.02 0.00 1.00 $15,890.02 1.00 $ 15,890.020 256 COR#130 - 11605 Gale #1 & #8: installation of
bigger sized windows than shown on the jobwalk LS 1 $2,574.98 $2,574.98 0.00 1.00 $2,574.98 1.00 $ 2,574.980 257 COR#131 - 11605 Gale #1 & #8: baseboard
installation LS 1 $6,625.63 $6,625.63 0.00 1.00 $6,625.63 1.00 $ 6,625.630 TOTAL(S): $ 5,541,982.22 $1,160,893.91
TOTAL $1,160,893.91 $ 3,409,083.34
LESS RETENTION $ 58,044.70 $ 170,454.17
LESS PREVIOUSLY PAID $ - $ 2,135,779.96
TOTAL AMOUNT DUE $1,102,849.21 $ 1,102,849.21
TOTAL AMOUNT DUE THIS 1st PROGRESS PAYMENT:
Account# $1,102,849.21
$ 1,102,849.21
Project Engineer
German Franco
TOTAL:
100-1150-125-0-0-40974
K:\Engineering\WPDOCS\PROJECTS\SPECS\23-09 Housing Rehabilitation 2023\Invoices&Payments\Payment 6\PP#6 Page16
AGENDA ITEM NO. 13
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Public Works
City Manager: __________
Vontray Norris
Dir. of Public Works: ___________
Akbar Farokhi
SUBJECT:
Agreement between the City of Hawthorne and Ninyo & Moore for evaluation of airport pavement strength for the Hawthorne Municipal Airport (HHR) in Hawthorne, CA.
RECOMMENDED MOTION:
Staff recommends that the City Council approve an agreement with Ninyo & Moor and authorize the Director of Public Works or his designee to enter into and execute the agreement.
DISCUSSION:
The Public Works Department invited companies to submit cost proposals to perform an airport pavement strength for the Hawthorne Municipal Airport. The purpose of the study would be to evaluate the existing pavements for the runway, taxiways, and aprons at the Hawthorne Municipal Airport in accordance with FAA Advisory Circular (AC) 150/5335-5D, Standardized Method of Reporting Airport Pavement Strength – PCR.
On June 18, 2024, the Public Works Department requested cost proposals from several companies. As a result of that process, four firms submitted cost proposals – Santect, Applied Pavement Technology, Inc., Ninyo & Moorse, and ENGEO, Inc. After careful review of the cost proposals, Ninyo & Moore was selected by the City as the most qualified and with the most competitive price. The total fee submitted by Ninyo & Moore for these services is $107,945.00.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
This project aligns with the City’s Economic Development goal of enhancing the quality of life in the City, which is an important marketing asset for business attraction and making economic development a part of City decision. Improved airport facilities can attract more tourists and business travelers, benefiting local hotels, restaurants, and other hospitality services. Upgrading the airport can attract new businesses, such as aviation-related companies, logistics firms, and
other industries that benefit from proximity to a well-maintained airport. This can lead to job creation and increased economic activity in the City.
FISCAL IMPACT:
None. The total cost of $107,945.00 for these services will be paid in full by Hawthorne Airport, LLC.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Cost Proposal
2. Agreement
475 Goddard, Suite 200 | Irvine, California 92618 | p. 949.753.7070 | www.ninyoandmoore.com August 19, 2024
Proposal No. 04-04604
Mr. Guido Fernandez
Airport Manager
Hawthorne Municipal Airport
12101 Crenshaw Boulevard, Suite 300
Hawthorne, California 90250
Subject: Revised Proposal for ACR/PCR Evaluation
Hawthorne Municipal Airport
Hawthorne, California
References: Federal Aviation Administration, 2022, Standardized Method of Reporting Airport Pavement Strength – PCR, Advisory Circular AC150/5335-5D, dated April 29.
Fernandez, Guido, 2024, Electronic mail correspondences with Mr. Kurt Yoshii, dated June 18, June 20, and June 21.
Mead & Hunt, 2007, Runway 7-25 Rehabilitation and Improvements, Typical Sections, City of Hawthorne, Engineering Division, dated July 2.
Dear Mr. Fernandez:
At your request, we have prepared this revised proposal to perform an Aircraft Classification Rating/Pavement Classification Rating (ACR/PCR) evaluation of all runways, taxiways, and aprons at Hawthorne Municipal Airport located in Hawthorne, California. Based on several e-mail correspondences, referenced above, we understand that our services will involve the determination of PCR values for the airfield pavements in accordance with the above-referenced Federal Aviation Administration (FAA) Advisory Circular AC150/5335-5D. In order to accomplish this, Ninyo & Moore will perform a structural evaluation utilizing a Heavy Weight Deflectometer (HWD). Pavement layer thicknesses will be estimated using a Ground Penetrating Radar (GPR) supplemented by field cores at select locations. Dynamic Cone Penetrometer (DCP) will be performed at each core location to evaluate subgrade properties. Data collected in the field will be analyzed by our team and will be submitted to Hawthorne Airport in our PCR report. Since we have not worked with Hawthorne Airport before, we have attached a brief statement of qualifications at the end of this letter.
SCOPE OF SERVICES
Based on our collective experience involving airport-related work, our scope of work will include the following:
Ninyo & Moore | Hawthorne Municipal Airport, Hawthorne, California | 04-04604 | August 19, 2024 2 HWD AND GPR Testing
• Our scope of work will include HWD and GPR testing as shown in Table 1. We propose to test all airport pavements in accordance with FAA criteria. A total of 5 day of testing will be needed to perform the HWD and GPR field evaluation. GPR testing will be conducted simultaneously with the HWD testing. The estimated number of HWD test points and GPR length is shown below.
• At each test location, the HWD will apply three load drops (load levels to be determined after a review of the design aircraft mix, gear configuration and loads). In addition to the load-deflection data, the HWD records surface temperature, station, and GPS coordinates. The HWD testing locations will be staggered across test lines to maximize coverage. The HWD will have a reference calibration performed within a year prior to the date of the testing. • Pavement layer thicknesses are required to perform analysis of the load-deflection data. GPR data is continuous in nature and provides a high level of detail for all areas tested. In addition, by using the GPR technology, there is a significant reduction in the required number of pavement cores, which in turn translates into savings for the agency and less traffic disruption for the airport. Once the HWD and GPR testing is conducted a precise number and location of pavement cores needed will be provided.
• Thickness information will be collected continuously with the GPR. The GPR works by emitting a series of radar waves to the pavement structure while the vehicle is traveling at traffic speed and collects the dielectric constants of the underlying structure. The GPR data will be analyzed using RADAN 7 software package to estimate the dielectric properties of the pavement and Ninyo & Moore | Hawthorne Municipal Airport, Hawthorne, California | 04-04604 | August 19, 2024 3 determine the layer thicknesses. The resulting correlated dielectric constants are then filtered to determine pavement thicknesses and types. The results must be calibrated through pavement cores at selected locations provided by Ninyo and Moore.
The HWD equipment is fully integrated with the GPR system so that each HWD station corresponds to the same location from the GPR system. Furthermore, pavement thicknesses will be reported for every HWD tested station continuously which in turn increases the accuracy and quality of the pavement evaluation and design and increases the probability of successfully identifying any localized failure that might otherwise be missed by common destructive procedures.
Field Coring and DCP Testing
Cores will be taken at select locations along the runway, taxiways, and aprons. We anticipate that our coring will take 3 days. Thickness measurements of the pavement structural section will be taken to supplement the GPR data. At each core location, DCP will be taken to evaluate the subgrade soil modulus.
Pavement Analyses and Report Preparation
• Back-calculation of the pavement layer moduli will be performed using Evaluation of Layer Moduli and Overlay Design (ELMOD) software that can provide back-calculated layer moduli and structural overlay requirements required over the design/analysis period. The layer moduli provide an indication of material condition in the pavement structure. ELMOD is accepted for use by the FAA and it is used by 300+ public and private agencies nationwide and overseas. • For every HWD test point collected along an airport feature, the layer moduli will be calculated using ELMOD. The average layer moduli will be used as an input into FAARFIELD to determine the remaining life and the overlay requirements for the provided traffic mix over the analysis period. In addition, the ACR/PCR analysis using FAARFIELD will be performed in accordance with the FAA circular(s). The analysis results will be included in our final report. • We will also perform a limited survey of the pavement surface through digital photographs that are automatically collected at a pre-set interval (typically 25-ft). The photos will show the condition of the pavement during HWD testing. If the HWD testing is performed at night, then we will collect the pavement images during the day if possible. Typically, ROW images on a runway are collected in about 15 minutes at traffic speed. • The pavement structural evaluation will include the following activities:
o Perform nondestructive deflection testing on the airport features using HWD. o Determine existing pavement layer thicknesses using GPR o Recommend location for pavement coring for GPR calibration o Determine back-calculated layer moduli.
o Determine the bearing capacity and remaining life using the FAA FAARFIELD software.
Ninyo & Moore | Hawthorne Municipal Airport, Hawthorne, California | 04-04604 | August 19, 2024 4 o Determine the Aircraft Classification Rating/Pavement Classification Rating (ACR/PCR) using the FAA FAARFIELD software.
o Provide a report that details the analyses results
ASSUMPTIONS
The following assumptions have been made in the preparation of our scopes of services:
• Existing aircraft and traffic information will be provided by Hawthorne Airport. • All of our field services for HWD/GPR and pavement coring will be performed during night time, and in dry weather conditions.
• We have assumed that fees associated with security clearances, badges, permits or safety meetings will be waived.
• Our firm will contact USA prior to performing our subsurface work and will coordinate with an airport representative to approve all coring locations relative to airport operations, underground utilities, and other parameters of significance to the airport. Ninyo & Moore will not be responsible for utilities not shown on the plans provided to us prior to coring. • Our services are subject to prevailing wage rate requirements. • Core holes will be backfilled with sand and patched with rapid-set concrete.
SCHEDULE
Ninyo & Moore is prepared to begin our geotechnical evaluation upon receipt of your authorization to proceed. Assuming that there are no delays due to inclement weather, subcontractor availability, or access, we anticipate that our HWD/GPR work for this project will begin approximately 2 weeks or more from authorization depending on previous commitments for the HWD/GPR equipment.
Coring will be performed approximately 1 week after the HWD/GPR field testing following the approval of the proposed core locations. A draft report will be submitted approximately 2 weeks after coring, and final report will be submitted approximately 1 week after receiving comments to our draft report.
FEE
Our pavement evaluation will be provided on a lump sum basis in accordance with the attached Schedule of Fees. Our fee for the services described above will be $107,945. Any additional services, if requested, will be performed on a time-and-materials basis in accordance with our Schedule of Fees.
Ninyo & Moore | Hawthorne Municipal Airport, Hawthorne, California | 04-04604 | August 19, 2024 5 Ninyo & Moore appreciates the opportunity to provide this proposal, and we look forward to working with you.
Respectfully submitted,
NINYO & MOORE
Garreth M. Saiki, PE GE
Principal Engineer
Kurt S. Yoshii, PE, GE
Principal Engineer
GMS/KSY/mlc
Attachments: Schedule of Fees
Ninyo & Moore | Hawthorne Municipal Airport, Hawthorne, California | 04-04604 | JAugust 19, 2024 CA14 Schedule of Fees
Hourly Charges for Personnel
Professional Staff
Principal Engineer/Geologist/Environmental Scientist/Certified Industrial Hygienist................................................$ 210 Senior Engineer/Geologist/Environmental Scientist .................................................................................................$ 200 Senior Project Engineer/Geologist/Environmental Scientist.....................................................................................$ 195 Project Engineer/Geologist/Environmental Scientist.................................................................................................$ 185 Senior Staff Engineer/Geologist/Environmental Scientist.........................................................................................$ 170 Staff Engineer/Geologist/Environmental Scientist.....................................................................................................$ 155 GIS Analyst................................................................................................................................................................$ 130 Technical Illustrator/CAD Operator ...........................................................................................................................$ 110 Field Staff
Certified Asbestos/Lead Technician......................................................................................................................... $ 195 Field Operations Manager.........................................................................................................................................$ 130 Nondestructive Examination Technician (UT, MT, LP)............................................................................................ $ 125 Supervisory Technician .............................................................................................................................................$ 120 Special Inspector (Concrete, Masonry, Structural Steel, Welding, and Fireproofing)..............................................$ 115 Senior Technician..................................................................................................................................................... $ 110 Technician..................................................................................................................................................................$ 110 Administrative Staff
Information Specialist ................................................................................................................................................$ 90 Geotechnical/Environmental/Laboratory Assistant ...................................................................................................$ 95 Data Processor..........................................................................................................................................................$ 75 Other Charges
Concrete Coring Equipment (includes technician).............................................................................................. $ 190/hr Anchor Load Test Equipment (includes technician) ........................................................................................... $ 190/hr GPR Equipment................................................................................................................................................... $ 180/hr Inclinometer ......................................................................................................................................................... $ 100/hr Hand Auger Equipment....................................................................................................................................... $ 80/hr Rebar Locator (Pachometer)............................................................................................................................... $ 25/hr Vapor Emission Kit .............................................................................................................................................. $ 65/kit Nuclear Density Gauge ....................................................................................................................................... $ 15/hr X-Ray Fluorescence............................................................................................................................................ $ 70/hr PID/FID................................................................................................................................................................ $ 25/hr Air Sampling Pump.............................................................................................................................................. $ 10/hr Field Vehicle ........................................................................................................................................................ $ 15/hr Expert Witness Testimony................................................................................................................................... $ 450/hr Direct Expenses .................................................................................................................................... Cost plus 15 % Special equipment charges will be provided upon request.
Notes
Technicians and special inspectors, are charged at a 4-hour minimum, and 8-hour minimum for hours exceeding 4 hours.
Overtime rates at 1.5 times the regular rates will be charged for work performed in excess of 8 hours in one day Monday through Friday and all day on Saturday. Rates at twice the regular rates will be charged for all work in excess of 12 hours in one day, all day Sunday and on holidays.
Our rates will be adjusted in conjunction with the increase in the Prevailing Wage Determination during the life of the project, as applicable.
The terms and conditions are included in Ninyo & Moore’s Work Authorization and Agreement form.
Ninyo & Moore | 2024 Laboratory Testing
Schedule of Fees for Laboratory Testing
SOILS CONCRETE
Atterberg Limits, D 4318, CT 204..............................................................$ 170 Compression Tests, 6x12 Cylinder, C 39 ...................................................$ 35 California Bearing Ratio (CBR), D 1883....................................................$ 550 Concrete Mix Design Review, Job Spec.....................................................$ 300 Chloride and Sulfate Content, CT 417 & CT 422 .....................................$ 175 Concrete Mix Design, per Trial Batch, 6 cylinder, ACI...............................$ 850 Consolidation, D 2435, CT 219..................................................................$ 300 Concrete Cores, Compression (excludes sampling), C 42 .......................$ 120 Consolidation, Hydro-Collapse only, D 2435............................................$ 150 Drying Shrinkage, C 157..............................................................................$ 400 Consolidation – Time Rate, D 2435, CT 219............................................$ 200 Flexural Test, C 78 .......................................................................................$ 85 Direct Shear – Remolded, D 3080 ............................................................$ 350 Flexural Test, C 293 .....................................................................................$ 85 Direct Shear – Undisturbed, D 3080 .........................................................$ 300 Flexural Test, CT 523...................................................................................$ 95 Durability Index, CT 229.............................................................................$ 175 Gunite/Shotcrete, Panels, 3 cut cores per panel and test, ACI................$ 275 Expansion Index, D 4829, IBC 18-3..........................................................$ 190 Lightweight Concrete Fill, Compression, C 495 .........................................$ 80 Expansion Potential (Method A), D 4546..................................................$ 170 Petrographic Analysis, C 856 ......................................................................$ 2,000 Geofabric Tensile and Elongation Test, D 4632.......................................$ 200 Restrained Expansion of Shrinkage Compensation ..................................$ 450 Hydraulic Conductivity, D 5084..................................................................$ 350 Splitting Tensile Strength, C 496.................................................................$ 100 Hydrometer Analysis, D 6913, CT 203......................................................$ 220 3x6 Grout, (CLSM), C 39 .............................................................................$ 55 Moisture, Ash, & Organic Matter of Peat/Organic Soils ...........................$ 120 2x2x2 Non-Shrink Grout, C 109 .................................................................$ 55 Moisture Only, D 2216, CT 226 .................................................................$ 35 Moisture and Density, D 2937 ...................................................................$ 45 ASPHALT Permeability, CH, D 2434, CT 220 ............................................................$ 300 Air Voids, T 269 ............................................................................................$ 85 pH and Resistivity, CT 643.........................................................................$ 175 Asphalt Mix Design, Caltrans (incl. Aggregate Quality).............................$ 4,500 Proctor Density D1557, D 698, CT 216, AASHTO T-180........................$ 220 Asphalt Mix Design Review, Job Spec .......................................................$ 180 Proctor Density with Rock Correction D 1557 ..........................................$ 340 Dust Proportioning, CT LP-4........................................................................$ 85 R-value, D 2844, CT 301 ...........................................................................$ 375 Extraction, % Asphalt, including Gradation, D 2172, CT 382....................$ 250 Sand Equivalent, D 2419, CT 217.............................................................$ 125 Extraction, % Asphalt without Gradation, D 2172, CT 382........................$ 150 Sieve Analysis, D 6913, CT 202................................................................$ 145 Film Stripping, CT 302..................................................................................$ 120 Sieve Analysis, 200 Wash, D 1140, CT 202.............................................$ 100 Hveem Stability and Unit Weight D 1560, T 246, CT 366 .........................$ 225 Specific Gravity, D 854...............................................................................$ 125 Marshall Stability, Flow and Unit Weight, T 245.........................................$ 240 Thermal Resistivity (ASTM 5334, IEEE 442)............................................$ 925 Maximum Theoretical Unit Weight, D 2041, CT 309..................................$ 150 Triaxial Shear, C.D, D 4767, T 297 ...........................................................$ 550 Moisture Content, CT 370............................................................................$ 95 Triaxial Shear, C.U., w/pore pressure, D 4767, T 2297 per pt ................$ 450 Moisture Susceptibility and Tensile Stress Ratio, T 238, CT 371 .............$ 1,000 Triaxial Shear, C.U., w/o pore pressure, D 4767, T 2297 per pt.......................$ 350 Slurry Wet Track Abrasion, D 3910.............................................................$ 150 Triaxial Shear, U.U., D 2850......................................................................$ 250 Superpave, Asphalt Mix Verification (incl. Aggregate Quality)..................$ 4,900 Unconfined Compression, D 2166, T 208.................................................$ 180 Superpave, Gyratory Unit Wt., T 312..........................................................$ 100 Superpave, Hamburg Wheel, 20,000 passes, T 324.................................$ 1,000 MASONRY Unit Weight sample or core, D 2726, CT 308.............................................$ 100 Brick Absorption, 24-hour submersion, 5-hr boiling, 7-day, C 67............$ 70 Voids in Mineral Aggregate, (VMA) CT LP-2..............................................$ 90 Brick Compression Test, C 67...................................................................$ 55 Voids filled with Asphalt, (VFA) CT LP-3 ....................................................$ 90 Brick Efflorescence, C 67...........................................................................$ 55 Wax Density, D 1188................................................................................... $ 140 Brick Modulus of Rupture, C 67.................................................................$ 50 Brick Moisture as received, C 67...............................................................$ 45 AGGREGATES Brick Saturation Coefficient, C 67..............................................................$ 60 Clay Lumps and Friable Particles, C 142 ...................................................$ 180 Concrete Block Compression Test, 8x8x16, C 140 .................................$ 70 Cleanness Value, CT 227............................................................................$ 180 Concrete Block Conformance Package, C 90..........................................$ 500 Crushed Particles, CT 205...........................................................................$ 175 Concrete Block Linear Shrinkage, C 426..................................................$ 200 Durability, Coarse or Fine, CT 229..............................................................$ 205 Concrete Block Unit Weight and Absorption, C 140 ................................$ 70 Fine Aggregate Angularity, ASTM C 1252, T 304, CT 234 .......................$ 180 Cores, Compression or Shear Bond, CA Code........................................$ 70 Flat and Elongated Particle, D 4791 ...........................................................$ 220 Masonry Grout, 3x3x6 prism compression, C 39 .....................................$ 45 Lightweight Particles, C 123 ........................................................................$ 180 Masonry Mortar, 2x2 cube compression, C 109.......................................$ 35 Los Angeles Abrasion, C 131 or C 535.......................................................$ 200 Masonry Prism, half size, compression, C 1019 ......................................$ 120 Material Finer than No. 200 Sieve by Washing, C 117..............................$ 90 Masonry Prism, Full size, compression, C 1019 ......................................$ 200 Organic Impurities, C 40 ..............................................................................$ 90 Potential Alkali Reactivity, Mortar Bar Method, Coarse, C 1260...............$ 1,250 REINFORCING AND STRUCTURAL STEEL Potential Alkali Reactivity, Mortar Bar Method, Fine, C 1260....................$ 950 Chemical Analysis, A 36, A 615.................................................................$ 135 Potential Reactivity of Aggregate (Chemical Method), C 289 ...................$ 475 Fireproofing Density Test, UBC 7-6 ..........................................................$ 90 Sand Equivalent, T 176, CT 217 .................................................................$ 125 Hardness Test, Rockwell, A 370 ...............................................................$ 80 Sieve Analysis, Coarse Aggregate, T 27, C 136........................................$ 120 High Strength Bolt, Nut & Washer Conformance, Sieve Analysis, Fine Aggregate (including wash), T 27, C 136 ................$ 145 per assembly, A 325 .............................................................................$ 150 Sodium Sulfate Soundness, C 88 ...............................................................$ 450 Mechanically Spliced Reinforcing Tensile Test, ACI................................$ 175 Specific Gravity and Absorption, Coarse, C 127, CT 206 .........................$ 115 Pre-Stress Strand (7 wire), A 416..............................................................$ 170 Specific Gravity and Absorption, Fine, C 128, CT 207 ..............................$ 175 Reinforcing Tensile or Bend up to No. 11, A 615 & A 706......................$ 75 Structural Steel Tensile Test: Up to 200,000 lbs., A 370 .........................$ 90 ROOFING Welded Reinforcing Tensile Test: Up to No. 11 bars, ACI.......................$ 80 Roofing Tile Absorption, (set of 5), C 67.....................................................$ 250 Roofing Tile Strength Test, (set of 5), C 67 ................................................$ 250 Special preparation of standard test specimens will be charged at the technician’s hourly rate.
Ninyo & Moore is accredited to perform the AASHTO equivalent of many ASTM test procedures. 1 CITY OF HAWTHORNE
AGREEMENT FOR CONSULTANT SERVICES
THIS CONSULTANT AGREEMENT is made and effective as of August __, 2024 between the City of Hawthorne, a municipal corporation ("City") and Ninyo & Moore ("Consultant"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows:
1. TERM
This Agreement shall commence on August __, 2024, and shall remain and continue in effect on an as needed basis unless sooner terminated pursuant to the provisions of this Agreement.
2. SERVICES
Consultant shall perform the tasks described and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full as part of its services.
Consultant may be asked to provide additional services if necessary during the term of this Agreement.
3. PERFORMANCE
Consultant shall at all times faithfully, competently and to the best of his/her ability, experience, and talent, perform all tasks described herein. Consultant shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of Consultant hereunder in meeting its obligations under this Agreement.
4. PAYMENT
(a) The City agrees to pay Consultant in accordance with the payment rates and terms and the schedule of payment as set forth in Exhibit A, attached hereto and incorporated herein by this reference as though set forth in full, based upon actual time spent on services indicated in Exhibit A of this Agreement unless additional payment is approved as provided in this Agreement.
(b) Consultant shall not be compensated for any services rendered in connection with its performance of this Agreement which are in addition to those set forth herein, unless such additional services are authorized in advance and in writing by the Director of Public Works. Consultant shall be compensated for any additional services in the amounts and in the manner as agreed to by the Director of Public Works and at the time the City's written authorization is given to Consultant for the performance of said services.
2 (c) Consultant will submit invoices for actual services performed. Payment shall be made within thirty (30) days of receipt of each invoice as to all non-disputed fees. If the City disputes any of Consultant's fees it shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice.
5. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE (a) The City may at any time, for any reason, with or without cause, suspend or terminate this Agreement, or any portion hereof, by serving upon the consultant at least ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall immediately cease all work under this Agreement, unless the notice provides otherwise. If the City suspends or terminates a portion of this Agreement such suspension or termination shall not make void or invalidate the remainder of this Agreement.
(b) In the event this Agreement is terminated pursuant to this Section, the City shall pay to Consultant the actual value of the work performed up to the time of termination, provided that the work performed is of value to the City. Upon termination of the Agreement pursuant to this Section, the Consultant will submit an invoice to the City.
6. DEFAULT OF CONSULTANT
(a) The Consultant's failure to comply with the provisions of this Agreement shall constitute a default. In the event that Consultant is in default for cause under the terms of this Agreement, City shall have no obligation or duty to continue compensating Consultant for any work performed after the date of default and can terminate this Agreement immediately by written notice to the Consultant. If such failure by the Consultant to make progress in the performance of work hereunder arises out of causes beyond the Consultant's control, and without fault or negligence of the Consultant, it shall not be considered a default. (b) If the Director of Public Works or his delegate determines that the Consultant is in default in the performance of any of the terms or conditions of this Agreement, he/she shall cause to be served upon the Consultant a written notice of the default. The Consultant shall have ten (10) days after service upon it of said notice in which to cure the default by rendering a satisfactory performance.
In the event that the Consultant fails to cure its default within such period of time, the City shall have the right, notwithstanding any other provision of this Agreement, to terminate this Agreement without further notice and without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.
3 7. OWNERSHIP OF DOCUMENTS
(a) Consultant shall maintain complete and accurate records with respect to sales, costs, expenses, receipts, and other such information required by City that relate to the performance of services under this Agreement. Consultant shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. Consultant shall provide free access to the representatives of City or its designees at reasonable times to such books and records; shall give City the right to examine and audit said books and records; shall permit City to make transcripts therefrom as necessary; and shall allow inspection of all work, data, documents, proceedings, and activities related to this Agreement. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment.
(b) Upon completion of, or in the event of termination or suspension of this Agreement, all original documents, designs, drawings, maps, models, computer files, surveys, notes, and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of the City and may be used, reused, or otherwise disposed of by the City without the permission of the Consultant.
8. INDEMNIFICATION
When the law establishes a professional standard of care for Consultant’s Services, to the fullest extent permitted by law, Consultant shall indemnify, protect, defend and hold harmless City and any and all of its officials, employees and agents (“Indemnified Parties”) from and against any and all losses, liabilities, damages, costs and expenses, including attorney’s fees and costs to the extent same are caused in whole or in part by any negligent or wrongful act, error or omission of Consultant, its officers, agents, employees or subconsultants (or any entity or individual that Consultant shall bear the legal liability thereof) in the performance of professional services under this Agreement.
9. INSURANCE
A) Consultant shall maintain in-force: Professional Liability Insurance. Consultant shall maintain in-force; Professional Liability Insurance (and/or Errors & Omissions Insurance) with minimum limits of liability of $1,000,000 combined single limit coverage against an injury, death, loss or damages because of wrongful or negligent acts or omissions by the named insured. 4 B) Contractor shall maintain in-force Workers’ Compensation and Employer’s Liability Insurance as required by the California Labor Code. Evidence of coverage shall take the form of a Certificate of Insurance or a California Certificate to Self-Insure. Acceptable minimum limits for this coverage are: Workers’ Compensation; Statutory in California; Employer’s Liability: $1,000,000.
C) Certificates of Insurance. Contractor shall furnish to Customer evidence of any insurance required by this Agreement. A Certificate of Insurance from an insurer admitted to do business in the State of California will be provided, indicating that the respective policy(s) meets the following requirements: (1) The City, its officers, and employees shall be named as additional insured on the General Liability Insurance; (2) Insurance shall not be canceled or terminated without 30 days written notice; (3) General Liability shall be primary and any insurance held by City for its own protection shall be excess and shall be effective only upon exhaustion of Contractor's insurance; (4) Insurance shall be maintained for the duration of the Agreement, including any period extended beyond the expiration date of this Agreement required to complete performance as stipulated in this Agreement and all amendments thereto.
10. INDEPENDENT CONSULTANT
(a) Consultant is and shall at all times remain as to the City a wholly independent Consultant. The personnel performing the services under this Agreement on behalf of Consultant shall at all times be under Consultant's exclusive direction and control. Neither City nor any of its officers, employees, or agents shall have control over the conduct of Consultant or any of Consultant's officers, employees, or agents, except as set forth in this Agreement. Consultant shall not at any time or in any manner represent that it or any of its officers, employees, or agents are in any manner officers, employees, or agents of the City. Consultant shall not incur or have the power to incur any debt, obligation, or liability whatever against City, or bind City in any manner.
(b) No employee benefits shall be available to Consultant in connection with the performance of this Agreement. Except for the fees paid to Consultant as provided in the Agreement, City shall not pay salaries, wages, or other compensation to Consultant for performing services hereunder for City. City shall not be liable for compensation or indemnification to Consultant for injury or sickness arising out of performing services hereunder.
11. LEGAL RESPONSIBILITIES
5 The Consultant shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. The Consultant shall at all times observe and comply with all such laws and regulations. The City, and its officers and employees, shall not be liable at law or in equity occasioned by failure of the Consultant to comply with this Section.
12. UNDUE INFLUENCE
Consultant declares and warrants that no undue influence or pressure is used against or in concert with any officer or employee of the City of Hawthorne in connection with the award, terms or implementation of this Agreement, including any method of coercion, confidential financial arrangement, or financial inducement. No officer or employee of the City of Hawthorne will receive compensation, directly or indirectly, from Consultant, or from any officer, employee or agent of Consultant, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. Violation of this Section shall be a material breach of this Agreement entitling the City to any and all remedies at law or in equity.
13. NO BENEFIT TO ARISE TO LOCAL EMPLOYEES
No member, officer, or employee of City, or their designees or agents, and no public official who exercises authority over or responsibilities with respect to the Project during his/her tenure or for one year thereafter, shall have any interest, direct or indirect, in any agreement or sub-agreement, or the proceeds thereof, for work to be performed in connection with the Project performed under this Agreement.
14. RELEASE OF INFORMATION/CONFLICTS OF INTEREST
(a) All information gained by Consultant in performance of this Agreement shall be considered confidential and shall not be released by Consultant without City's prior written authorization. Consultant, its officers, employees, agents, or subconsultants, shall not without written authorization from the City Manager or unless requested by the City Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories, or other information concerning the work performed under this Agreement or relating to any project or property located within the City. Response to a subpoena or court order shall not be considered "voluntary" provided Consultant gives City notice of such court order or subpoena.
(b) Consultant shall promptly notify City should Consultant, its officers, employees, agents, or subconsultants be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions, or other discovery request, court order, or subpoena from any person 6 or party regarding this Agreement and the work performed thereunder or with respect to any project or property located within the City. City retains the right, but has no obligation, to represent Consultant and/or be present at any deposition, hearing, or similar proceeding. Consultant agrees to cooperate fully with City and to provide the opportunity to review any response to discovery requests provided by Consultant. However, City's right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response.
15. ASSIGNMENT
The Consultant shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City because of the personal nature of the services to be rendered pursuant to this Agreement.
16. LICENSES
At all times during the term of this Agreement, Consultant shall have in full force and effect, all licenses required of it by law for the performance of the services described in this Agreement.
17. GOVERNING LAW
The City and Consultant understand and agree that the laws of the State of California shall govern the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the municipal, superior, or federal district court with jurisdiction over the City of Hawthorne.
18. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to the obligations of the parties described in this Agreement. All prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged into this Agreement and shall be of no further force or effect. Each party is entering into this Agreement based solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material. 7 19. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of Consultant warrants and represents that he/she has the authority to execute this Agreement on behalf of the Consultant and has the authority to bind Consultant to the performance of its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written.
CITY OF HAWTHORNE: CONSULTANT:
By:
AKBAR FAROKHI Name:
Director of Public Works Title:
City of Hawthorne Ninyo & Moore
APPROVED AS TO FORM: ATTEST:
_________________________ _____________________________
ROBERT KIM DAYNA WILLIAMS-HUNTER
City Attorney City Clerk
City of Hawthorne City of Hawthorne
8 EXHIBIT A
Proposal
9 EXHIBIT B
INSURANCE REQUIREMENTS
Prior to the beginning of and throughout the duration of the Work, Consultant will maintain insurance in conformance with the requirements set forth below. Consultant will use existing coverage to comply with these requirements. If that existing coverage does not meet the requirements set forth here, Consultant agrees to amend, supplement or endorse the existing coverage to do so. Consultant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. Any insurance proceeds available to City in excess of the limits and coverage required in this Agreement and which is applicable to a given loss, will be available to City.
Consultant shall provide the following types and amounts of insurance:
Commercial General Liability Insurance using Insurance Services Office “Commercial General Liability” policy form CG 00 01 or the equivalent. Limits are subject to review but in no event less than $1,000,000 per occurrence.
Professional Liability Coverage. Consultant shall maintain in-force Professional Liability Insurance (and/or errors & Omissions Insurance) for protection against claims alleging negligent acts, errors or omissions which may arise from Consultant’s operations under this Agreement, whether such operations be by the Consultant or by its employees, or subconsultants. The amount of this insurance shall not be less than one million dollars ($ 1,000,000) on a claims-made annual aggregate basis, or a combined single-limit per occurrence basis.
AGENDA ITEM NO. 14
CITY OF HAWTHORNE
City Council
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Human Resources
City Manager:
Vontray Norris
Human Resources Director:
Erika Lampkin
SUBJECT:
A Side Letter Agreement between the City of Hawthorne and the Hawthorne Municipal Employees Association Part-Time (HMEA-PT), amending the Memorandum of Understaning (MOU).
RECOMMENDED MOTION:
Staff Recommends that the City Council approve the amendment.
DISCUSSION:
The City of Hawthorne and the Hawthorne Municipal Employees’ Association Part-Time (HMEAPT) met and conferred in good faith to amend the HMEA-PT by extending the current memorandum of understanding until June 30, 2027 in an effort to create language more appropriate for part-time employee status.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
Not applicable.
FISCAL IMPACT:
Funds have been appropriated in the general fund for this fiscal year.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act ATTACHMENT(S):
1. Side Letter between City of Hawthorne & Hawthorne Municipal Employees Association PartTime (HMEA-PT)
Side Letter Agreement
City of Hawthorne
And
Hawthorne Municipal Employees Association Part-Time
This side letter is executed pursuant to the July 1, 2022 – June 30, 2024, Memorandum of Understanding between the City of Hawthorne and the Hawthorne Municipal Employees Association Part-Time. The City and HMEA-PT have met and conferred in good faith and have an agreement to modify Article 20 within the MOU. All other terms and conditions of the MOU from July 1, 2022 – June 2024 shall remain in full force and effect.
Article 20 – Term of Agreement
Extend the term of the Memorandum of Understanding up to and including June 30, 2027.
HMEA–PT:
____________________________________
Damian Stafford, Labor Relations Representative
_________________________
Daniel Mills, HMEA President
City:
_____________________________________
Erika Lampkin, Director of Human Resources
_______________________________
Vontray Norris, City Manager
AGENDA ITEM NO.
CITY OF HAWTHORNE
CITY COUNCIL
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: City Attorney
City Attorney: _______________________
Robert M. Kim
SUBJECT:
Claim for physical assault and property damage by Vincent Rand Littlejohn.
RECOMMENDED MOTION:
Staff recommends that the City Council deny the claim by Vincent Rand Littlejohn.
DISCUSSION:
Claimant Vincent Rand Littlejohn alleges that members of the Hawthorne Police Department committed an assault on him and caused property damage to his vehicle.
FISCAL IMPACT:
None
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act.
ATTACHMENT(S):
None
62952365.v2
AGENDA ITEM NO.
CITY OF HAWTHORNE
PUBLIC FINANCING AUTHORITY
AGENDA BILL
For the meeting of August 27, 2024
Originating Department: Finance
Exec. Director: ____________________ Chief Financial Officer: ____________________ Vontray Norris Felice Lopez
SUBJECT:
Resolution No. 12 of the Hawthorne Public Financing Authority Authorizing the Sale, Issuance and Delivery of Lease Revenue Bonds, Series 2024, Authorizing the Execution and Delivery of an Indenture and Other Documents and Taking Related Actions.
RECOMMENDED MOTION:
Approve Resolution No. 12 (i) Authorizing Issuance of the Lease Revenue Bonds, Series 2024 (the “2024 Bonds”); (ii) Approving Related Documents, Including the Preliminary Official Statement; and (iii) Directing Related Actions by the Hawthorne Public Financing Authority to Finance Public Improvements to the City Hall and Civic Center Park, the new Public Works Yard, the Senior Center, the Police Facility, and the City Aquatics Center (the “Public Improvements”).
DISCUSSION:
Plan of Finance. The City contemplates issuance of the 2024 Bonds to fund, together with additional funds on hand of the City, the proposed construction of the Public Improvements:
Public Improvements
City Hall Building and Civic Center Park
Public Works Yard
Senior Center Addition
Police Facility Improvements
City Aquatics Center Updates
Total
Total Approximate Cost
$24 million
$7 million
$12 million
$2 million
$2 million
$47 million
Approximately $30 million will be funded from the proposed 2024 Bonds and approximately $17 million from existing reserves of the general fund.
Lease Financings Generally. California cities commonly use lease financing to pay for capital improvements through their general fund without first holding a city-wide election. Lease financings are commonly structured as lease revenue bonds issued by a joint powers authority (a
62952365.v2
separate public agency formed to provide assistance with financings under State law). Under a lease revenue bond financing, the City is obligated to make lease payments to the joint powers authority for the right to use and occupy a public building, and the joint powers authority assigns its right to receive the lease payments to a bond trustee; the bond trustee uses the lease payments to pay debt service on lease revenue bonds that are sold to investors. In lease financing structures, cities covenant to annually budget and appropriate from the general fund for the lease payments.
Hawthorne Public Financing Authority. The City and the Hawthorne Public Financing Authority (the “Authority”) are parties to a certain Joint Exercise of Powers Agreement, dated as of November 23, 1992 (the “Joint Powers Agreement”), pursuant to which the Authority was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) (the “Joint Powers Law”) for the purpose of providing assistance to the City and the Authority with their financing programs, and for any other purposes authorized under Article 4 of the Joint Powers Law (the “Bond Law”).
Authority Resolution No. 12. By adopting the Resolution No. 12, the Authority Board will authorize the issuance of the 2024 Bonds, and approve the execution and delivery of the following documents. Each of the documents are presented in substantial final form, and will be completed after the 2024 Bonds are priced (i.e., when the principal amount of the 2024 Bonds, the interest rates and the original issue premium or discount will be determined). (i) Indenture,
(ii) Lease Agreement,
(iii) Sublease Agreement,
(iv) Assignment Agreement,
(v) Preliminary Official Statement, and
(vi) Bond Purchase Agreement.
Below are brief descriptions of these documents:
(i) Lease Agreement: (Attachment No. 2)
Under the Lease Agreement, the City will lease the Leased Properties (described below) to the Authority in consideration for the application of the bond proceeds for the project.
(ii) Sublease Agreement: (Attachment No. 3)
Under the Sublease, the Authority will sublease the Leased Properties to the City and the City will pay the Lease Payments. The scheduled Lease Payments will correspond, in amounts and due dates, to the scheduled principal and interest payments of the 2024 Bonds. The City will also covenant to maintain certain insurance coverage with respect to the Leased Properties.
Under the provisions of the Lease and the Sublease, the properties currently proposed to be subject to Lease Payments are identified as the Memorial Center Complex; Fire Station #1; Fire Station #2; Fire Station #3, Eucalyptus Park, the
62952365.v2
existing Public Works Yard and the recently purchased lot with storage structure (collectively, the “Leased Properties”). The Resolution authorizes the City Manager to make the final determination of which City assets will ultimately be subject to the Lease and the Sublease. Upon completion of the various project components, the Sublease provides the City with the ability to release all of the Leased Properties with the exception of the Memorial Center Complex. (iii) Assignment Agreement: (Attachment No. 4)
Under the Assignment Agreement, the Authority will assign its right to receive the Lease Payments from the City pursuant to the Sublease and certain other rights under the Lease and Sublease to the Trustee, for the benefit of the owners of the 2024 Bonds.
(iv) Preliminary Official Statement:( Attachment No. 5) In connection with a public offering, the Preliminary Official Statement (the “POS”) will be distributed by the Underwriter (as described below) to potential investors. The POS provides a summary of the proposed terms of the 2024 Bonds, the sources of repayment and certain risks relating to the investment in the 2024 Bonds. As permitted by federal securities laws, some of the terms relating to the 2024 Bonds (such as interest rates and redemption schedule), will appear as blanks or be footnoted as “preliminary; subject to change” in the POS and will not be determined until the pricing of the 2024 Bonds. After the pricing of the 2024 Bonds, these terms will be inserted, and the POS will be converted into a final Official Statement. The Underwriter will then distribute the Official Statement to buyers of the 2024 Bonds and cause it to be uploaded onto the Electronic Municipal Market Access website (known as EMMA), the official repository for information pertaining municipal securities issued in the United States.
The Official Statement is the “offering document” for the 2024 Bonds, required to be made available to investors pursuant to federal securities laws. The Official Statement must include all information that would be material to a prospective investor’s decision whether to purchase the 2024 Bonds. While the various members of the financing team have contributed to the preparation of the POS and the Official Statement, the City and the Authority are ultimately responsible for ensuring that the POS is accurate, contains no misleading information and does not omit any information necessary to make the POS not misleading to investors. (v) Bond Purchase Agreement: (Attachment No. 6)
In connection with a public offering, this agreement will be executed on the day that the 2024 Bonds are priced (i.e., when the principal amount of the 2024 Bonds, the interest rates and the original issue premium or discount will be determined, a few weeks before the closing date). Under this agreement, Samuel A. Ramirez &
62952365.v2
Co. Incorporated (the “Underwriter”) will agree to buy the 2024 Bonds from the Authority on the issuance date of the 2024 Bonds upon satisfaction of the closing conditions specified in the Bond Purchase Agreement, including the execution and delivery of applicable documents by the Authority and the City. (vi) Indenture: (Attachment No. 7)
The Indenture contains provisions pertaining to the terms of the 2024 Bonds, including maturity schedule, interest rates and redemption provisions. It also provides for the establishment and maintenance of certain funds and accounts (including a debt service reserve account) and the rights and duties of the Trustee.
Under the Indenture, the Authority will pledge “Revenues” derived from the City’s Lease Payments under the Sublease to pay debt service on the 2024 Bonds.
Authorization Parameters. Under the Authority Resolution No. 12, the Executive Director is authorized to act on behalf of the Authority within the following parameters: (i) the principal amount of the 2024 Bonds shall not exceed $32,000,000; (ii) the true interest cost of the 2024 Bonds shall not exceed 6.50%; and (iii) the Underwriter’s discount (excluding any original issue discount, or bond insurance or reserve fund surety premiums paid for by the Underwriter) shall not exceed 1.00% of the principal amount of the 2024 Bonds.
Additional Financing Team Agreements. The Authority’s Resolution No. 12 approves the engagements of Nossaman LLP, as Bond Counsel and Disclosure Counsel, and CSG Advisors Incorporated as Municipal Advisor.
Additional Actions. Resolution No. 12 also authorizes Authorized Officers the Authority as needed to effectuate bond closing, including the provision of bond insurance and/or a reserve fund surety as needed.
Good Faith Estimates. Pursuant to Government Code Section 5852.1, the following information consists of estimates that have been provided in good faith by the Municipal Advisor, in consultation with the Underwriter, and based on market conditions as of August 16, 2024:
(A) True Interest Cost of the 2024 Bonds: 4.30%
(B) Finance Charge of the 2024 Bonds (Sum of all fees/charges paid to third parties, but excluding potential bond insurance or debt service reserve fund insurance premiums): $580,500 (C) Net Proceeds of the 2024 Bonds to be Received (net of finance charges, reserves and capitalized interest, if any): $30,000,000
(D) Total Payment on the 2024 Bonds Through Maturity: $55,003,000 The foregoing estimates constitute good faith estimates only. The principal amount of the 2024 Bonds, the true interest cost of the 2024 Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith
62952365.v2
estimates due to (a) the actual date of the sale of the 2024 Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of 2024 Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the 2024 Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the 2024 Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the 2024 Bonds and the actual principal amount of 2024 Bonds sold will be determined by the City based on the timing of the need for proceeds of the 2024 Bonds and other factors. Market interest rates are affected by economic and other factors beyond the control of the City.
FISCAL IMPACT:
In accordance with the Good Faith Estimates above, the annual lease payments are estimated to average approximately $1,835,000 per year through November 1, 2054, and would be paid from the City’s available general fund revenues. Actual annual average lease payments will not be determined until the 2024 Bonds price as expected in September 2024.
The fees and expenses of the financing team, including Bond Counsel, Disclosure Counsel, Underwriter and Municipal Advisor, Rating Agency, title company, and any bond insurance or reserve fund surety, if applicable, are paid from proceeds of the 2024 Bonds.
NOTICING PROCEDURES:
72 hours posted notice pursuant to the Ralph M. Brown Act.
ATTACHMENT(S):
1. Authority Resolution No. 12
2. Lease Agreement
3. Sublease Agreement
4. Assignment Agreement
5. Preliminary Official Statement
6. Bond Purchase Agreement.
7. Indenture
1 62950339.v2
RESOLUTION NO. 12
RESOLUTION OF THE HAWTHORNE PUBLIC FINANCING
AUTHORITY AUTHORIZING THE SALE, ISSUANCE AND
DELIVERY OF LEASE REVENUE BONDS, SERIES 2024,
AUTHORIZING THE EXECUTION AND DELIVERY OF AN
INDENTURE AND OTHER DOCUMENTS AND TAKING RELATED
ACTIONS
WHEREAS, the Hawthorne Public Financing Authority (the “Authority”) is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated November 23, 1992, by and between the City of Hawthorne (the “City”) and the Community Redevelopment Agency of the City of Hawthorne, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the “Act”), and is authorized pursuant to Article 4 of the Act to issue bonds to provide financing for public capital improvements; and WHEREAS, the Authority proposes to issue and sell lease revenue bonds (the “Bonds”), to be secured pursuant to an Indenture (the “Indenture”), to be entered into by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”); and WHEREAS, proceeds of the Bonds will used to assist the City with financing a portion of the costs of construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvements (the “Project”); and WHEREAS, in connection with the issuance of the Bonds, it is proposed that the Authority will enter into a Lease Agreement (the “Lease”), under which the Authority will lease certain real properties, including the land and the improvements thereon (collectively, the “Leased Properties”) from the City, and a Sublease (the “Sublease”), under which the City will sublease the Leased Properties from the Authority and make base rental payments, calculated to be sufficient to allow the Authority to pay principal and interest payments on the Bonds; and WHEREAS, for the benefit of the holders of the Bonds, the Authority will enter into the Assignment Agreement (defined below) under which the Authority will assign its right to receive the base rental payments and certain other rights of the Authority under the Lease and Sublease to the trustee for the Bonds; and
WHEREAS, there has been presented to the Authority and the City a Bond Purchase Agreement (the “Bond Purchase Agreement”), to be entered into by and among the Authority, the 2 62950339.v2
City and Samuel A. Ramirez & Co., Incorporated, as underwriter (the “Underwriter”), pursuant to which the Underwriter will purchase the Bonds, upon their issuance, from the Authority; and WHEREAS, The City Council of the City of Hawthorne has made a finding, after a duly noticed public hearing pursuant to Section 6586.5 of the Government Code, that the issuance of the Bonds will result in significant public benefit.
NOW, THEREFORE, BE IT RESOLVED, that the Governing Board of the Hawthorne Public Financing Authority hereby finds, determines, resolves and orders as follows:
SECTION 1. The above recitals are true and correct and are a substantive part of this Resolution.
SECTION 2. The Authority hereby acknowledges and concurs with the City Council’s finding of significant public benefit. The Authority hereby authorizes the issuance and sale of the Bonds, subject to the parameters set forth below.
SECTION 3. Subject to the parameters set forth below, the issuance of the Bonds is hereby approved and authorized. The Indenture (the “Indenture”), proposed to be entered into by and between the Authority and U.S. Bank Trust Company, National Association, as trustee for the Bonds (the “Trustee”), in the form on file with the Authority Secretary, is hereby approved. Each of the Chairperson, the Vice Chairperson, the Executive Director and the Chief Financial Officer of the Authority, and any officer of the Authority designated by any of them in writing (each, an “Authorized Officer”), acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such changes therein as such Authorized Officer may require or approve (such approval to be conclusively evidenced by the execution and delivery thereof).
SECTION 4. The Lease Agreement (the “Lease”), proposed to be entered into by and between the City, as lessor, and the Authority, as lessee, in the form on file with the Authority Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Lease in substantially said form, with such changes therein as such Authorized Officer may require or approve (such approval to be conclusively evidenced by the execution and delivery thereof).
SECTION 5. The Sublease (the “Sublease”), proposed to be entered into by and between the Authority, as sublessor, and the City, as sublessee, in the form on file with the Authority Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Sublease in substantially said form, with such changes therein as such Authorized Officer may require or approve (such approval to be conclusively evidenced by the execution and delivery thereof). 3 62950339.v2
SECTION 6. The Assignment Agreement (the “Assignment Agreement”), proposed to be entered into by and between the Authority and the Trustee, in the form on file with the Authority Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment Agreement in substantially said form, with such changes therein as such Authorized Officer may require or approve (such approval to be conclusively evidenced by the execution and delivery thereof).
SECTION 7. The Bond Purchase Agreement, in the form on file with the Authority Secretary, is hereby approved. Subject to the parameters set forth below, each Authorized Officer, acting individually, is hereby authorized, for and in the name and on behalf of the Authority, execute and deliver the Bond Purchase Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve (such approval to be conclusively evidenced by the execution and delivery thereof).
SECTION 8. The Executive Director is hereby authorized to act on behalf of the Authority to establish and determine: (i) the aggregate principal amount of the Bonds, which shall not exceed $32,000,000; (ii) the purchase price of the Bonds and the interest rates thereon, provided that the true interest cost shall not exceed 6.50%; and (iii) the Underwriter’s compensation (discount) which shall not exceed 1.00% of the principal amount of the Bonds, exclusive of any original issue discount and any bond insurance or reserve fund surety paid for by the Underwriter.
SECTION 9. The Preliminary Official Statement relating to the Bonds (the “Preliminary Official Statement”), in the form on file with the Authority Secretary, is hereby approved. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to cause the Preliminary Official Statement in substantially said form, with such additions or changes therein as such Authorized Officer may approve, to be deemed final for the purposes of Rule 15c2-12 promulgated pursuant to the Securities and Exchange Act of 1934.
The distribution by the Underwriter of copies of the Preliminary Official Statement to potential purchasers of the Bonds is hereby approved.
SECTION 10. Each Authorized Officer, acting singly, is hereby authorized and directed, for and in the name and on behalf of the Authority, to cause the Preliminary Official Statement to be brought into the form of a final Official Statement (the “Official Statement”), and to execute the same for and in the name and on behalf of the Authority, with such additions or changes therein as such Authorized Officer may approve (such approval to be conclusively evidenced by such Authorized Officer’s execution and delivery thereof). The distribution and use of the Official Statement by the Underwriter in connection with the sale of the Bonds are hereby approved.
SECTION 11. In accordance with Government Code Section 5852.1, there has been presented to this Board of Directors in the Staff Report accompanying this Resolution certain good 4 62950339.v2
faith estimates provided to the Authority by its Municipal Advisor with respect to the Bonds. The Board of Directors hereby finds that the requirements of Government Code Section 5852.1 have been satisfied.
SECTION 12. In connection with the issuance of the Bonds, the appointment of the following firms is hereby approved: (i) Nossaman LLP, as bond counsel and disclosure counsel, and (ii) CSG Advisors Incorporated, as municipal advisor.
SECTION 13. The Authorized Officers, and all other officers of Authority, are hereby authorized, jointly and severally, to execute and deliver any and all necessary instruments and to do all things which they may deem necessary or in the best interests of the City to effectuate the purposes of this Resolution, the documents approved hereby, and the issuance, sale and delivery of the Bonds (including, but not limited to, obtaining reserve fund surety bonds, bond insurance policies or other types of credit enhancement, as necessary or appropriate, determining which City properties will ultimately serve as the Leased Property for the Lease and the Sublease, and executing termination agreements with the title company to release certain leased assets from documents related to debt that is no longer outstanding) and any such actions previously taken by such officers are hereby ratified and confirmed.
SECTION 14. That the Authority Secretary shall certify to the adoption of this Resolution and shall cause this Resolution and this certification to be entered in the Book of Resolutions of the Authority.
ADOPTED by the Hawthorne Public Financing Authority at a duly noticed regular meeting of the Governing Board held on this 27th day of August 2024. ______________________________
ALEX VARGAS, Chairman
Hawthorne Public Financing Authority
ATTEST:
_________________________________
DAYNA WILLIAMS-HUNTER
Authority Secretary
62902453.v2
Recording requested by and when
recorded mail to:
City of Hawthorne
c/o Nossaman LLP
777 South Figueroa Street, 34th Floor
Los Angeles, California 90017
Attention: Lolly Enriquez, Esq.
This Document is recorded for the benefit of the City of Hawthorne and is exempt from California documentary transfer tax pursuant to Section 11928 of the California Revenue and Taxation Code and from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.
====================================================================
LEASE AGREEMENT
by and between
the
CITY OF HAWTHORNE,
as lessor
and the
HAWTHORNE PUBLIC FINANCING AUTHORITY,
as lessee
Dated as of [September] 1, 2024
====================================================================
TABLE OF CONTENTS
Page
-i62902453.v2
SECTION 1. DEFINITIONS .............................................................................................1 SECTION 2. LEASE OF LEASED PROPERTY ....................................................................2 SECTION 3. TERM ........................................................................................................2 SECTION 4. RENTAL .....................................................................................................2 SECTION 5. TITLE .........................................................................................................3 SECTION 6. DEFAULT ...................................................................................................3 SECTION 7. EMINENT DOMAIN ...................................................................................4 SECTION 8. RIGHT OF ENTRY.......................................................................................4 SECTION 9. SURRENDER OF PROPERTIES UPON TERMINATION .................................4 SECTION 10. QUIET ENJOYMENT BY THE AUTHORITY...................................................4 SECTION 11. ASSIGNMENTS AND SUBLEASES ...............................................................4 SECTION 12. WAIVER OF PERSONAL LIABILITY..............................................................5 SECTION 13. TAXES........................................................................................................5 SECTION 14. GOVERNING LAW .....................................................................................5 SECTION 15. NOTICES....................................................................................................5 SECTION 16. VALIDITY AND SEVERABILITY ....................................................................5 SECTION 17. PURPOSE OF LEASE...................................................................................5 SECTION 18. WAIVER OF DEFAULT................................................................................5 SECTION 19. SECTION HEADINGS..................................................................................6 SECTION 20. AMENDMENTS .........................................................................................6 SECTION 21. EXECUTION ...............................................................................................6
EXHIBIT A DESCRIPTION OF LEASED PROPERTY
62902453.v2
LEASE AGREEMENT
This Lease Agreement, dated as of [September] 1, 2024 (this “Lease”), is made by and between the CITY OF HAWTHORNE, a municipal corporation duly organized and existing under the laws of the State of California (the “City”), as lessor, and the HAWTHORNE PUBLIC FINANCING AUTHORITY, a joint powers authority duly formed and existing under the laws of the State of California (the “Authority”), as lessee.
RECITALS:
A. The Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated November 23, 1992, by and between the City of Hawthorne (the “City”) and the Community Redevelopment Agency of the City of Hawthorne, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the “Act”), and is authorized pursuant to Article 4 of the Act to issue bonds to provide financing for public capital improvements.
B. The Authority is issuing its Lease Revenue Bonds, Series 2024 (the “Bonds”), pursuant to the Indenture, dated as of [September] 1, 2024 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee.
C. Proceeds from the sale of the Bonds will be used to (i) pay a portion of the costs of construction, renovation, and installation of the City’s city hall expansion and new civic center Park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and other capital improvements; and (ii) pay cost of issuance.
D. In connection with the issuance of the Bonds, the City and the Authority desire to enter into this Lease, whereby the Authority will lease certain real property from the City (the “Leased Property”).
E. Pursuant to the Sublease, dated as of even date herewith, by and between the City and the Authority, the Authority will sublease the Leased Property to the City.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL
AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
SECTION 1. DEFINITIONS.
Terms used and not otherwise defined herein but which are defined in the Indenture shall have the meanings ascribed to them in the Indenture. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease, have the meanings specified in this Section (the following definitions to be equally applicable to both the singular and plural forms of such defined terms):
-2-
62902453.v2
“Bonds” means the Authority’s Lease Revenue Bonds, Series 2024. “Commencement Date” means the Closing Date with respect to the Bonds. “Expiration Date” means November 1, 2054; provided, however, if the City is in default with respect to any Base Rental payment on November 1, 2054, then the Expiration Date shall be automatically extended to November 1, 2064.
“Indenture” means the Indenture, dated as [September] 1, 2024, by and between the Authority and the Trustee, relating to the Bonds, as the same may be amended, supplemented or otherwise modified from time to time, pursuant to the terms thereof. “Lease” means this Lease, and as the same may be amended, supplemented or otherwise modified from time to time pursuant to the terms hereof. “Leased Property” means the real property in the City described in Exhibit A of this Lease, and incorporated herein by reference, including improvements thereon, including the following: (1) ______.
“Sublease” means the Sublease, dated as of [September] 1, 2024, with respect to the Leased Property, by and between the Authority, as lessor, and the City, as lessee, and as the same may be amended, supplemented or otherwise modified from time to time pursuant to the terms thereof.
“Trustee” means U.S. Bank National Association, its successors and assigns, acting as the Trustee under the Indenture.
SECTION 2. LEASE OF LEASED PROPERTY.
The City hereby leases the Leased Property to the Authority and the Authority hereby leases the Leased Property from the City, on the terms and conditions hereinafter set forth.
SECTION 3. TERM.
The term of this Lease shall commence on the Commencement Date and shall end on the last day of the term of the Sublease; which is the earliest of: (i) the Expiration Date; (ii) the date on which the Base Rental payments are paid (or prepaid) in full under the provisions of the Sublease; or (iii) the date of discharge of the Indenture.
SECTION 4. RENTAL.
The Authority agrees to pay to the Trustee on the Closing Date the proceeds of the Bonds as advance rental for the use and right to possession of the Leased Property for the term of this Lease. The rental shall be applied by the Trustee as provided in the Indenture. -3-
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SECTION 5. TITLE.
In accordance with the Sublease, the City shall obtain one or more CLTA (or at the City’s sole discretion, ALTA) policies of title insurance at the time of and dated as of the Commencement Date in an amount not less than the aggregate principal amount of the Outstanding Bonds, payable to the Trustee, insuring the respective interests of the City and the Authority in the Leased Property, and insuring the validity of this Lease and the Sublease, issued by a title insurance company qualified to do business in the State of California and acceptable to the Authority. To the extent permitted under the Indenture, the costs of obtaining such title insurance policy or policies may be paid out of the sale proceeds of the Bonds.
SECTION 6. DEFAULT.
If -
(a) the Authority shall fail to keep, observe or perform any term, covenant or condition contained herein to be kept or performed by the Authority, or (b) the Authority’s interest in this Lease or any part thereof is assigned or transferred without the written consent of the City, either voluntarily or by operation of law or otherwise, except as provided in Section 11 hereof, or
(c) any proceeding under the United States Bankruptcy Code or any federal or state bankruptcy, insolvency or similar law or any law providing for the appointment of a receiver, liquidator, trustee or similar official of the Authority or of all or substantially all of its assets is instituted by or with the consent of the Authority, or is instituted without its consent and is not permanently stayed or dismissed within 30 days, or
(d) the Authority offers to the Authority’s creditors to effect a composition or extension of time to pay the Authority’s debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for readjustment of the Authority’s debts, or (e) the Authority shall make, in connection with any proceedings related to bankruptcy, insolvency, liquidation, winding up or similar events a general assignment or any assignment for the benefit of the Authority’s creditors, then the Authority shall be deemed to be in default hereunder and it shall be lawful for the City to exercise any and all rights and remedies available pursuant to law; provided, however, that:
(i) no merger of this Lease and the Sublease shall be deemed to occur as a result thereof and (ii) so long as any Bonds remain outstanding, the City shall have no power to terminate this Lease by reason of any default on the part of the Authority.
Neither the City nor the Authority shall in any event be in default in the performance of any of its obligations hereunder or imposed by law unless and until the City or the Authority (as the case may be) shall have failed to perform such obligation within 30 days -4-
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after notice by the Authority or the City (as the case may be) to the nonperforming party properly specifying wherein such party has failed to perform any such obligation.
SECTION 7. EMINENT DOMAIN.
If the whole or any part of the Leased Property shall be taken under the power of eminent domain, the interest of the Authority shall be recognized and any condemnation award shall be applied as provided in Section 9 of the Sublease.
SECTION 8. RIGHT OF ENTRY.
The City and its assignees shall have the right to enter any of the Leased Property during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the City’s or the Authority’s rights or obligations under this Lease and (c) for all other lawful purposes.
SECTION 9. SURRENDER OF PROPERTIES UPON TERMINATION.
The Authority agrees upon the termination of this Lease to quit and surrender the Leased Property in the same good order and condition as the same were in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and the Authority and the City agree that any permanent improvements and structures existing upon the Leased Property at the time of the termination of this Lease shall remain thereon and title thereto shall be vested in the City.
SECTION 10. QUIET ENJOYMENT BY THE AUTHORITY.
The Authority shall at all times during the term of this Lease peaceably and quietly have, hold and enjoy the real property leased hereunder without suit, trouble or hindrance from the City, subject to the rights granted to the City under the Sublease, and subject to the Authority’s compliance with the terms and provisions hereof.
SECTION 11. ASSIGNMENTS AND SUBLEASES.
The parties understand that this Lease and the rights of the Authority hereunder (except the Authority’s rights to give approvals and consents hereunder and to indemnification and payment or reimbursement for any costs or expenses of the Authority hereunder) will be assigned to the Trustee pursuant to the Assignment Agreement for the benefit of the Owners of the Bonds. Except as provided in the foregoing sentence, the Authority shall not assign, mortgage, hypothecate or otherwise encumber this Lease or any rights hereunder or the leasehold created hereby by trust agreement, indenture or deed of trust or otherwise or sublet the Leased Properties without the written consent of the City except as provided by the Sublease and as security for the Bonds.
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SECTION 12. WAIVER OF PERSONAL LIABILITY.
All liabilities hereunder on the part of the Authority shall be solely liabilities of the Authority as a separate legal entity, and no member, officer or employee of the Authority shall at any time or under any circumstances be individually or personally liable hereunder for anything done or omitted to be done by the Authority under this Lease.
SECTION 13. TAXES.
The City shall be responsible for the payment of any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Leased Property.
SECTION 14. GOVERNING LAW.
This Lease shall be governed exclusively by the provisions hereof and by the laws of the State of California.
SECTION 15. NOTICES.
Any notice, request, demand, or other communication under this Lease shall be governed by Section 9.14 of the Indenture, which is hereby incorporated.
SECTION 16. VALIDITY AND SEVERABILITY.
If for any reason this Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the City or by the Authority, or if for any reason it is held by such a court that any of the covenants and conditions of the Authority hereunder is unenforceable for the full term hereof, then and in such event this Lease is and shall be deemed to be a lease from year to year and all of the rental and other terms, provisions and conditions of this Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect.
SECTION 17. PURPOSE OF LEASE.
The Authority covenants that during the term of this Lease, except to the extent that other uses may be permitted under the Sublease, it will use, or cause the use of, the Leased Property to be consistent with the descriptions set forth in the Sublease or related public purposes.
SECTION 18. WAIVER OF DEFAULT.
Failure of the City to take advantage of any default on the part of the Authority shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this Lease be construed to waive or to lessen the right of the City to insist upon performance by the Authority of any term, covenant or -6-
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condition hereof, or to exercise any rights given the City on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default.
The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Lease.
SECTION 19. SECTION HEADINGS.
All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Lease.
SECTION 20. AMENDMENTS.
This Lease may not be amended unless such amendment is agreed upon in writing by the parties hereof; provided that, no such amendment shall materially affect the interests and rights of the Owners of the Bonds under the Indenture or the Sublease unless: (i) there shall have been delivered to the Trustee an opinion of Bond Counsel that such amendment will not adversely affect the tax-exempt status of any Bonds, or (ii) the Trustee shall have obtained written consent of the Owners of at least a majority in aggregate principal amount of the affected Bonds then Outstanding to such amendment. A substitution or release of any portion of the Leased Properties under this Lease and the Sublease, or an amendment to delete of a portion of the Leased Properties in connection with a partial prepayment of Base Rental under the Sublease from insurance or condemnation proceeds, shall not be considered as materially affecting the interests and rights of the Owners of the Bonds if such substitution, release or deletion complies with the provisions of the Sublease. The Authority shall provide copies of all amendments to the Trustee promptly after execution of any such amendment.
SECTION 21. EXECUTION.
This Lease may be executed in any number of counterparts, each of which shall be deemed to an original, but all together shall constitute but one and the same instrument. -7-
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IN WITNESS WHEREOF, the City and the Authority have caused this Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
CITY OF HAWTHORNE
By:
Vontray Norris, City Manager
Attest:
Dayna Williams-Hunter, City Clerk
HAWTHORNE PUBLIC FINANCING AUTHORITY
By:
Vontray Norris, Executive Director
Attest:
Dayna Williams-Hunter, Secretary
EXHIBIT A
DESCRIPTION OF LEASED PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF HAWTHORNE, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS, TOGETHER WITH IMPROVEMENTS THEREON:
PARCEL 1 - (APN: ____)
State of California )
County of Los Angeles)
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California )
County of Los Angeles)
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. 62902455.v3
Recording requested by and when
recorded mail to:
City of Hawthorne
c/o Nossaman LLP
777 South Figueroa Street, 34th Floor
Los Angeles, California 90017
Attention: Lolly Enriquez, Esq.
This Document is recorded for the benefit of the City of Hawthorne and is exempt from California documentary transfer tax pursuant to Section 11928 of the California Revenue and Taxation Code and from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.
====================================================================
SUBLEASE
by and between
the
HAWTHORNE PUBLIC FINANCING AUTHORITY,
as lessor,
and the
CITY OF HAWTHORNE,
as lessee
Dated as of [September] 1, 2024
====================================================================
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS..........................................................................................................1 SECTION 2. TERM ...................................................................................................................3 SECTION 3. RENTAL ..................................................................................................................3 SECTION 4. USE OF PROCEEDS.................................................................................................5 SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS.........................................5 SECTION 6. CHANGES TO THE LEASED PROPERTY ...................................................................5 SECTION 7. TITLE INSURANCE ..................................................................................................6 SECTION 8. OTHER INSURANCE................................................................................................6 SECTION 9. DAMAGE, DESTRUCTION AND CONDEMNATION .................................................8 SECTION 10. DEFAULT ................................................................................................................9 SECTION 11. PREPAYMENT AND CREDITS................................................................................10 SECTION 12. RIGHT OF ENTRY..................................................................................................11 SECTION 13. MECHANICS’ LIENS..............................................................................................11 SECTION 14. QUIET ENJOYMENT .............................................................................................12 SECTION 15. INDEMNIFICATION ..............................................................................................12 SECTION 16. ASSIGNMENT TO TRUSTEE ..................................................................................12 SECTION 17. ABATEMENT OF RENTAL .....................................................................................13 SECTION 18. ADDITIONAL COVENANTS REGARDING TAX-EXEMPT BONDS ............................13 SECTION 19. SUBSTITUTION OR RELEASE OF PROPERTY.........................................................14 SECTION 20. WAIVER................................................................................................................15 SECTION 21. NET LEASE............................................................................................................15 SECTION 22. AMENDMENTS ....................................................................................................15 SECTION 23. GOVERNING LAW................................................................................................15 TABLE OF CONTENTS (cont.)
Page
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SECTION 24. NOTICES...............................................................................................................15 SECTION 25. VALIDITY AND SEVERABILITY...............................................................................15 SECTION 26. SECTION HEADINGS.............................................................................................16 SECTION 27. EXECUTION..........................................................................................................16
EXHIBIT A DESCRIPTION OF LEASED PROPERTY
EXHIBIT B BASE RENTAL PAYMENT SCHEDULE
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SUBLEASE
This Sublease, dated as of [September] 1, 2024 (this “Sublease”), is made by and between the HAWTHORNE PUBLIC FINANCING AUTHORITY, a joint powers authority duly formed and existing pursuant to the laws of the State of California (the “Authority”), as lessor, and the CITY OF HAWTHORNE, a municipal corporation duly organized and existing under the laws of the State of California (the “City”), as lessee.
RECITALS:
A. The Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated November 23, 1992, by and between the City of Hawthorne (the “City”) and the Community Redevelopment Agency of the City of Hawthorne, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the “Act”), and is authorized pursuant to Article 4 of the Act to issue bonds to provide financing for public capital improvements.
B. The Authority is issuing its Lease Revenue Bonds, Series 2024 (the “Bonds”), pursuant to the Indenture, dated as of [September] 1, 2024 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee.
C. Proceeds from the sale of the Bonds will be used to (i) pay a portion of the costs of construction, renovation, and installation of the City’s city hall expansion and new civic center Park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and other capital improvements; and (ii) pay cost of issuance.
D. In connection with the issuance of the Bonds, the City and the Authority are entering into the Lease Agreement, dated as of [September] 1, 2024 (the “Lease”), whereby the Authority will lease certain properties from the City (the “Leased Property”).
E. Pursuant to this Sublease, the Authority will sublease the Leased Property to the City.
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Terms used and not otherwise defined herein but which are defined in the Indenture shall have the meanings ascribed to them in the Indenture. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Sublease, have the meanings specified in this Section (the following definitions to be equally applicable to both the singular and plural forms of any of such defined terms):
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“Additional Rental” has the meaning assigned to that term in Section 3(b) hereof. “Assignment Agreement” means the Assignment Agreement, dated as of [September] 1, 2024, by and between the Authority and the Trustee, as the same may be amended, supplemented or otherwise modified from time to time.
“Base Rental” has the meaning assigned to that term in Section 3(a) hereof. “Bonds” means the Authority’s Lease Revenue Bonds, Series 2024. “Commencement Date” means the Closing Date with respect to the Bonds. “Expiration Date” means November 1, 2054; provided, however, if on such date, the City is in default with respect to any Base Rental payment or an abatement event has occurred such that all Base Rental payments have not been made, then the Expiration Date shall be automatically extended to November 1, 2064.
“Indenture” means the Indenture, dated as [September] 1, 2024, by and between the Authority and the Trustee relating to the Bonds, as the same may be amended and supplemented from time to time in accordance with the terms thereof. “Leased Property” means the real property in the City described in Exhibit A of this Sublease, and incorporated herein by reference, including improvements thereon, including the following: (1) [__________]
“Net Proceeds” means any insurance or condemnation proceeds, paid with respect to the Leased Property remaining after payment therefrom of all expenses in the collection thereof. “Payment Date” means, with respect to a Base Rental payment, the date listed as its related “Payment Date” in Exhibit B of this Sublease.
“Permitted Encumbrances” means (a) liens for general ad valorem taxes, special taxes and assessments, if any, not then delinquent, or which the City may, pursuant to this Sublease, permit to remain unpaid; (b) liens created pursuant to or permitted under the Lease or this Sublease; (c) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Commencement Date; (d) utility, access and other easements and rights of way, restrictions and exceptions that do not interfere with or impair the use intended to be made of the relevant Leased Property; (e) the City’s right to access and exclusive right to use and maintain facilities essential to the City’s utilities systems; (f) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the Commencement Date; (g) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the relevant Leased Property and as do not materially impair the use intended to be made of property affected thereby; and (h) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions -3-
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established following the Commencement Date which do not materially impair the City’s use of the Leased Property and to which the Authority and the City consent in writing. “Projects” means the construction, renovation, and installation of the City’s City Hall expansion and Civic Center Park, Senior Center and Public Works Yard. “Rental Payments” means, together, Base Rental and Additional Rental. “Sublease” means this Sublease, as the same may be amended and supplemented from time to time in accordance with the terms hereof.
SECTION 2. TERM.
(a) The Authority hereby subleases to the City and the City hereby leases from the Authority, the Leased Property on the terms and conditions set forth in this Sublease. (b) The term of this Sublease shall commence on the Commencement Date, and shall end on the earliest of: (i) the Expiration Date; (ii) the date on which the Base Rental payments are paid (or prepaid) in full under the provisions the Sublease; or (iii) the date of discharge of the Indenture.
(c) Throughout the term of this Sublease, fee title to the Leased Property shall remain in the City. While any Bonds remain Outstanding under the Indenture, there shall be no merger of the subleasehold estate in the Leased Property created by this Sublease, the leasehold estate in the Leased Property created by the Lease, and the fee estate in the Leased Property merely because such estates, or any of them, have been acquired or become vested in the same person or entity.
SECTION 3. RENTAL.
Subject to the provisions of Sections 8(c) and 17 hereof, the City agrees to pay to the Authority, its successors or assigns, as rental for the use and possession of the Leased Property, the following amounts at the following times:
(a) The City shall pay as “Base Rental” to the Authority or to the Trustee, as hereinafter provided, semiannually, the rental payments in accordance with the Base Rental payment Schedule attached hereto as Exhibit B, less any amount credited against Base Rental pursuant to Section 4.02(d) of the Indenture. Each Base Rental payment shall be payable in arrears five days before its Payment Date, and shall be made in consideration for the City’s use and possession of the Leased Property for the six month period preceding the Payment Date of such payment.
(b) The City shall also pay, as “Additional Rental” hereunder, in addition to the Base Rental, to the Authority or to the Trustee, as hereinafter provided, such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in -4-
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connection with the execution, performance or enforcement of this Sublease or the assignment hereof, the Indenture, or the Authority’s or the Trustee’s respective interests in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture. The Authority or the Trustee shall bill such Additional Rental to the City from time to time. The City shall pay amounts so billed within 30 days after receipt of the bill by the City.
(c) Such payments of Base Rental and Additional Rental for each rental payment period shall constitute the total rental for said rental payment period, and shall be paid by the City in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Property during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental does not exceed the fair rental value of the Leased Property for each such period. In making such determination, consideration has been given to other obligations of the parties under this Sublease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. The determination of fair rental value of the Leased Property pursuant to this paragraph shall not be deemed to be controlling in connection with a determination of fair value of the Leased Property by the parties hereto for any other purpose.
(d) Each installment of Base Rental payable hereunder shall be paid in lawful money of the United States of America to the order of the Trustee at the corporate trust office of the Trustee in Los Angeles, California, or such other place as the Trustee may designate. (e) Notwithstanding any dispute between the City and the Authority, the City shall make all Rental Payments when due, without deduction or offset of any kind, and shall not withhold any Rental Payments pending the final resolution of any such dispute. In the event of a determination that the City was not liable for said Rental Payments or any portion thereof, said payments or excess of payments, as the case may be, at the option of the City, shall be credited against subsequent Rental Payments due hereunder or be refunded at the time of such determination.
(f) The City covenants to take such action as may be necessary to include all such Rental Payments due hereunder in its annual budget and to make the necessary annual appropriations for all such Rental Payments. If the City’s adopted annual budget for any fiscal year fails to include sufficient appropriation for the scheduled Rental Payments for such fiscal year, the City shall give written notice to the Authority and the Trustee of such failure as soon as practical, but in any event within ten Business Days of the adoption of such annual budget. The covenants on the part of the City contained in this Sublease shall be deemed to be and shall be -5-
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construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Sublease agreed to be carried out and performed by the City; provided, the obligation of the City to make Base Rental or Additional Rental payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Base Rental or Additional Rental payments constitutes an indebtedness of the City, the State or any of its political subdivisions in contravention of any constitutional or statutory debt limitation or restriction.
SECTION 4. USE OF PROCEEDS.
The Authority and the City agree that the proceeds of the Bonds will be used to:
(i) finance the Projects, and (ii) pay the costs of issuing the Bonds and incidental and related expenses, as more fully set forth in the Indenture.
SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS. (a) During such time as the City or any assignee or sublessee thereof is in possession of the Leased Property, all maintenance and repair, ordinary or extraordinary, of the Leased Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of: (i) all utility services supplied to the Leased Property, (ii) the cost of operation of the Leased Property, and (iii) the costs of maintenance of and repair to the Leased Property resulting from ordinary wear and tear or want of care on the part of the City. The City shall, at the City’s sole cost and expense, keep and maintain the Leased Property clean and in a safe and good condition and repair. The Authority shall have no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Property or any part thereof, and the parties hereto affirm that the Authority has made no representations or warranties to the City respecting the condition of the Leased Property.
(b) The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Property. The Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Property. (c) The parties hereto contemplate that the City will use the Leased Property for public purposes and, therefore, that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. In the event that the use, possession or acquisition by the Authority or the City of any of the Leased Property is found to be subject to taxation in any form, the City will pay during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to such Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to such Leased Property; provided, -6-
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that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as this Sublease is in effect.
SECTION 6. CHANGES TO THE LEASED PROPERTY.
(a) The City shall have the right during the term of this Sublease to acquire and construct improvements or to attach fixtures, structures or signs to any of the Leased Property if the improvements, fixtures, structures or signs are necessary or beneficial for the use of such Leased Property by the City; provided, however, that no such acquisition or construction shall result in a material reduction in the aggregate value of the Leased Property or reduce the aggregate fair rental value thereof or result in an abatement of the Rental Payments. (b) Upon termination of this Sublease, the City may remove any fixture, structure or sign added by the City, but such removal shall be accomplished so as to leave the Leased Property, except for ordinary wear and tear and damage by casualty, in substantially the same condition as they were in before the fixture, structure or sign was attached.
SECTION 7. TITLE INSURANCE.
The City shall obtain one or more California Land Title Association insurance policies (or, at the City’s sole discretion, American Land Title Association insurance policies) at the time of and dated as of the Commencement Date in an aggregate amount not less than the aggregate principal amount of the Bonds, payable to the Trustee, insuring the respective interests of the City and the Authority in the Leased Property, and insuring the validity of this Sublease, subject only to Permitted Encumbrances, naming the Trustee as an insured thereunder, issued by a title insurance company qualified to do business in the State of California and acceptable to the Trustee. To the extent permitted under the Indenture, the costs of obtaining such title insurance policy or policies may be paid out of the sale proceeds of the Bonds.
SECTION 8. OTHER INSURANCE.
(a) Fire and Extended Coverage Insurance. The City shall maintain or cause to be maintained fire, lightning and extended coverage insurance on the Leased Property in an amount equal to (i) 100 percent of the then current replacement cost of the Leased Property, excluding the then fair market value of the land as unimproved or (ii) the principal amount of all outstanding Bonds, whichever is less (except that such insurance may be subject to a deductible clause not to exceed 10 percent of the amount of such policy). Earthquake insurance shall be maintained on the Leased Property only if available on the open market from reputable insurance companies at a reasonable cost. The extended coverage endorsement shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, vandalism, malicious mischief, dumping or other deposit of any pollutant or other debris and such other hazards as are normally covered by such endorsement. Each such policy of insurance shall be in form reasonably satisfactory to the Authority, and shall contain a clause naming the Trustee as an additional insured and making all losses payable to the Trustee, and all proceeds -7-
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thereof shall be paid over to the party contractually responsible for making repairs of casualty damage.
In the event of any damage to or destruction of the Leased Property caused by the perils covered by such insurance, the proceeds of such insurance shall be utilized to repair, reconstruct or replace the Leased Property to the end that the property shall be restored to at least the same condition that such Leased Property was in prior to such damage or destruction.
Any balance of such proceeds not required for such repair, reconstruction or replacement shall be transferred to the Authority and treated as Revenues and applied in the manner provided in the Indenture.
(b) Liability Insurance. The City shall maintain or cause to be maintained public liability insurance with limits of not less than $3,000,000 for one person and $5,000,000 for more than one person involved in one accident to protect the Authority and the Trustee from all direct or contingent loss or liability for damages for bodily injury or death occasioned by reason of the construction, condition or operation of the Leased Property. The City will also maintain or cause to be maintained insurance against liability for property damage resulting from any casualty attributable to the operation of the property in an amount not less than $1,000,000 for each accident. The public liability insurance and property damage insurance may be subject to a deductible clause for anyone accident of not to exceed $250,000. The insurance coverage required by this subsection may be effected by blanket policies covering the Leased Property issued to the party contractually responsible for the maintenance and operation of the project and such insurance policy or policies shall name the Trustee as an additional insured. (c) Rental Interruption Insurance. The City will maintain or cause to be maintained rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Property as a result of any of the hazards covered by the insurance required by subsection (a) of this section in an amount not less than the greatest of the aggregate Base Rental payable by the City under this Sublease for a period of any future 24 months. Any such insurance policy shall be in form satisfactory to the Authority and shall contain a clause naming the Trustee as an additional insured and making any loss thereunder payable to the Trustee as its interests may appear. Any proceeds of such insurance shall be used by the Trustee to pay Annual Debt Service on the Outstanding Bonds for the period during which the payment of rental under the Sublease is abated, and any proceeds of such insurance not so used shall be applied as provided in the Indenture to the extent required to pay administrative costs of the Authority in connection with the Leased Property.
(d) Self-Insurance; Alternative Plan of Protection. As an alternative to providing the insurance required by paragraph (b) above, the City may provide or cause to be provided a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee, its directors, officers, agents and employees in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than -8-
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the City; provided that the obligation of the Authority or City to make payments under such selfinsurance shall be limited to money in a designated fund balance established by the Authority or City and that the Authority or City shall not be obligated to replenish such designated fund balance from the General Fund or be otherwise obligated to make payments except from such designated fund balance. After the Commencement Date, before any substitute method or plan may be provided by the City, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford adequate protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee and its directors, officers, agents and employees against loss and damage from the hazards and risks covered thereby; provided, however, that in the event the City provides a self-insurance method or plan of protection for the insurance required by paragraph (c) above, the designated fund balance established by the City shall be funded in an amount at least equal to the greatest of the aggregate Base Rental payable by the City under this Sublease for a period of any future 24 months.
Moreover, as an alternative to providing the insurance required by paragraph (b) above, the City may provide a self-insurance method or plan of protection through the California Insurance Pool Authority (or another insurance risk sharing pool joint powers authority formed in the State) or any successor entity as the City may reasonably determine. (e) Evidence of Insurance. The City shall deliver to the Trustee each year a Certificate of the City stating that all requirements of this Sublease related to insurance have been complied with. Each such insurance policy shall require that the Trustee be given 30 days’ notice of any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall have no responsibility as to the sufficiency of coverage or amounts of such policies.
If so requested in writing by the Trustee, the City shall also deliver to the Trustee duplicate originals or certified copies of each insurance policy described in such schedule. (f) Advances. If the City shall fail to perform any of its obligations under this Section, then the Authority may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money on behalf of the City, and the City shall be obligated to repay all such advances as soon as possible, as Additional Rental under Section 3(b).
(g) Waivers of Subrogation. Each of the parties hereby waives any and all rights to recovery against the other or against any other tenant or occupant of the Leased Property, or against the officers, employees, agents, representatives, customers, and business visitors of such other party or of such other tenant or occupant of the Leased Property, for loss or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the standard form of property damage insurance policy with all permissible extensions and endorsements covering extended perils or under any other policy of insurance carried by such waiving party in lieu thereof, to the extent such policies then in force permit such waiver.
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SECTION 9. DAMAGE, DESTRUCTION AND CONDEMNATION; APPLICATION OF NET PROCEEDS.
If: (i) the whole, or any portion, of the Leased Property is destroyed (in whole or in part) or is damaged by fire of other casualty or taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain), or (ii) the leasehold title in all or a portion of the Leased Property is materially impaired by reason of a defect in title, then (a) the City, but only to the extent permitted by law, shall substitute other property for the portion of the Leased Property that has been destroyed, or taken, or affected by the defective title in accordance with Section 19 hereof; or (b) the City shall require the Net Proceeds of any insurance payment (other than the Net Proceeds of rental interruption insurance which shall be applied pursuant to Section 8(c)) or any condemnation award to be held by the Trustee in a special trust fund to be applied and disbursed by the Trustee as follows:
(i) If less than all of the Leased Property shall have been so destroyed or taken or affected by defective title and the remainder is usable, then this Sublease shall continue in full force and effect as to such remainder and (A) if the portion taken or destroyed is replaced by one or more properties of equal or greater fair market value (as demonstrated by an MAI fair market appraisal), the Trustee upon written direction of the City shall disburse such proceeds to the party that incurred the expense of making such replacement and there shall not be any abatement of the Base Rental under this Sublease; or (B) failing the making of such replacement, there shall be a partial abatement of the Base Rental under this Sublease (in accordance with Section 17) and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds in accordance with Sections 4.03 and 2.03(a) of the Indenture.
(ii) If less than all of the Leased Property shall have been so destroyed or taken or affected by defective title and the remainder is not usable, or if all of the Leased Property shall have been so destroyed or taken or affected by the defective title, then the term of this Sublease shall cease as of the day that possession shall be so taken; and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds in accordance with Sections 4.03 and 2.03(a) of the Indenture.
SECTION 10. DEFAULT.
(a) If default shall be made by the City in the observance or performance of any agreement, condition, covenant or term contained herein required to be observed or performed by it (including, without limitation, the payment of any Base Rental or Additional Rental due hereunder), subject to the provisions of subsection (c) below, the Authority may at any time thereafter (with or without notice and demand and without limiting any other rights or -10-
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remedies the Authority may have) recover rent and other monetary charges as they become due hereunder without terminating the City’s right to possession of the Leased Property (regardless of whether or not the City has abandoned the Leased Property). Furthermore, upon the occurrence of such a default, the Authority shall have the right, and the City hereby irrevocably appoints the Authority as its agent and attorney-in-fact for such purpose, to attempt to relet the Leased Property at such rent, upon such conditions and for such term (subject to then existing Permitted Encumbrances, including but not limited to the City’s right to access and exclusive right to maintain and use facilities essential to the City’s utilities systems), and to do all other acts to maintain or preserve the Leased Property, including the removal of persons or property therefrom or taking possession thereof, as the Authority deems desirable or necessary. The City hereby waives any and all claims for any damages that may result to the Leased Property upon any action taken by the Authority under this Section 10(a). No action taken by the Authority under this Section 10(a) shall be deemed to terminate the Lease or the Sublease and the City shall continue to remain liable for any deficiency that may arise out of such reletting, taking into account expenses incurred by the Authority due to such reletting, payable at the same time and manner as provided for Base Rental in Section 3(a).
The Authority expressly waives the right to receive any amount from the City pursuant to Section 1951.2(a)(3) of the California Civil Code.
Each and all of the remedies given to the Authority hereunder or by any law now existing or hereafter enacted are cumulative and the exercise of any one remedy shall not impair the right of the Authority to any or all other remedies. (b) In addition to any default resulting from breach by the City of any agreement, condition, covenant or term hereof, if –
(i) the City’s interest herein or any part thereof is assigned or transferred, either voluntarily or by operation of law, except as provided in Section 16; or (ii) the City shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the City shall make a general or any assignment for the benefit of its creditors in connection with any proceedings related to bankruptcy, insolvency, liquidation, winding up or similar event; or
(iii) the City shall abandon the Leased Property or any portion thereof, then in each and every such case the City shall be deemed to be in default hereunder. -11-
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(c) Neither the Authority nor the City shall be in default in the performance of any of its obligations hereunder (except for the obligation of the City to pay Base Rental when due pursuant to Section 3(a)) unless and until it shall have failed to perform such obligation within 30 days after notice by the Authority or the City, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation.
SECTION 11. PREPAYMENT AND CREDITS.
(a) In the event that, pursuant to Section 9, the City determines that Base Rental shall be abated and Net Proceeds from insurance or any condemnation award shall be used to redeem Bonds, the City shall provide the Authority and the Trustee an amended Exhibit B reflecting the new schedule of Base Rental payments.
(b) The City may, at its option, prepay from any source of available moneys, Base Rental then unpaid, in whole or in part, for the redemption of Bonds, which redemption date(s) shall be on or after November 1, 2033. In such event, the Bonds shall be redeemed pursuant to Section 2.03(b) of the Indenture. A prepayment under this Section 11(b) shall be deemed made upon the occurrence of either of the following:
(i) The City shall have deposited with the Trustee an amount equal to the sum of (A) the principal components of Base Rental being so prepaid, plus (B) the interest components with respect thereto accrued to the related redemption date(s) of the Bonds, plus (C) a premium, if any, in an amount equal to the redemption premium applicable to the Bonds being so redeemed; or
(ii) There shall have been deposited, on behalf of the Authority, with the Trustee or another fiduciary, Federal Securities in a sufficient amount to satisfy the requirements of Section 9.03 of the Indenture to discharge the Bonds to be redeemed in connection with such prepayment.
Except in the case of a prepayment of Base Rental to redeem all of the then Outstanding Bonds, a prepayment of principal components of Base Rental pursuant to this Section 11(b) shall: (1) apply only to Base Rental previously unpaid and not yet due, and (2) be applied to reduce Base Rental so that, after such prepayment (and the related redemption of Bonds), (A) each annual installment of principal components of Base Rental due hereunder shall be an integral multiple of $5,000 and (B) the principal components of Base Rental due in any year shall correspond with the principal amount of Bonds due and payable in such year. (c) Before making any prepayment pursuant to this Section 11, the City shall give written notice to the Trustee specifying the date on which the prepayment will be made.
Such notice by the City shall be given at least 45 days before the prepayment date; provided, that the Trustee may accept a shorter notice period or waive such notice requirement at the Trustee’s sole discretion. The City shall have the right to rescind an optional prepayment (exercised under Section 11(b)) by written notice to the Authority and the Trustee prior to the corresponding redemption date of the Bonds, and the Trustee, upon receipt of such notice, shall promptly send -12-
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notices of rescission of such optional redemption of the Bonds pursuant to Section 2.03(e) of the Indenture.
(d) In the event of a partial prepayment of Base Rental under this Section 11, the City shall provide the Trustee with an amended Exhibit B reflecting the new schedule of Base Rental payments. A prepayment made pursuant to this Section 11 shall not cause a defeasance of Bonds unless the requirements of Section 9.03 of the Indenture are satisfied. (e) In the event of a prepayment in full of the principal component of Base Rental under this Section 11, such that this Sublease shall be terminated by its terms as provided in Section 2, all amounts then on deposit under the Indenture which are to be credited to the City’s obligations to make Base Rental payments shall be credited towards the amounts then required to be so prepaid.
SECTION 12. RIGHT OF ENTRY.
The Authority and its assignees shall have the right to enter any of the Leased Property during reasonable business hours (and in emergencies at all times), subject to the City’s reasonable security measures, (a) to inspect the same, (b) for any purpose connected with the City’s or the Authority’s rights or obligations under this Sublease, and (c) for all other lawful purposes.
SECTION 13. MECHANICS’ LIENS.
In the event the City shall at any time before or during the term of this Sublease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Property, the City shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the City in, upon or about the Leased Property and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Property or the Authority’s interest therein, and will cause any such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall promptly pay and discharge said judgment.
SECTION 14. QUIET ENJOYMENT.
The parties hereto mutually covenant that the City, so long as it keeps and performs the covenants and agreements herein contained, shall at all times during the term of this Sublease peaceably and quietly have, hold and enjoy the Leased Property without suit, trouble or hindrance from the Authority.
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SECTION 15. INDEMNIFICATION.
The City shall, to the full extent then permitted by law, indemnify, defend, protect and hold harmless the Authority and its members, officers and employees and the Trustee and its officers, directors or employees from and against any and all liabilities, obligations, losses, claims and damages whatsoever, regardless of the cause thereof (except for any liability, obligation, loss, claim or damage arising out of the negligent or intentional act or omission of the Trustee, its officers, directors or employees), and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of this Sublease and the Indenture, or the payment of costs of (including any accident in connection with) the operation, use, condition or possession of the Leased Property or any portion thereof resulting in damage to property or injury to or death to any person. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all rent obligations hereunder or the termination hereof for any reason, and with regard to the Trustee, the resignation or removal of the Trustee. The City agrees not to withhold or abate any portion of the payments required pursuant hereto by reason of any defects, malfunctions, breakdowns or infirmities of the Leased Property. The Authority and the City mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either’s learning thereof.
SECTION 16. ASSIGNMENT TO TRUSTEE; SUBLETTING BY CITY.
(a) The parties understand that this Sublease and the rights of the Authority hereunder (except for the Authority’s rights with respect to approvals or consents hereunder, and indemnification and payment or reimbursement for any costs or expenses of the Authority hereunder) will be assigned to the Trustee pursuant to the Assignment Agreement and the Indenture, and accordingly, the City agrees to make all Rental Payments due to the Authority hereunder directly to the Trustee, notwithstanding any claim, defense, setoff or counterclaim whatsoever (whether arising from a breach hereof or otherwise) that the City may have from time to time against the Authority, except as provided in Section 17. (b) Neither this Sublease nor any interest of the City hereunder shall be mortgaged, pledged, assigned or transferred by the City by voluntary act or by operation of law or otherwise; provided, subject to Section 18, that the City may sublease all or any portion of the Leased Property, and may grant concessions to others involving the use of any portion of the Leased Property, whether such concessions purport to convey a leasehold interest or a license to use a portion of the Leased Property. The City shall at all times remain liable for the performance of the covenants and conditions on its part to be performed under this Sublease, notwithstanding any subletting or granting of concessions which may be made. Nothing contained herein shall be construed to relieve the City from its obligation to pay Base Rental and Additional Rental as provided in this Sublease or to relieve the City from any other obligations contained herein. (c) Without limiting the foregoing, to the extent that this Sublease or the Assignment Agreement confer upon or grants the Trustee any right, remedy or claim under or by -14-
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reason of this Sublease, the Trustee is hereby further recognized as being a third party beneficiary hereunder and may enforce such right, remedy or claim conferred, given or granted hereunder.
SECTION 17. ABATEMENT OF RENTAL.
(a) The obligation of the City to pay Base Rental and Additional Rental shall be abated during any period in which, by reason of any damage, destruction, condemnation or impairment of leasehold interest, there is substantial interference with the use and occupancy of the Leased Property or any portion thereof by the City. Such abatement shall be in an amount agreed upon by the City and the Authority such that the resulting Base Rental in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or impairment do not substantially interfere with the City’s use and right of possession. Such abatement shall continue for the period commencing with the date of such interference and ending with the restoration of the relevant Leased Property to tenantable condition. For clarification purposes, to the extent that any Base Rental is to be paid or prepaid from insurance or condemnation proceeds deposited with the Trustee pursuant to Section 8(c) of this Sublease, such Base Rental shall not be reduced or abated pursuant to this Section.
(b) Upon the cessation of the occurrence of any abatement event during the term of this Sublease, the City and the Authority shall, in good faith, determine the current fair rental value of the Leased Property. If such fair rental value is greater than the fair rental value of the Leased Property determined under Section 3 as of the Commencement Date, the Base Rental shall be increased by the lesser of (i) such incremental value or (ii) the amount needed to recoup all amounts abated during the remaining term of this Sublease. (c) Except as set forth herein, in the event of any damage, destruction of condemnation, this Sublease shall continue in full force and effect and the City hereby waives any right to terminate this Sublease by virtue of such damage, destruction or condemnation. The City further waives the benefit of Sections 1932(1), 1932(2), 1933(4), 1941 and 1942 of the California Civil Code.
SECTION 18. ADDITIONAL COVENANTS REGARDING TAX-EXEMPT BONDS.
The City covenants that during the term of this Sublease it shall not use or permit the use of the Leased Property or any proceeds of the Bonds, directly or indirectly, in any manner, and shall not take or omit to take any action, that would cause any of the Bonds to be treated as an obligation not described in Section 103(a) of the Code. The City shall comply with the provisions of the Tax Certificate, which is incorporated in this Sublease.
SECTION 19. SUBSTITUTION OR RELEASE OF PROPERTY.
(a) Notwithstanding anything herein to the contrary, the Leased Property may be substituted, in whole or in part, by other properties, or a portion of the Leased Property may -15-
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be released from this Sublease, at the option of the City; provided, that the following conditions shall have been satisfied:
(i) such substitution or release does not, in the opinion of Bond Counsel, adversely affect the Tax-Exempt status of the Bonds; (ii) The City shall have provided certification to the Authority and the Trustee that the fair market value of the Leased Property, after the proposed substitution or release, shall be equal to or greater than the aggregate amount of the principal component of the Base Rental (i.e., the principal amount of the Outstanding Bonds); (iii) the City certifies to the Authority and the Trustee that, based on the City’s determination, the annual fair rental value of the Leased Property, after such substitution or release, is at least equal to the maximum annual Base Rental remaining unpaid under the terms of this Sublease, and the expected useful life of the Leased Property, after such substitution or release, extends at least to the Expiration Date; (iv) Except as provided in Section 19(b), the City shall notify the rating agency (or agencies) then rating the Bonds regarding such substitution or release; (v) in the event that the substituted property consists in whole or in part of real property, a California Land Title Association insurance policy (or, at the City’s sole discretion, an American Land Title Association insurance policy) on the substituted real property has been obtained, along with evidence that, other than Permitted Encumbrances, no prior liens exist as to the substituted property;
(vi) the City shall provide to the Authority and the Trustee evidence that any existing title insurance with respect to the portion of the Leased Property remaining after such substitution or release is not affected; and (vii) the parties hereto shall amend this Sublease to properly reflect such substitution or release.
(b) In addition to the release and substitution of property pursuant to Section 19 hereof, upon completion of the new city yard and senior center expansion, the portions of the Leased Property other than the Memorial Center Complex and the related real property upon which the Memorial Center Complex is located (all as described in Exhibit A to this Sublease) may be released from the Lease and this Sublease; provided, however, that no such release shall occur until there is delivered to the Trustee a Written Certificate of the City that the conditions set forth in Section 19 have been satisfied and that the City has received a certificate of occupancy for, and has beneficial use and occupancy of, the new city yard.
SECTION 20. WAIVER.
Failure of the Authority to take advantage of any default on the part of the City shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may be -16-
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established between the parties in the course of administering this Sublease be construed to waive or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Sublease.
SECTION 21. NET LEASE.
Subject to the provisions of Section 17 (“Abatement of Rental”), this Sublease shall be deemed and construed to be a “Triple Net Lease” and the City hereby agrees that rental provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, charges or setoffs whatsoever.
SECTION 22. AMENDMENTS.
This Sublease may only be amended to the extent permitted by Section 5.07 of the Indenture.
SECTION 23. GOVERNING LAW.
This Sublease shall be governed exclusively by the provisions hereof and by the laws of the State of California.
SECTION 24. NOTICES.
Any notice, request, demand, or other communication under this Sublease shall be governed by Section 9.14 of the Indenture, which is hereby incorporated.
SECTION 25. VALIDITY AND SEVERABILITY.
If for any reason this Sublease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the City, or if for any reason it is held by such a court that any of the covenants of the City hereunder, including the covenant to pay rentals hereunder, is unenforceable for the full term hereof, then and in such event this Sublease is and shall be deemed to be a lease from year to year under which the rentals are to be paid by the City monthly in consideration of the right of the City to possess, occupy and use the Leased Property, and all of the rental and other terms, provisions and conditions of this Sublease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect.
SECTION 26. SECTION HEADINGS.
All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Sublease. -17-
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SECTION 27. EXECUTION; RECORDATION.
This Sublease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Authority and the City have caused this Sublease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
HAWTHORNE PUBLIC FINANCING AUTHORITY
By:
Vontray Norris, Executive Director
ATTEST:
Dayna Williams-Hunter, Secretary
CITY OF HAWTHORNE
By:
Vontray Norris, City Manager
ATTEST:
Dayna Williams-Hunter, City Clerk
A-1
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EXHIBIT A
Description of Leased Property
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF HAWTHORNE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS, TOGETHER WITH IMPROVEMENTS THEREON:
PARCEL 1 - __ Boulevard - __: (APN: __)
.
B-1
62902455.v3
EXHIBIT B
Base Rental Payment Schedule
Payment Date Principal Component Interest Component Total 11/1/2054
TOTAL $ $ $
Payable five days before each payment date.
62902455.v3
State of California )
County of Los Angeles)
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California )
County of Los Angeles)
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. 62902451.v2
Recording requested by and when
recorded mail to:
City of Hawthorne
c/o Nossaman LLP
777 South Figueroa Street, 34th Floor
Los Angeles, California 90017
Attention: Lolly Enriquez, Esq.
This Document is recorded for the benefit of the City of Hawthorne and is exempt from California documentary transfer tax pursuant to Section 11928 of the California Revenue and Taxation Code and from recording fees pursuant to Sections 6103, 27383 and 27388.1 of the California Government Code.
====================================================================
ASSIGNMENT AGREEMENT
by and between the
HAWTHORNE PUBLIC FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION
as Trustee
Dated as of [September] 1, 2024
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62902451.v2
ASSIGNMENT AGREEMENT
This Assignment Agreement (this “Agreement”), dated as of [September] 1, 2024, is made by and between the HAWTHORNE PUBLIC FINANCING AUTHORITY, a joint powers agency duly organized and existing pursuant to the laws of the State of California (the “Authority”), and U.S.
BANK NATIONAL ASSOCIATION, a national banking association, duly organized and existing under and by virtue of the laws of the United States of America, as Trustee (the “Trustee”).
RECITALS:
A. The Authority is issuing its $[principal amount] in aggregate principal amount of its Lease Revenue Bonds, Series 2024 (the “Bonds”) pursuant to an Indenture, dated as of [September] 1, 2024 (the “Indenture”), by and between the Authority and the Trustee.
B. In connection with the Bonds, the Authority and the City of Hawthorne, California (the “City”), are entering into a Lease Agreement, dated as of [September] 1, 2024 (the “Lease”), whereby the City leases to the Authority leases certain real property, including improvements thereon, described in Exhibit A, attached hereto and incorporated by reference, and improvements thereon (collectively, the “Leased Property”).
C. The Authority and the City are also entering into a Sublease, dated as of [September] 1, 2024 (the “Sublease”), whereby the Authority subleases to the City the Leased Property.
D. Pursuant to the Sublease, the City is obligated to make certain rental payments to the Authority for the subleasing of the Leased Property.
E. The Authority desires to assign to the Trustee, without recourse, all of the Authority’s rights to receive “Base Rental” payments scheduled or required to be paid by the City under and pursuant to the Sublease.
F. The Authority has determined that 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 Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL
AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Definitions.
Unless context clearly requires otherwise, all capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. -2-
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Section 2. Assignment.
The Authority hereby transfers in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the right, title and interest of the Authority in (but not of its obligations under) the Lease and the Sublease (except the Authority’s rights to give approvals and consents under the Lease and the Sublease and to indemnification and payment or reimbursement for any costs or expenses thereunder), including the Authority’s rights to receive the Base Rental Payments scheduled to be paid by the City under and pursuant to the Sublease, and any and all of the other rights of the Authority under the Lease and the Sublease as may be necessary to enforce payment of such Base Rental Payments when due or otherwise to protect the interest of the Owners of the Bonds.
Section 3. Acceptance.
The Trustee hereby accepts the foregoing assignment for the benefit of the Bond Owners, subject to the conditions and terms of the Indenture, and all such Base Rental Payments shall be applied and all such rights so assigned shall be exercised by the Trustee under and pursuant to the Indenture. Excepting only the assignment and transfer of rights to the Trustee pursuant to Section 2 hereof, this Agreement shall confer no rights and shall impose no obligations upon the Trustee beyond those expressly provided in the Indenture. In executing and performing under this Agreement, the Trustee shall be entitled to all of the rights, protections, immunities and indemnities granted to it under the Indenture.
Section 4. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California.
(b) This Agreement shall be binding on and inure to the benefit of the parties hereto, and their successors and assigns.
(c) This Agreement may be executed in counterparts, and all such executed counterparts shall constitute the same instrument. It shall be necessary to account for only one set of such counterparts in proving this Agreement.
[Remainder of Page Intentionally Left Blank]
-3-
62902451.v2
IN WITNESS WHEREOF, the parties hereto have executed and entered into this Agreement by their authorized signatories thereunto duly authorized as of the day and year first above written.
HAWTHORNE PUBLIC FINANCING AUTHORITY
By:
Vontray Norris
Executive Director
ATTEST:
Dayna Williams-Hunter, Secretary
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
Ismael Diaz, Vice President
A-1
62902451.v2
EXHIBIT A
DESCRIPTION OF LEASED PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF HAWTHORNE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS, TOGETHER WITH IMPROVEMENTS THEREON:
[Legal Description to Come]
PARCEL 1:
PARCEL 2:
State of California )
County of Los Angeles )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California )
County of Los Angeles )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
PRELIMINARY OFFICIAL STATEMENT DATED ___, 2024
62908452.v3
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the dated date of the Official Statement in its final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
NEW ISSUE – BOOK ENTRY ONLY RATINGS: S&P:__
(See “RATING” herein.)
In the opinion of Nossaman LLP, Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax; however, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax, and (ii) interest on the Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds. For a more complete discussion of the tax aspects, see “TAX MATTERS” herein.
$[principal amount]*
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
Dated: Date of Delivery Due: November 1, as shown on the inside front cover The Hawthorne Public Financing Authority (the “Authority”) will issue its Lease Revenue Bonds, Series 2024 (the “Bonds”) pursuant to an Indenture, dated as of September 1, 2024 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as Trustee.
Proceeds of the Bonds will be used to: (i) pay a portion of the costs of construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvements; (ii) [to purchase a municipal bond insurance policy]; and (iii) pay cost of issuance of the Bonds.
The Bonds will be payable solely from and secured by Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of certain rental payments (“Base Rental Payments”) to be made by the City of Hawthorne (the “City’”) to the Authority pursuant to a Sublease Agreement, dated as of September 1, 2024 (the “Sublease”), by and between the Authority and the City for subleasing of the Leased Property (as described herein). The City covenants under the Sublease to take such action as necessary to include the Base Rental Payments and Additional Rental (as defined in the Sublease, and together with the Base Rental Payments, the “Rental Payments”) in its annual budget and to make all necessary appropriations therefor subject to abatement of such payments.
The Bonds are subject to optional redemption,* mandatory sinking fund redemption,* and extraordinary redemption prior to their maturity as described herein. The Bonds are expected to be redeemed prior to maturity from the proceeds of grant funds.
See “’PLAN OF FINANCING” and “THE BONDS.”
The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds. Individual purchases of the Bonds may be made in book-entry form only, in denominations of $5,000 each or any integral multiple thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased. Principal of and interest on the Bonds will be paid directly to DTC by the Trustee. Principal of the Bonds is payable on their maturity dates set forth on the inside cover hereof. Interest on the Bonds is payable on May 1 and November 1 of each year, commencing [May 1, 2025]. Upon its receipt of payments of principal and interest, DTC is in turn obligated to remit such principal and interest to DTC participants for subsequent disbursement to the beneficial owners of the Bonds as described herein.
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER.
THE OBLIGATION OF THE CITY TO MAKE RENTAL PAYMENTS UNDER THE SUBLEASE DOES NOT CONSTITUTE AN
OBLIGATION OF THE CITY WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE BONDS NOR THE OBLIGATION OF THE CITY
TO MAKE RENTAL PAYMENTS UNDER THE SUBLEASE CONSTITUTES AN INDEBTEDNESS OF THE CITY, STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.
See the section of this Official Statement entitled “BONDOWNERS’ RISKS” for a discussion of certain of the risk factors that should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers must read the entire Official Statement to obtain information essential to making an informed investment decision. [The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by ___. See “MUNICIPAL BOND INSURANCE” herein.] [insurer logo]
The Bonds are offered when, as and if issued, subject to the approval as to their legality by Nossaman LLP, Los Angeles, California, Bond Counsel. Certain legal matters will also be passed on for the Authority by Nossaman LLP, Los Angeles, California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by Kutak Rock LLP, Irvine, California. It is anticipated that the Bonds will be available for delivery in book-entry form through the facilities of DTC on or about September ___, 2024. [Ramirez & Co., Inc. logo]
Dated: ________, 2024
* Preliminary, subject to change.
62908452.v3
MATURITY SCHEDULE
(Base CUSIP† ________)
$[principal amount]*
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
Maturity Date
(November 1)
Principal
Amount
Interest
Rate Yield Price
CUSIP†
Suffix
$ % %
$____ __% Term Bonds due November 1, 20__ Yield: __%, Price: CUSIP† ___ ___________________________
* Preliminary; subject to change.
C Priced to optional redemption date of ___, 20__ at par. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright(c) 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services.
This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or counsel take any responsibility for the accuracy of such numbers. 62908452.v3
CITY OF HAWTHORNE / HAWTHORNE PUBLIC FINANCING AUTHORITY
LOS ANGELES COUNTY, CALIFORNIA
CITY COUNCIL / AUTHORITY COMMISSION
Alex Vargas, Mayor / President
Katrina Manning, Mayor Pro Tempore / Vice President
Angie Reyes English, Council Member / Commissioner
Alex Monteiro, Council Member / Commissioner
L. David Patterson, Council Member / Commissioner
CITY / AUTHORITY OFFICIALS AND STAFF
Vontray Norris, City Manager / Executive Director
Dana Williams-Hunter, City Clerk / Secretary
Robert Kim, City Attorney / General Counsel
Felice Lopez, Director of Finance
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Nossaman LLP
Los Angeles, California
Municipal Advisor
CSG Advisors Incorporated
San Francisco, California
Trustee
U.S. Bank Trust Company, National Association
Los Angeles, California
62908452.v3
No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement and the information contained herein are subject to completion or amendment without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof. The Bonds may not be sold nor may an offer to buy be accepted prior to the time this Official Statement is delivered in final form. This Official Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” “intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption “BONDOWNERS’ RISKS” and “THE CITY.”
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY
UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY
CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE
BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES
LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The references to internet websites in this Official Statement are shown for reference and convenience only; unless explicitly stated to the contrary, the information contained within the websites and any links contained within those websites are not incorporated herein by reference and do not constitute part of this Official Statement.
TABLE OF CONTENTS
Page Page
i
62908452.v3
INTRODUCTION ............................................1 Authority for Issuance ................................1 Purpose of the Bonds.................................1
The Authority and the City..........................1
Bond Terms; Book-Entry Only. ..................2
Security for the Bonds................................2 Municipal Bond Insurance..........................2
Redemption. ..............................................3 Additional Bonds. .......................................3 Risks of Investment....................................3 Professionals Involved in the Offering........3
Summaries of Documents..........................4
PLAN OF FINANCING....................................4
The Projects ..............................................4 SOURCES AND USES OF FUNDS ...............6
ANNUAL DEBT SERVICE ..............................6
THE BONDS ...................................................7 Authority for Issuance ................................7 General Provisions.....................................7 Transfer, Registration and Exchange.........8
Redemption. ..............................................8 Book-Entry Only System ............................11
SECURITY FOR THE BONDS .......................11
Revenues; Pledge of Revenues.................11
Allocation of Revenues by Trustee; Application
of Funds .............................................12 Base Rental................................................13 Additional Rental........................................13 Fair Rental Value .......................................14 Limited Obligation ......................................14 Source of Payments; Covenant to Appropriate
Funds for Base Rental .......................14
Abatement..................................................14 Additional Bonds ........................................15 Default; Remedies......................................15 Covenants to Maintain Insurance...............17
Damage, Destruction and Condemnation; Net
Proceeds..............................................19 LEASED PROPERTY .....................................20 Lease of the Leased Property....................20
Description of the Leased Property............20
Changes to Leased Property .....................20
Substitution or Release of Property ...........21
THE AUTHORITY ...........................................21 THE CITY........................................................22 General ..............................................22 City Government ........................................23 Population ..............................................23 Employment ..............................................24 Commerce ..............................................25 Construction Activity...................................26 CITY FINANCIAL INFORMATION..................26
Budgetary Process; City Budget for Fiscal
Years 2023-24 through 2024-25.............26
General Fund Reserve Policy ....................29
Debt Policy ..............................................30 Financial Statements..................................30 Primary General Fund Revenue Sources ..32
Sales Taxes ..............................................33 Property Taxes...........................................34 Transient Occupancy Taxes ......................36
Vehicle License Fee...................................37 Franchise Fees ..........................................37 Investment Policy and Portfolio..................37
Long-Term Liabilities..................................38 Retirement Pension Plans..........................39
Contributions ..............................................40 Net Pension Liability...................................41 Other Post-Employment Benefits Other
Than Pensions.............................44
Risk Management ......................................46 BONDOWNERS’ RISKS.................................47
No Pledge of Taxes....................................47 Abatement ..............................................48 Limited Recourse on Sublease Default......48
Limitations on Remedies for Bond Holders49
Limited Obligations with Respect to the
Bonds ..........................................49
Additional Obligations of the City ...............50
Transient Occupancy Taxes ......................50
Sales Tax ...................................................51 Property Taxes...........................................51 Natural Calamities......................................52 Risk of Uninsured Loss ..............................53 Public Health Emergencies........................53
Cyber Security............................................54 State Finances ...........................................54 Investment of Funds...................................55 Future Initiative and Legislation .................55
Loss of Tax Exemption...............................55
Secondary Market for Bonds......................56
LIMITATIONS ON REVENUES AND
APPROPRIATIONS ...........................56
Property Tax Limitations - Article XIIIA ......56
Article XIIIA Implementing Legislation........57
Challenges to Article XIIIA .........................57 Appropriations Limitations: Article XIIIB.....57
Propositions 218 and 26: Article XIIIC
and Article XIIID ....................................58 Proposition 62 ............................................59 Unitary Property .........................................59 ABSENCE OF LITIGATION............................59
CONTINUING DISCLOSURE.........................60
LEGAL MATTERS ..........................................60 TAX MATTERS...............................................60 MUNICIPAL ADVISOR ...................................63 UNDERWRITING............................................63 RATINGS ........................................................63 FINANCIAL STATEMENTS ............................63
MISCELLANEOUS .........................................63 TABLE OF CONTENTS (cont’d)
ii
62908452.v3
APPENDIX A – CITY OF HAWTHORNE ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR YEAR ENDED JUNE 30, 2023 ...............................................................................................A-1 APPENDIX B –FORM OF BOND COUNSEL OPINION ........................................................................B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS .....................................................C-1 APPENDIX D – DTC’S BOOK-ENTRY ONLY SYSTEM.........................................................................D-1 APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT ..............................................E-1 APPENDIX F -- SPECIMEN MUNICIPAL BOND INSURANCE POLICY................................................F-1 [Insert Map of Hawthorne]
1 62908452.v3
$[principal amount]*
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the meanings set forth in the Indenture (as defined below). See “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Authority for Issuance
The Hawthorne Public Financing Authority (the “Authority”) is issuing its $[principal amount]* aggregate principal amount of Lease Revenue Bonds, Series 2024 (the “Bonds”), pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the California Government Code, including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 thereof (the “Bond Law”), and an Indenture, dated as of September 1, 2024 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association (the “Trustee”).
Purpose of the Bonds
Proceeds of the Bonds will be used to: (i) pay a portion of the costs of construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvements; (ii) [to purchase a municipal bond insurance policy]; and (iii) pay cost of issuance of the Bonds.
The Authority and the City
The Authority is a joint powers authority, duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of November 23, 1992, by and between the City and the Community Redevelopment Agency of the City of Hawthorne, in accordance with the provisions of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Joint Powers Law”). The Authority is governed by a five-member Board of Directors which consists of the City Council of the City. The Authority has no taxing power. The Authority and the City are each separate and distinct legal entities, and the debts and obligations of one such entity are not debts or obligations of the other entity. See “THE AUTHORITY” herein.
The City was incorporated in 1922 and encompasses six square miles. The City is located in the South Bay region of Los Angeles County, 17 miles west of downtown Los Angeles, and five miles east of Los Angeles International Airport (LAX). Neighboring communities include Gardena, Lawndale and Redondo Beach. Based on an estimate by the California Department of Finance, the City’s population was approximately 85,556, as of January 1, 2024. *
Preliminary, subject to change.
2 62908452.v3
The City is a general law city governed by the council-manager form of government. The City Council is composed of five members. Every two years, two members of the City Council are elected at-large by the community to serve four-year terms. The Mayor is elected by residents to serve a four-year term. The City Manager, City Attorney, Human Resources Director and Chief of Police are appointed by the City Council. See “THE CITY” herein.
Bond Terms; Book-Entry Only
Interest on the Bonds is payable on May 1 and November 1 of each year, commencing [May 1], 2025. The Bonds will mature in the amounts and on the dates and bear interest at rates shown on the cover of this Official Statement.
The Bonds will be issued in fully registered form only and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”). DTC will act as the depository for the Bonds and all payments due on the Bonds will be made to Cede& Co. Ownership interests in the Bonds may be purchased only in book-entry form. See “THE BONDS – Book-Entry Only System” and “APPENDIX D – DTC’S BOOK-ENTRY ONLY SYSTEM.”
Security for the Bonds
The Bonds will be payable solely from and secured by Revenues (defined below) and certain funds and accounts held under the Indenture. Revenues consist primarily of certain rental payments (“Base Rental Payments”) to be made by the City to the Authority pursuant to a Sublease Agreement, dated as of September 1, 2024 (the “Sublease”), by and between the Authority and the City for subleasing of certain City properties and the improvements thereon as described below under “LEASED PROPERTY” (collectively, the “Leased Property”). Pursuant to an Assignment Agreement, dated as of September 1, 2024 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority has assigned to the Trustee for the benefit of the Owners of the Bonds, certain of its rights under the Sublease, including its rights to receive Base Rental Payments for the purpose of securing the payment of debt service on the Bonds. The City covenants under the Sublease to take such action as necessary to include the Base Rental Payments and Additional Rental (as defined therein, and together with the Base Rental Payments, the “Rental Payments”) in its annual budget and to make all necessary appropriations therefor (subject to abatement under certain circumstances described in the Sublease).
Base Rental Payments payable by the City under the Sublease are calculated to be sufficient to permit the Authority to pay the principal of, and interest on, the Bonds when due.
However, under the certain circumstances, Base Rental Payments may be abated under the Sublease without constituting a default. See “SECURITY FOR THE BONDS.” [Municipal Bond Insurance]
[Concurrently with the issuance of the Bonds, _______ (the “Municipal Bond Insurer”) will issue its Municipal Bond Insurance Policy (the “Insurance Policy”) for the Bonds. The Insurance Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Insurance Policy included as Appendix G – “Specimen Municipal Bond Insurance Policy.” See “MUNICIPAL BOND INSURANCE” herein.] 3 62908452.v3
Redemption*
The Bonds are subject to optional redemption,* mandatory sinking fund redemption,* and extraordinary redemption prior to their maturity as described herein. See “THE BONDS.” Additional Bonds
Under the Indenture, the Authority may from time to time issue one or more series of Additional Bonds payable from and secured by Revenues (consisting primarily of Base Rental Payments received by the Authority from the City) on parity with all other Outstanding Bonds. In addition, the City is permitted to enter into other obligations which constitute additional charges against its general fund revenues without the consent of Owners of the Bonds. See “SECURITY FOR THE BONDS – Additional Bonds.”
Risks of Investment
Debt service on the Bonds is payable only from Base Rental Payments and other amounts payable by the City to the Authority under the Sublease. The Base Rental payments are payable from revenues available in the City’s General Fund, which revenues may be materially adversely affected by numerous factors outside the City’s control. See “SECURITY FOR THE BONDS” and “BONDOWNERS’ RISKS.”
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY
FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE
OBLIGATION OF THE CITY TO MAKE RENTAL PAYMENTS UNDER THE SUBLEASE DOES
NOT CONSTITUTE AN OBLIGATION OF THE CITY WHICH THE CITY IS OBLIGATED TO LEVY
OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Professionals Involved in the Offering
U.S. Bank Trust Company, National Association, Los Angeles, California, will act as Trustee with respect to the Bonds. CSG Advisors Incorporated, San Francisco, California, has served as Municipal Advisor to the Authority and the City in connection with the Bonds and has assisted the Authority and the City in structuring the Bonds. All proceedings in connection with the issuance of the Bonds are subject to the approval of Nossaman LLP, Los Angeles, California, Bond Counsel.
Certain legal matters will also be passed on for the Authority by Nossaman LLP, as Disclosure Counsel.
Summaries of Documents
There follows in this Official Statement descriptions of the Bonds, the Indenture, the Sublease, and various other agreements and documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document and, with respect to certain rights and remedies, to laws and principles of equity relating to or affecting creditors’ rights generally.
Capitalized terms not defined herein shall have the meanings set forth in the Indenture. Copies of *
Preliminary, subject to change.
4 62908452.v3
the Indenture and the Sublease are available for inspection during business hours at the corporate trust office of the Trustee in Los Angeles, California.
PLAN OF FINANCING
Projects
The Bonds are being issued to finance a portion of the costs of design, construction and renovation of various City projects, including an additional city hall building, new civic center park, new public works yard, senior center expansion, police department facility improvements, aquatics center and pool improvements, and certain other related capital improvements (collectively, the “Projects”). The Projects will be done in various phases as described below, with an expected cost of $47 million, which will be funded by Bond proceeds in the approximate amount of $30 million, with the remaining costs financed from City general fund moneys.
Additional City Hall Building and Civic Center Park
The new additional city hall building will be three-stories and 32,000 square feet, and will be built adjacent to the existing city hall with a covered bridge connecting to the two buildings. The new building will hold the Council chambers and provide approximately 20,000 square feet of additional office space for staff, as well as a usable roof top deck space.
A new 95,000 square foot civic center park will be built in front of the existing city hall and the new three-story city hall building, on the same lot. The new civic center park will feature a “great lawn” for recreation use, as well as a walking path, and a botanical garden. The park will hold approximately 1,200 people, allowing the City to host events for residents, such as a farmers market, art fair, movie nights, and holiday events. Approximately 44 angled parking stalls will be built along the streets surrounding the civic center park lot to provide additional street parking.
There is an existing building on the same lot as the civic center park, which is currently leased to Bank of America. In the future, the City intends to renovate the building leased to Bank of America with general fund moneys in the approximate amount of $10 million. An underground parking structure providing approximately 166 parking stalls will be built underneath the civic center park using general fund moneys. In addition, in 2028, the City plans to build a new three-story parking garage, known as the Grevillea parking garage, located catty-corner to the existing city hall providing approximately 100 parking stalls for city staff. The City expects this parking structure to cost approximately $3 million and will use general fund moneys to pay for the costs of design and construction.
The City Hall Expansion and Civic Center Park is expected to cost approximately $24 million. The design of the project is expected to be completed in August 2024. The City plans to bid the construction of this project in October 2024 and award the project in January 2025. Construction is expected to commence in March 2025 and be completed by the summer of 2027.
Public Works Yard
The new public works yard will consist of a two-story, 70,000 square foot maintenance facility constructed on a portion of the existing under-utilized parking lot of the City’s Memorial Center Complex. Once built, the new public works yard will replace the City’s existing public works yard located at a different location in the City. The new facility will feature a public access counter for inquiries and reports related to street and park maintenance, as well as offices, a conference room, a training room, bathrooms, and locker facilities. Additionally, it will include mechanic bays 5 62908452.v3
for maintaining the city’s fleet, a gas station, and storage rooms for hazardous materials (HAZMAT), electronic waste (E-Waste), and organic waste. The City’s purchasing department will be housed at this location, with a 20,000 square foot storage area designated for City documents used in audits.
The new public works yard is expected to cost approximately $7 million. The design of the public works yard was completed in July 2024. The City plans to bid the construction of the public works yard in August 2024 and award the project in October 2024. Construction is expected to commence in November 2024 and be completed by the Spring of 2026.
Senior Center Expansion
The senior center project will consist of adding an approximately 10,000 square foot second story to the existing one-story senior center building, resulting in a 20,000 square foot facility. The new senior center will feature several upgrades, such as new elevators, ADA-compliant restrooms, walkways, ramps, signage, and handicap parking spaces. There will be a green courtyard with accessible walkways, seating, and outdoor spaces. The existing building will be renovated with new LED lighting, a modern mechanical system, and a courtyard. The first floor will have 20-foot ceilings and include a commercial kitchen, sewing room, dance room, billiards room, dedicated computer lab, elevator, lobby with transit information and programs, multipurpose room, courtyard entrance, and administrative offices. The second floor, with 15-foot ceilings, will feature a conference room, art room, lounge, library, larger multipurpose room, outdoor deck overlooking the park, and administrative offices.
The new Senior Center is expected to cost approximately $12 million. The design of the senior center project was completed July 2024. The City plans to bid the construction of the senior center project in September 2024 and award the project in November 2024. Construction is expected to commence in January 2025 and be completed by the Spring of 2026.
Police Facility
The police department facility will undergo several improvements including facade repairs to address structural issues and improve the aesthetic appearance of the building's exterior and interior. In addition, a new roof and energy efficient lighting fixtures and bulbs will be installed.
The police department improvements are expected to cost approximately $2 million. The design of the police department improvements is expected to be completed by December 2024.
The City plans to bid the construction of the project in January 2025 and award the project in March 2025. Construction is expected to commence in the Summer of 2025 and be completed by March 2026.
City Aquatics Center
The City’s aquatics center improvements include renovations to the existing City pool, restrooms, and locker facilities, as well as the addition of new benches throughout the facility. The existing pool will be resurfaced with non-slip material, and will undergo structural repairs to fix cracks and leaks. The pool will be equipped with a new filtration system to maintain water quality, and a new heating system as well as energy-efficient LED lighting. Additional lockers with a digital locking system will be added to the locker facility. Bathroom renovations will include new fixtures, flooring, and lighting, and improvements to ensure ADA compliance. 6 62908452.v3
The aquatics center and pool improvements are expected to cost approximately $2 million.
The design of the project is expected to be completed by January 2025. The City plans to bid the construction of the project in April 2025 and award the project in July 2025. Construction is expected to commence in the September of 2025 and be completed by the end of 2026.
SOURCES AND USES OF FUNDS
The following table shows the estimated sources and uses of the proceeds from the sale of the Bonds:
Sources:
Par amount of the Bonds $
[Plus/Less] Net Original Issue[Premium/Discount]
Less: Underwriter’s discount ()
Total Sources
Uses:
Project Fund
Costs of Issuance (1)
Total Uses
____________________
(1) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Municipal Advisor, Trustee, [premiums for the Insurance Policy,] printing expenses, rating fees and other costs.
ANNUAL DEBT SERVICE
The following table shows the scheduled annual debt service for the Bonds assuming no optional redemption or extraordinary mandatory redemption:
Bond Year
Ending
November
1 Principal Interest Total
Total
7 62908452.v3
LEASED PROPERTY
Description of the Leased Property
The Leased Property consists of the following City-owned assets, and the improvements thereon.
City Property Address Square Feet Insured Value
Memorial Center Complex(1) 3901 West El Segundo Blvd. 60,089 $19,778,000 Fire Station #1(2) 4475 W. El Segundo Blvd. 14,788 3,476,000 Fire Station #2(2) 12151 S. Crenshaw Blvd. 2,164 613,000 Fire Station #3(2) 5323 Rosecrans Blvd. 2,388 621,000
City Yard 12501 Truro Avenue 15,070 2,410,000
Lot with Small Office Structure 11605 Hawthorne Blvd. 19,639 3,750,000 Eucalyptus Park 123rd Street & Gate Avenue 30,804 2,935,000 Total Insured Value $33,583,000
_________
(1) The senior center expansion, which is located on the lot of the Memorial Center Complex, will remain operational during construction.
(2) The City allows Los Angeles County to operate out of the City’s fire stations to provide fire protection services to the City pursuant to [an Agreement ___].
The City calculated the value of the Leased Property, based on current insurance coverage, at more than $33 million. The Leased Property is not subject to a security interest, mortgage or any other lien in favor of the Trustee for the benefit of Bond Owners.
Lease of the Leased Property
Simultaneously with the delivery of the Bonds, the Authority will acquire a leasehold interest in the Leased Property from the City. The Authority will sublease the Leased Property to the City pursuant to the Sublease. While the City is in possession of the Leased Property, all maintenance and repairs of the Leased Property are the responsibility of the City. Pursuant to the Sublease, the City may substitute the Leased Property, in whole or in part, with other properties, upon the satisfaction of certain conditions. See “SECURITY FOR THE BONDS” and “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Sublease.”
The City has not granted any security interest in the Leased Property for the benefit of the Bonds, and there is no remedy of foreclosure on the Leased Property upon the occurrence of an Event of Default under the Indenture or the Sublease. For a discussion of remedies upon an Event of Default under the Indenture or the Sublease, see “BONDOWNERS’ RISKS – Limited Recourse on Sublease Default” and “—Limitations on Remedies.”
Changes to Leased Property
The City will have the right during the term of the Sublease to acquire and construct improvements or to attach fixtures, structures or signs to any of the Leased Property if the improvements, fixtures, structures or signs are necessary or beneficial for the use of such Leased Property by the City; provided, however, that such acquisition or construction must not result in a material reduction in the aggregate value of the Leased Property or reduce the aggregate fair rental value thereof.
8 62908452.v3
Substitution or Release of Property
Pursuant to the Sublease, the Leased Property may be substituted, in whole or in part, by other properties, or a portion of the Leased Property may be released from the Sublease, at the option of the City; provided, that the following conditions have been satisfied:
• Such substitution or release does not, in the opinion of Bond Counsel, adversely affect the tax-exempt status of the Bonds;
• the City shall have provided certification to the Authority and the Trustee that the fair market value of the Leased Property, after the proposed substitution or release, shall be equal to or greater than the aggregate amount of the principal component of the Base Rental (i.e., the principal amount of the Outstanding Bonds); • the City certifies to the Authority and the Trustee that, based on the City’s determination, the annual fair rental value of the Leased Property, after such substitution or release, is at least equal to the maximum annual Base Rental remaining unpaid under the terms of the Sublease, and the expected useful life of the Leased Property, after such substitution or release, extends at least to the Expiration Date, as such term is defined in the Sublease; • the City will notify any rating agency then rating the Bonds regarding such substitution or release;
• in the event that the substituted property consists in whole or in part of real property, a California Land Title Association insurance policy (or, at the City’s sole discretion, an American Land Title Association insurance policy) on the substituted property has been obtained, along with evidence that, other than Permitted Encumbrances, no prior liens exist as to the substituted property;
• the City will provide to the Authority and the Trustee evidence that any existing title insurance with respect to the portion of the Leased Property remaining after such substitution or release is not affected;
• the Authority and the City will amend the Sublease to properly reflect such substitution or release.
In addition to the release and substitution of property under to the Sublease, upon completion of the new public works yard and the senior center expansion, the portions of the Leased Property other than the Memorial Center Complex may be released from the Lease and the Sublease; provided, however, that no such release shall occur until there is delivered to the Trustee a certification of the City that the conditions set forth in the Sublease have been satisfied and that the City has received a certificate of occupancy for, and has beneficial use and occupancy of, the new city yard.
See “APPENDIX C − SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” 9 62908452.v3
THE BONDS
This section provides summaries of the Bonds and certain provisions of the Indenture. See APPENDIX C for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C.
Authority for Issuance
The Bonds are being issued under the Bond Law, the Indenture, the Authority Resolution adopted by the Board of the Authority on August [27], 2024, and the City Resolution adopted by the City Council on August [27], 2024.
General Provisions
Bond Terms. The Bonds will be dated their date of delivery and issued in fully registered form, numbered from one upwards in consecutive numerical order (with such alphabetical prefix as the Trustee shall determine), without coupons in denominations of $5,000 or any integral multiple of $5,000. The Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement.
Payments of Principal and Interest. Interest on the Bonds will be payable on May 1 and November 1 in each year, beginning [April] 1, 2025 (each an “Interest Payment Date”). Principal on the Bonds will be payable on November 1 in the amounts and in the years set forth on the inside front cover of this Official Statement.
While the Bonds are subject to the book-entry system, the principal, interest and any prepayment premium with respect to the Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the Bonds. See “− Book-Entry Only System” below.
Interest with respect to any Bond will be payable on each Interest Payment Date to the Owner thereof as of the close of business on the Record Date, such interest to be paid by check or draft of the Trustee, mailed by first-class mail, no later than the Interest Payment Date to the Owner at such Owner’s address as it appears on the registration book maintained by the Trustee; provided however that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Trustee prior to any Record Date, interest on such Bonds will be paid to such Owner on each succeeding Interest Payment Date (unless such request has been revoked in writing), by wire transfer in immediately available funds to an account in the United States of America designated by written request. Payments of defaulted interest will be paid by check or draft to the Owners as of a special record date to be fixed by the Trustee, notice of which special record date will be given to the Owners of the Bonds not less than 10 days prior thereto.
The principal of and premium, if any, and interest on the Bonds are payable by check when due upon surrender thereof at the Trust Office in lawful money of the United States of America.
Calculation of Interest. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless: (i) it is authenticated during the period from the day after the Record Date for an Interest Payment Date to and including such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or (ii) it is authenticated on or prior to the Record Date for the first Interest Payment Date, in which event it will bear interest from its dated date, provided however, that if at the time of registration of any Bond, interest with 10 62908452.v3
respect to such Bond is in default, such Bond will bear interest from the Interest Payment Date to which interest has been paid or made available for payment with respect to such Bond.
Notwithstanding the foregoing, if, at the time of registration of any Bond, interest with respect to such Bond is in default, such Bond will bear interest from the Interest Payment Date to which interest has been paid or made available for payment with respect to such Bond.
Transfer, Registration and Exchange
See “APPENDIX C − SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the Bonds.
Redemption
Optional Redemption. The Bonds maturing on or after [November 1, 2035], shall be subject to redemption prior to their respective maturity dates on any date on or after [November 1, 2034], as a whole or in part, from prepayments of Base Rental made at the option of the City under the Sublease on any date with respect to which such prepayment have been made. The Bonds called for optional redemption shall be redeemed at a redemption price equal to 100 percent of the principal amount of the Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption.
Mandatory Sinking Fund Redemption. The Bonds maturing on November 1, 20__ and November 1, 20__ (the “Term Bonds”) shall be subject to redemption in part by lot from sinking account payments made by the Authority, at a redemption price equal to the principal amount thereof to be redeemed with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal amounts and on the respective dates as set forth in the following tables; provided, however, if some but not all of the Term Bonds of a maturity have been redeemed pursuant to the optional and extraordinary redemption provisions of the Indenture, each future sinking account payment with respect to such Term Bonds will be reduced on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, so that the total amount of sinking account payments with respect to such Term Bonds to be made subsequent to the optional and extraordinary redemption provisions of the Indenture shall be reduced by an amount equal to the principal amount of the Term Bonds so redeemed, all as shall be designated pursuant to written notice filed by the Authority with the Trustee:
Bonds Maturing on November 1, 20__
Redemption Date
(November 1)
Principal Amount
to be Redeemed
______________
* maturity
11 62908452.v3
Bonds Maturing on November 1, 20__
Redemption Date
(November 1)
Principal Amount
to be Redeemed
______________
* maturity
Extraordinary Redemption from Insurance and Condemnation Proceeds. The Bonds are subject to redemption prior to their respective maturity dates, upon notice as provided below, as a whole or in part on a pro rata basis (as much as practicable) among the maturities, on any date, from amounts on deposit in the Redemption Fund pursuant the Sublease (from Net Proceeds received by the City from insurance payments or condemnation awards with respect to the Leased Property or any portion thereof under the circumstances and upon the conditions and terms prescribed in the Sublease, together with additional money, if any, transferred by the City at its discretion for such purpose). Extraordinary redemption will be made at a redemption price equal to the sum of the principal of the Bonds to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all the Bonds, the Trustee will select the Bonds to be redeemed from the all Outstanding Bonds or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in the Indenture or in writing by the Authority, and by lot within a maturity in any manner which the Trustee in its discretion deems appropriate, subject to the procedures of the depository (if applicable). For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 portions and such portions will be treated as separate Bonds, which may be separately redeemed.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority will execute, and the Trustee will authenticate and deliver, to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond being redeemed. A partial redemption will be valid upon payment of the amount required to be paid to the Owner, and the Authority and the Trustee will be released and discharged from all liability to the extent of such payment.
Notice of Redemption. The Authority will give written notice of its intention to redeem Bonds under the optional or extraordinary redemption provisions of the Indenture to the Trustee at least 45 days before the proposed redemption date; provided, that the Trustee may accept a shorter notice period or waive such notice requirement at the Trustee’s sole discretion. The Trustee, on behalf and at the expense of the Authority, will send by first class mail (or if the Owner of such Bonds is a depository, by such method as acceptable to such depository) notice of any redemption to (i) the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, (ii) to the Securities Depositories and (iii) to one or more Information Services by such manner of delivery as then acceptable to such entities, at least 30 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so sent nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. 12 62908452.v3
Such notice of redemption will state the date of the notice, the redemption date, the redemption place, the redemption price and will specify the CUSIP numbers, the Bond numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date.
Neither the Authority nor the Trustee will have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee will be liable for any inaccuracy in such numbers.
Right to Rescind Optional Redemption. The Authority (upon direction by the City, at the City’s option) may rescind any optional redemption by written notice to the Trustee on or prior to the date fixed for redemption. In addition, any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The Authority, the City and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Outstanding Bonds or such given portion thereof not previously called for redemption, on a pro rata basis among the maturities (unless the maturity or maturities are otherwise specified in this Indenture or in writing by the Authority) and by lot within a maturity in any manner which the Trustee in its discretion shall deem appropriate, subject to the procedures of the depository (if applicable). For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 portions and such portions shall be treated as separate Bonds, which may be separately redeemed.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond being redeemed. A partial redemption shall be valid upon payment of the amount required to be paid to the Owner, and the Authority and the Trustee shall be released and discharged from all liability to the extent of such payment.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest will accrue thereon from and after the redemption date. All Bonds redeemed pursuant to the Indenture will be canceled by the Trustee. All moneys held by or on behalf of the Trustee for the payment of principal of or interest or premium on Bonds, whether at redemption or maturity, will be held in trust for the account of the Owners thereof and the Trustee will not be required to pay Owners any interest on, or be liable to Owners for any interest earned on, moneys so held. 13 62908452.v3
Book-Entry Only System
The Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple of $5,000, under the book-entry system maintained by DTC. While the Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to a Bond will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the Bonds. Purchasers of the Bonds will not receive certificates representing their interests therein, which will be held at DTC. See “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM” for further information regarding DTC and the book-entry system.
SECURITY FOR THE BONDS
The principal of and interest on the Bonds are not a debt of the Authority or the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture.
This section provides summaries of the security for the Bonds and certain provisions of the Indenture, the Sublease and the Lease. See “APPENDIX C – Summary of Principal Legal Documents” for a more complete summary of the Indenture, the Sublease, the Lease and the Assignment Agreement. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C.
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Under the Indenture, subject to the lien in favor of the trustee for certain fees and costs, the Bonds will be secured by a first lien on and pledge (which shall be effected in the manner and to the extent provided in the Indenture) of all of the Revenues and a pledge of all the moneys in the Lease Revenue Fund, including all amounts derived from the investments of such moneys.
The Bonds will be equally secured by a pledge, charge and lien upon the Revenues and such moneys without priority for number, date of the Bonds, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premiums upon the redemption of any portion thereof will be and are secured by an exclusive pledge, charge and lien upon the Revenues and such moneys.
So long as any of the Bonds remain Outstanding, the Revenues will not be used for any other purpose; except that out of the Revenues and such moneys there may be apportioned such sums in the Lease Revenue Fund, for such purposes, as are expressly permitted under the Indenture.
Definition of Revenues. “Revenues” are defined in the Indenture as (a) all Base Rental Payments payable by the City pursuant to the Sublease (including prepayments); (b) any proceeds of Bonds originally deposited with the Trustee and held by the Trustee in the Lease Revenue Fund and the accounts thereof; (c) investment income with respect to any moneys held by the Trustee in the Lease Revenue Fund and the accounts thereof (other than amounts payable to the United States of America pursuant to tax-exemption law requirements); and (d) any insurance proceeds or condemnation awards received by or payable to the Trustee with respect to the Leased Properties, including rental interruption insurance.
14 62908452.v3
Revenues Held in Trust. Except as otherwise provided in the provisions of the Indenture concerning the investment of moneys in funds, all Revenues to which the Authority may at any time be entitled will be paid directly to the Trustee and all of the Revenues collected or received by the Authority will be deemed to be held in trust and to have been collected or received by the Authority as the agent of the Trustee, and if received by the Authority at any time will be deposited by the Authority with the Trustee.
Allocation of Revenues by Trustee; Application of Funds Transfers from the Lease Revenue Fund. All Base Rental Payments will be deposited by the Trustee in a special fund designated as the Lease Revenue Fund (the “Lease Revenue Fund”), which the Trustee will establish, maintain and hold in trust under the Indenture.
Under the Indenture, on or before each Interest Payment Date, the Trustee will transfer from the Lease Revenue Fund and deposit into the following respective accounts, each of which the Trustee will establish and maintain within the Lease Revenue Fund, and the moneys in each of which will be disbursed and applied only as authorized in the Indenture. Revenues will be deposited in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any fund subsequent in priority:
Interest Account. On or before each Interest Payment Date, the Trustee will deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on such Interest Payment Date on all Outstanding Bonds. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest becoming due and payable upon all Outstanding Bonds on each succeeding Interest Payment Date within the then current Bond Year.
All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it becomes due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to the Indenture).
Principal Account. On or before each Interest Payment Date, the Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds maturing or required to be redeemed through mandatory sinking account redemption on such Interest Payment Date. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds.
Surplus. On or promptly after each Interest Payment Date, Trustee will determine the amount, if any, remaining in the Lease Revenue Fund after making the deposits required by the paragraphs above and the transfers of investment earnings pursuant to the Indenture, and shall notify the City of the amount so determined. The Trustee will apply such amount as a credit against the next following Base Rental Payment; provided however, if directed in a Request of the City, the Trustee will, with respect to all or any portion of such amount, pay, or set an amount aside for the payment of, any rebate requirement in accordance with a computation made by the City pursuant to the Code, or if no such rebate requirement is then due, release to the City for use for any lawful purpose.
15 62908452.v3
Base Rental
Requirement to Make Base Rental. Under the Sublease, the City agrees to pay to the Authority, its successors or assigns, as rental for the use and possession of the Leased Property (subject to the provisions of the Sublease concerning the rental interruption insurance and rental abatement), the amounts at the times specified in and in accordance with the Base Rental Payment Schedule set forth in the Sublease, less any amount credited against Base Rental Payments pursuant to the Indenture.
Base Rental Payments will be payable in arrears 5 days before each Interest Payment Date during the term of the Sublease, and will be made in consideration for the City’s use and possession of the Leased Property for the six month period preceding the date of such payment. The Authority has assigned its right to receive Base Rental Payments to the Trustee.
Payment in Installments. Each installment of Base Rental payable under the Sublease and each installment of Additional Rental (as described under the heading “− Additional Rental”) payable under the Sublease will be paid in lawful money of the United States of America to the order of the Trustee at the corporate trust office of the Trustee in Los Angeles, California, or such other place as the Trustee designates.
Offsets and Credits. Notwithstanding any dispute between the City and the Authority, the City is obligated to make all rental payments when due under the Sublease, without deduction or offset of any kind and will not withhold any rental payments pending the final resolution of such dispute. In the event of a determination that the City was not liable for said rental payments or any portion thereof, the payments or excess of payments, as the case may be, at the option of the City, will be credited against subsequent rental payments due under the Sublease or be refunded at the time of such determination.
Additional Rental
Under the Sublease, the City will also pay as Additional Rental, in addition to the Base Rental, to the Authority or to the Trustee, such amounts in each year as will be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of the Sublease or the assignment thereof, the Indenture, or the Authority’s or the Trustee’s respective interests in the Leased Property, including, but not limited to:
(i) All fees, costs and expenses.
(ii) All administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture).
(iii) Fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture.
16 62908452.v3
Fair Rental Value
The payments of the Base Rental and Additional Rental for each rental payment period during the term of the Sublease will constitute the total rental for said rental payment period, and will be paid by the City in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Property during each such period for which said rental is to be paid.
The City and the Authority have agreed and determined that such total rental does not exceed the fair rental value of the Leased Property for each such period. In making such determination, consideration has been given to other obligations of the parties under the Sublease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public.
Notwithstanding any other provision of the Sublease, if rental payments are abated for any period of time, the resulting Base Rental in any year during which such interference continues will not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or impairment do not substantially interfere with the City’s use and right of possession. See “– Abatement” below.
Limited Obligation
The Bonds are special obligations of the Authority, payable solely from and secured by a pledge of the Revenues as specified herein and in the Indenture. Neither the payment of the principal of the Bonds, nor any interest thereon, constitutes a debt, liability or obligation of the City, Authority or State of California. The obligation of the City to pay the Base Rental or Additional Rental does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.
Source of Payments; Covenant to Appropriate Funds for Base Rental Under the Sublease, the City covenants to take such action as may be necessary to include all Base Rental and Additional Rental payments due under the Sublease in its annual budget and to make necessary annual appropriations for all such rental payments. If the City’s adopted annual budget for any fiscal year fails to include sufficient appropriation for the scheduled Base Rental Payments and Additional Rental payments for the such fiscal year, the City shall give written notice to the Authority and the Trustee of such failure as soon as practical, but in any event within ten Business Days of the adoption of such annual budget.
Such covenants will be deemed to be and will be construed to be duties imposed by law and it will be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements agreed to be carried out and performed by the City in the Sublease; provided, the obligation of the City to make Base Rental or Additional Rental payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
Abatement
General. The obligation of the City to pay Base Rental and Additional Rental will be abated during any period in which, by reason of any damage, destruction, condemnation or impairment of 17 62908452.v3
leasehold interest, there is substantial interference with the use and occupancy of the Leased Property or any portion thereof by the City.
Except as set forth therein, in the event of any damage, destruction of condemnation, the Sublease will continue in full force and effect and the City waives any right to terminate the Sublease by virtue of such damage, destruction or condemnation. Under the Sublease, the City waives the benefits of California Civil Code Sections 1932(1), 1932(2), 1933(4), 1941, and 1942.
The abatement will be in an amount agreed upon by the City and the Authority such that the resulting Base Rental in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction, taking or impairment do not substantially interfere with the City’s use and right of possession. Such abatement will continue for the period commencing with the date of such interference and ending with the restoration of the relevant Leased Property to tenantable condition.
Proceeds of Rental Interruption Insurance. Under the Sublease, the City acknowledges and agrees that during any period of abatement with respect to all or any part of the Leased Property, proceeds of rental interruption insurance maintained under the Sublease will be used to pay Annual Debt Service on the Bonds to the extent necessary to restore the balance therein to the Reserve Requirement, and any proceeds of such insurance not so used shall be applied as provided in the Indenture to the extent required to pay administrative costs of the Authority in connection with the Leased Property. See “– Covenants to Maintain Insurance − Rental Interruption Insurance.”
Additional Bonds
Under the Indenture, the Authority may from time to time issue one or more series of Additional Bonds payable from and secured by Revenues on parity with all other Outstanding Bonds. In addition, the City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the Bonds.
Additional Bonds may be issued pursuant to a Supplemental Indenture, which shall specify:
(i) the maturity date or dates of such Additional Bonds, which shall be November 1 in any given year; (ii) the interest payment dates, which shall be May 1 and November 1; (iii) the terms, if any, for call and redemption of such Additional Bonds prior to maturity; and (iv) the interest rate or rates on such Additional Bonds and any other matters deemed appropriate or necessary and not inconsistent with the provisions of the Indenture.
In addition, there shall be provided a Certificate of the Authority: (i) certifying that the Authority is in compliance in all material respects with all agreement and covenants contained in the Indenture and that no Event of Default has occurred or is continuing; (ii) stating that the Authority and the City have entered into an amendment to the Sublease pursuant to which the City is obligated to make Base Rental Payments at times and in amounts sufficient to provide for payment of the principal of and interest on the Bonds (including such Additional Bonds) which will be Outstanding following the sale and delivery of such Additional Bonds; and (iii) containing such additional statements as may be reasonably necessary to show compliance with the requirements of the Indenture.
Default; Remedies
City Default and Remedies. The City will be deemed to be in default under the Sublease if the following occurs: default in the observance or performance of any agreement, condition, 18 62908452.v3
covenant or term contained in the Sublease required to be observed or performed by the City (including, without limitation, the payment of any Base Rental or Additional Rental due under the Sublease; provided that non-payment of Base Rental or Additional Rental during any period of abatement under the Sublease will not be deemed a default), subject to the provisions of the Sublease.
The Trustee, as assignee of the Authority, may at any time after default by the City (with or without notice and demand and without limiting any other rights or remedies the Authority may have), recover rent and other monetary charges as they become due under the Sublease without terminating the City’s right to possession of the Leased Property (regardless of whether or not the City has abandoned the Leased Property).
Furthermore, upon the occurrence of such a default by the City, the Trustee, as assignee of the Authority, will have the right, and the City irrevocably appoints the Authority as its agent and attorney-in-fact for such purpose, to attempt to relet the Leased Property at such rent, upon such conditions and for such term, and to do all other acts to maintain or preserve the Leased Property, including the removal of persons or property therefrom or taking possession thereof, as the Authority deems desirable or necessary. Under the Sublease, the City waives any and all claims for any damages that may result to the Leased Property upon any action taken by the Authority in event of default.
No such action taken by the Trustee, as assignee of the Authority, upon the City’s default under the Sublease (as described above) will be deemed to terminate the Lease or the Sublease and the City will continue to remain liable for any deficiency that may arise out of such reletting, taking into account expenses incurred by the Authority due to such reletting, payable at the same time and manner as provided for Base Rental in the Sublease.
Authority Default and Remedies. The Authority will be deemed to be in default under the Indenture if the following occurs:
(a) (i) Default in the due and punctual payment of the
principal of or premium on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, or by proceedings for redemption. (b) (ii) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable.
(iii) Upon the happening of any of certain other events specified in the Indenture.
The Trustee under the Indenture, and as assignee of the Authority under the Sublease and the Indenture, may exercise any and all remedies available pursuant to law (other than those specifically waived in the Indenture, the Lease, and the Sublease) upon the occurrence of any default and will have the right to do any of the following:
(c) (i) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Authority or any member, officer or employee thereof, in order to compel the Authority or any such member, officer or employee to perform and carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained in the Indenture; 19 62908452.v3
(d) (ii) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or
(e) (iii) by suit in equity upon the happening of an Event of Default to require the Authority and its members, officers and employees to account as the trustee of an express trust.
Covenants to Maintain Insurance
Title Insurance. Under the Sublease, the City is required to obtain one or more California Land Title Association insurance policies (or, at the City’s sole discretion, American Land Title Association insurance policies) at the time of and dated as of the Closing Date in an aggregate amount not less than the aggregate principal amount of the Bonds, payable to the Trustee, insuring the respective interests of the City and the Authority in the Leased Property, and insuring the validity of the Sublease, subject only to Permitted Encumbrances, naming the Trustee as an insured thereunder, issued by a title insurance company qualified to do business in the State of California and acceptable to the Trustee.
Fire and Extended Coverage Insurance. Under the Sublease, the City is required to maintain or cause to be maintained fire, lightning and extended coverage insurance on the Leased Property in an amount equal to:
(i) 100 percent of the then current replacement cost of the Leased Property, excluding the then fair market value of the land as unimproved; or (ii) the principal amount of all outstanding Bonds, whichever is less (except that such insurance may be subject to a deductible clause not to exceed 10 percent of the amount of such policy).
Earthquake insurance will be maintained on the Leased Property only if available on the open market from reputable insurance companies at a reasonable cost. The City does not currently maintain earthquake insurance on the Leased Property and does not expect to purchase earthquake insurance at this time.
The extended coverage endorsement will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, vandalism, malicious mischief, dumping or other deposit of any pollutant or other debris and such other hazards as are normally covered by such endorsement. Each such policy of insurance will be in form reasonably satisfactory to the Authority, and will contain a clause naming the Trustee as an additional insured and making all losses payable to the Trustee, and all proceeds thereof shall be paid over to the party contractually responsible for making repairs of casualty damage.
In the event of any damage to or destruction of the Leased Property caused by the perils covered by such insurance, the proceeds of such insurance will be utilized to repair, reconstruct or replace the Leased Property to the end that the project will be restored to at least the same condition that it was in prior to such damage or destruction. Any balance of such proceeds not required for such repair, reconstruction or replacement will be transferred to the Authority and treated as Revenues and applied in the manner provided in the Indenture.
Liability Insurance. Under the Sublease, the City is required to maintain or cause to be maintained public liability insurance with limits of not less than $3,000,000 for one person and $5,000,000 for more than one person involved in one accident to protect the Authority and the 20 62908452.v3
Trustee from all direct or contingent loss or liability for damages for bodily injury or death occasioned by reason of the construction, condition or operation of the Leased Property. The City will also maintain or cause to be maintained insurance against liability for property damage resulting from any casualty attributable to the operation of the project in an amount not less than $1,000,000 for each accident. The public liability insurance and property damage insurance may be subject to a deductible clause for any one accident of not to exceed $250,000. The insurance coverage required by the Sublease may be effected by blanket policies covering the Leased Property issued to the party contractually responsible for the maintenance and operation of the project and such insurance policy or policies shall name the Trustee as an additional insured.
Rental Interruption Insurance. The City is required under the Sublease to maintain or cause to be maintained or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Property as a result of any of the hazards covered by the insurance required by the Fire and Extended Coverage Insurance section above, in an amount not less than the total rent payable by the City under this Sublease for a period of any future 24 months.
Any such insurance policy will be in form satisfactory to the Authority and will contain a clause naming the Trustee as an additional insured and making any loss thereunder payable to the Trustee as its interests may appear. Any proceeds of such insurance will be used by the Trustee to pay Annual Debt Service on the Outstanding Bonds for the period during which the payment of rental under the Sublease is abated, and any proceeds of such insurance not so used will be applied as provided in the Indenture to the extent required to pay administrative costs of the Authority in connection with the Leased Property.
Self-Insurance. As an alternative to providing the insurance required by the “Liability Insurance” description above, the City may provide or cause to be provided a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee, its directors, officers, agents and employees in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the City; provided that the obligation of the Authority or City to make payments under such self-insurance shall be limited to money in a designated fund balance established by the Authority or City and that the Authority or City shall not be obligated to replenish such designated fund balance from the General Fund or be otherwise obligated to make payments except from such designated fund balance. After the Commencement Date, before any substitute method or plan may be provided by the City, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford adequate protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee and its directors, officers, agents and employees against loss and damage from the hazards and risks covered thereby; provided, however, that in the event the City provides a self-insurance method or plan of protection for the insurance required by the “Rental Interruption Insurance” description above, the designated fund balance established by the City shall be funded in an amount at least equal to the greatest of the aggregate Base Rental payable by the City under the Sublease for a period of any future 24 months.
Moreover, as an alternative to providing the insurance required by the “Rental Interruption Insurance” description above, the City may provide a self-insurance method or plan of protection through the California Insurance Pool Authority (or another insurance risk sharing pool joint powers authority formed in the State) or any successor entity as the City may reasonably determine. 21 62908452.v3
Damage, Destruction and Condemnation; Net Proceeds
If the whole, or any portion, of the Leased Property is destroyed (in whole or in part) or is damaged by fire of other casualty or taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain), or the leasehold title in all or a portion of the Leased Property is materially impaired by reason of a defect in title, then (a) the City, but only to the extent permitted by law, shall substitute other property for the portion of the Leased Property that has been destroyed, or taken, or affected by the defective title in accordance with the Sublease; or
(b) the City shall require the Net Proceeds of any insurance payment (other than the Net Proceeds of rental interruption insurance which shall be applied pursuant to the Sublease) or any condemnation award to be held by the Trustee in the Insurance and Condemnation Fund established under the Indenture to be applied and disbursed by the Trustee as follows:
(i) If less than all of the Leased Property shall have been so destroyed or taken or affected by defective title and the remainder is usable, then the Sublease shall continue in full force and effect as to such remainder and (A) if the portion taken or destroyed is replaced by one or more properties of equal or greater fair market value (as demonstrated by an MAI fair market appraisal), the Trustee upon written direction of the City shall disburse such proceeds to the party that incurred the expense of making such replacement and there shall not be any abatement of the Base Rental under this Sublease; or (B) failing the making of such replacement, there shall be a partial abatement of the Base Rental under the Sublease and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds.
(ii) If less than all of the Leased Property shall have been so destroyed or taken or affected by defective title and the remainder is not usable, or if all of the Leased Property shall have been so destroyed or taken or affected by the defective title, then the term of the Sublease shall cease as of the day that possession shall be so taken; and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds.
See “THE BONDS – Redemption – Extraordinary Redemption.”
MUNICIPAL BOND INSURANCE POLICY
The following information has been furnished by the Municipal Bond Insurer for use in this Official Statement. No representation is made as to the accuracy or completeness of this information, or the absence of material adverse changes therein at any time subsequent to the date hereof. Reference is made to APPENDIX G for a specimen of the Insurance Policy. [to come]
THE AUTHORITY
The Hawthorne Public Financing Authority (the “Authority”) was established pursuant to a Joint Exercise of Powers Agreement, dated as of November 23, 1992, by and between the City and the Community Redevelopment Agency of the City of Hawthorne, in accordance with the provisions of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government 22 62908452.v3
Code (the “Joint Powers Law”). The Authority was created for the purpose of assisting in the financing and refinancing of public capital improvements for the City. Under the Marks-Roos Local Bond Pooling Act of 1985 (California Government Code Section 6854 et seq.), the Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. The Authority is governed by a five-member Board of Directors which consists of the City Council of the City. The Chairman of the Authority is the Mayor of the City, and the Vice-Chairman of the Authority is the Mayor Pro Tem of the City. The City Manager acts as its Executive Director, the City Clerk acts as its Secretary, and the Finance Director acts as its Treasurer.
The Authority has no taxing power. The Authority and the City are each separate and distinct legal entities, and the debts and obligations of one such entity are not debts or obligations of the other entity.
THE CITY
General
Incorporated in 1922, the City of Hawthorne has a population of approximately 85,566 as of January 1, 2024, within a six square mile area. Located near the Los Angeles International Airport, connected by rail to the Port of Los Angeles and downtown Los Angeles, and surrounded by the San Diego (I-405), Harbor (I-110), and Glenn M. Anderson (I-105) Freeways, the City is a transportation hub to the South Bay region of Los Angeles County. The City is the headquarters for several manufacturing and aerospace companies, including Tesla Motors (which has its design center at the Hawthorne Municipal Airport), SpaceX and OSI Systems. To the north of the City is the unincorporated community of Lennox and the city of Inglewood. To the east is the unincorporated community of Athens and the city of Gardena. To the south is the unincorporated community of El Camino Village, and the cities of Lawndale and Redondo Beach. Manhattan Beach is at the southwest corner of Hawthorne, and the city of El Segundo is to the west of Hawthorne.
The unincorporated community of Del Aire is surrounded on three sides by the city of Hawthorne along the western edge of Hawthorne.
The County Los Angeles County (the “County”) was established by an act of the State Legislature on February 18, 1850 as one of California's original 27 counties. Located in the southern portion of the State, the County covers 4,083 square miles. With a population of over nine million, its population is the largest of any county in the nation and is largest non–state level governmental entity in the United States.. The County serves as the central trade district for the western United States and the gateway to the Asian economies. The County has 88 incorporated cities and many unincorporated areas and, at 4,083 square miles (10,570 km2 ), it is larger than the combined areas of Delaware and Rhode Island. The County is home to more than one-quarter of California’s residents and is one of the most ethnically diverse counties in the U.S.
The City provides a wide range of services, including police protection, public works, storm drainage, planning and development, park and landscape maintenance, code enforcement, building inspection, and administration. Fire protection and library services are provided by Los Angeles County. Many recreation programs for all age groups and services for the mature adult population are provided year round. The City provides for trash collection services through a contracted third party.
City Government
The City is a general law city, which was incorporated in 1992. The City is governed by the council-manager form of municipal government. The City Council is composed of five members 23 62908452.v3
elected biennially at-large to four-year overlapping terms. The Mayor is elected annually by the residents to serve a four-year term. The City Manager is appointed by the City Council and is responsible for implementing the policies, ordinances and directives of the City Council and for overseeing the day to day operations of the City. The City Attorney and Chief of Police are also appointed directly by the Council. The City currently employs approximately 361 regular employees (246 full time, and 115 part-time).
The current members of the City Council are as follows:
Name and Office Current Term Expires
Alex Vargas, Mayor December 2024
Katrina Manning, Mayor Pro Tempore December 2026
Angie Reyes English, Council Member December 2024
Alex Monteiro, Council Member December 2026
L. David Patterson, Council Member December 2024
Below are brief biographies of the City Manager and the Finance Director:
Vontray Norris, City Manager. Vontray Norris joined the City of Hawthorne in 2017 as the Community Service Manager for the Community Service Department. Mr. Norris was appointed as Interim City Manager on April 14, 2021 prior to being appointed as City Manager on October 13, 2021. Mr. Norris’ contract to serve as City Manager was renewed on December 12, 2023 through December 12, 2027. Mr. Norris was raised in the Holly Park area of Hawthorne, and attended St.
Bernard High School in Playa del Rey, California. He attended California State University, Long Beach obtaining a Bachelor of Arts Degree in Recreation and Leisure Studies with an emphasis in Municipal Recreation. Prior to working for the City of Hawthorne, Mr. Norris worked for the City of Los Angeles Department of Recreation and Parks. His career has provided him with over 23 years of experience in Municipal Recreation serving in multiple capacities, which includes managing multiple recreation facilities and providing leadership training to other recreation professionals.
Felice Lopez, Director of Finance. Felice Lopez joined the City of Hawthorne in 2004, as Payroll Technician and shortly thereafter, was promoted to Accountant I in 2006, and to Accounting Supervisor in 2011. Ms. Lopez was appointed Acting Director of Finance in May 2018. After a lengthy recruitment process, Ms. Lopez became the Director of Finance in February 2019, overseeing the General Ledger, Annual Audits, Budget preparation, Payroll, and Grant administration Functions. Ms. Lopez attended Loyola Marymount University, where she earned a Bachelor of Business Administration in 1991. She has over 25 years of experience in all areas of Accounting/Finance.
Population
The City’s population was approximately 85,566 as of January 1, 2024, according to the California State Department of Finance’s estimates. The table below shows the population and population growth in the City and the County from January 1, 2015 through January 1, 2024:
24 62908452.v3
TABLE 1
City of Hawthorne
City and County Population
2015 through 2024
City County
Year (1) Population Growth Rate Population Growth Rate
2015 88,146 -- 10,124,800 --
2016 88,318 0.20% 10,150,386 0.25
2017 88,197 -0.14 10,181,162 0.30
2018 88,144 -0.06 10,192,593 0.11
2019 87,827 -0.36 10,163,139 -0.29
2020 87,571 -0.29 10,135,614 -0.27
2021 87,505 -0.08 9,955,445 -1.78
2022 86,539 -1.10 9,861,493 -0.94
2023 85,886 -0.75 9,819,312 -0.43
2024 85,566 -0.37 9,824,091 0.05
__________
(1) As of January 1 of each year.
Source: State of California, Department of Finance.
Employment
The following table shows certain employment statistics for the City and the County for the last five calendar years.
TABLE 2
City of Hawthorne
City and County Employment Statistics
Calendar Years 2020 through 2024(1)
City County
Year
Labor
Force Employed
Unemployment
Number
Unemployment
Rate
Unemployment
Rate
2020 43,900 37,500 6,400 14.6% 12.3%
2021 43,700 39,200 4,600 10.4 9.0
2022 43,100 40,900 2,200 5.0 5.0
2023 43,000 40,900 2,100 4.8 5.0
2024(2) 43,000 40,900 2,200 5.0 5.2
_____________
(1) Data not seasonally adjusted. Figures represent the 12-month average for each such year. (2) Preliminary, as of May 2024.
Source: State of California, Employment Development Department. 25 62908452.v3
The following table lists the City’s major area employers in calendar year 2023.
TABLE 3
City of Hawthorne
Major Area Employers
2023
Employer Employees
% of total City
Employment
SpaceX - Space Exploration Technologies(1) 6,992 16.37% Hawthorne School District 1,029 2.41
Amazon Fulfillment Center 606 1.42
Wiseburn Unified School District 489 1.15
OSI Systems Inc. 277 0.65
Home Depot(2) 260 0.61
Teledyne Relays 255 0.60
Ring Headquarters 250 0.59
City of Hawthorne 237 0.56
South Bay Ford 206 0.48
Total 10,601 24.83%
Total City Employment(2) 42,700(3)
_____________
(1) On July 16, 2024, SpaceX founder Elon Musk tweeted on X (formerly Twitter) that SpaceX will be moving to Texas.
Since then, there has been no formal announcement by SpaceX. The City does not know if or what date SpaceX plans to move out of the City, nor which departments of SpaceX will locate to Texas. SpaceX paid $260,000 per year in business license taxes to the City from 2012-2022, and $500,000 in 2023 and 2024. In fiscal year 2023-24, SpaceX paid approximately $606,334 in property taxes.
(2) Includes both full-time and part-time employees.
(3) Total City Employment provided by Employment Development Department Labor Force Data.
Source: City of Hawthorne Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2023.
Construction Activity
The following is a summary of the construction permits issued by the City for the last five fiscal years.
TABLE 4
City of Hawthorne
Building Permits Issued and Values for Permits Issued
Fiscal Years 2019-20 through 2023-24
Value of Permits Issued
Fiscal Year Building Permits Commercial Residential Total 2019-20 703 $53,028,505.01 $28,329,232.41 $81,357,737.42 2020-21 420 9,283,170.14 19,220,260.78 28,503,430.92
2021-22 393 18,494,182.80 12,273,827.47 30,768,010.27
2022-23 484 10,728,009.02 8,460,743.06 9,188,752.08
2023-24 548 12,139,333.71 19,145,152.79 31,284,486.50
Source: City of Hawthorne.
26 62908452.v3
Labor Relations
The City currently has approximately 361 employees (246 full-time and 115 part-time).
There are currently 90 sworn police officers, and eight department heads. The City Manager, Chief of Police and City Attorney, each have individual employment agreements with the City. The remaining employees are covered by negotiated agreement.
TABLE 5
City of Hawthorne
Negotiated Employee Agreements
Bargaining Unit
Contract
Expiration Date
Number of
Employees
Hawthorne Municipal Employees Association - Full Time June 30, 2027 140 Hawthorne Municipal Employees Association - Part Time June 30, 2027 115 Hawthorne Executive Group June 30, 2027 13
Hawthorne Police Officers Association June 30, 2027 63
Hawthorne Police Management and Supervisory Group June 30, 2027 27 Total 358
___________
Source: City of Hawthorne
27 62908452.v3
The following is a direct and overlapping debt report as of July 1, 2024, prepared by California Municipal Statistics, Inc. This report is included for informational purposes only. Neither the City nor the Authority has reviewed the report for completeness or accuracy and makes no representation in connection therewith.
TABLE 6
City of Hawthorne
Direct and Overlapping Debt
As of July 1, 2024
2023-24 Assessed Valuation: $10,842,229,863
OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 7/1/24 Metropolitan Water District 0.280% $ 50,988
El Camino Community College District 6.720 30,045,413
Los Angeles Community College District 0.079 4,073,118
Los Angeles Unified School District 0.097 9,765,543
Centinela Valley Union High School District 37.703 86,784,532 Centinela Valley Union High School District SFID No. 2016-1 36.210 78,517,764 Inglewood Unified School District 0.038 63,204
Wiseburn Unified School District 14.795 18,299,458
Hawthorne School District 97.236 62,981,235
Lawndale School District 19.401 9,826,607
Lennox School District 7.799 2,742,660
City of Hawthorne Community Facilities District No. 1999-1 100. 2,350,000 City of Hawthorne Community Facilities District No. 2004-1 100. 2,390,000 City of Hawthorne Community Facilities District No. 2006-1 100. 7,830,000 TOTAL GROSS OVERLAPPING TAX AND ASSESSMENT DEBT $315,720,522 Less: Los Angeles Unified School District supported general obligation bonds 290,492 TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT $315,430,030 DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Los Angeles County General Fund Obligations 0.541% $ 13,412,633 Los Angeles County Superintendent of Schools Certificates of Participation 0.541 15,458 Los Angeles Unified School District Certificates of Participation 0.097 457,442 Centinela Valley Union High School District Certificates of Participation 58.958 3,339,971 Inglewood Unified School District Certificates of Participation 0.038 399 Hawthorne School District Certificates of Participation 97.236 9,704,153 Lennox School District Certificates of Participation 7.799 260,487 City of Hawthorne General Fund Obligations 100. 18,676,850 (1) City of Hawthorne Pension Obligation Bonds 100. 108,530,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $154,397,393 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100. % $17,435,000 GROSS COMBINED TOTAL DEBT $487,552,915 (2)
NET COMBINED TOTAL DEBT $487,262,423
Ratios to 2023-24 Assessed Valuation:
Total Gross Overlapping Tax and Assessment Debt ..............2.91% Total Net Overlapping Tax and Assessment Debt ..................2.91% Total Direct Debt ($127,206,850) ...........1.17%
Gross Combined Total Debt...................................................4.50% Net Combined Total Debt.......................................................4.49% Ratios to Redevelopment Successor Agency Incremental Valuation ($2,782,924,355):
Total Overlapping Tax and Assessment Debt.........................0.63% _____________
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics.
28 62908452.v3
CITY FINANCIAL INFORMATION
Budgetary Process
The City’s Municipal Code requires that the annual budget be adopted on or before July 1st of each year. The annual budget serves as the foundation for the City’s financial planning and control. The budget development process begins in December of each year. The finance department updates excel worksheets for each department, which are distribute in February. Each department is responsible for developing the operational line items, while finance staff is responsible for the salary and benefit line items.
The Finance Director, along with the applicable operating departments, provides the City Manager with proposed revenue projections, which are reviewed along with the department expenditure budget requests to determine available funding. Supplemental requests, proposed changes to personnel, equipment and services, are subject to City Manager review and approval. The City Manager and Finance Director meet with each department to review all operating budgets and supplemental requests. Once this review is completed, the proposed budget is presented to the City Council at a public hearing and public workshop. The City Council adopts a budget recommended by the City Manager prior to June 30 of each year.
During the fiscal year, the budget can be amended to meet the City’s needs, with the approval of the City Council. Department heads may only authorize expenditures based on appropriations approved by the City Council, and only from accounts under their organizational responsibility. Total expenditures within each fund may not exceed the total appropriations by that fund. Interfund transfers require budget amendment by the City Council. The City conducts a mid-year budget review that analyzes the operating results for the first half of the fiscal year.
General Fund Reserve Policy
On September 10, 2019, the City Council approved a minimum cash reserve policy to ensure the general fund reserve balance does not fall below three months of average operating expenditures.
This amount is calculated by dividing the budgeted total operating expenditures for the current fiscal year by four.
Debt Policy
The City Council adopted a debt policy for the City in August 2019. The policy specifies the City may consider debt financing for capital improvement projects if the project’s useful life will equal or exceed the term of the financing and when resources are identified sufficient to pay the debt service.
The City may use long term debt financing if the project is approved by the Council, and the City estimates that sufficient revenues will be available to pay debt service through maturity. The City should periodically review outstanding long term debt for potential refunding opportunities, which will be considered if there is a net present value savings of at least three percent of the refunded debt, or to remove restrictive covenants.
29 62908452.v3
Budget
The following table shows the City’s adopted budget for Fiscal Year 2024-25.
TABLE 7
City of Hawthorne
Adopted Budget Summary
Fiscal Year 2024-25
FY 2024-25 Adopted Budget
Revenue
Sales Tax $40,059,374
Intergovernmental-State 14,535,329
Property Taxes 9,486,354
Utility Users Taxes 8,453,791
Business License Taxes 8,000,000
Franchise Fees 6,500,000
Transient Occupancy Tax 7,000,000
Service Charges 4,608,200
Fines & Forfeitures 3,200,000
Licenses & Permits 1,858,719
Other Revenue 2,092,331
Program Contributions 1,300,000
Other Taxes 3,610,063
Rev. Use Of Money 1,500,000
Total Revenue $112,204,161
Expenses
Personnel Costs $59,409,278
Contract Services 22,344,735
Maintenance and Operations 14,720,761
Interdepartmental Charges 5,390,438
Operating Transfers out 7,603,645
Capital Outlay 481,006
Total Expenses $109,949,863
Source: City of Hawthorne Adopted Budget for Fiscal Year 2024-25. 30 62908452.v3
The table below shows the City’s budget and actual results for General Fund revenues and expenditures for the fiscal years shown.
TABLE 8
City of Hawthorne
General Fund Budget Summary
Fiscal Years 2020-21 through 2023-24
FY 2020-21
Adopted
Budget
FY 2020-21
Audited Actual
FY 2021-22
Adopted Budget
FY 2021-22
Audited
Actual
FY 2022-23
Adopted
Budget
FY 2022-23
Audited Actual
FY 2023-24
Adopted Budget
FY 2023-24
Revised MidYear Budget
Revenues
Taxes $69,325,000 $75,978,052 $68,869,000 $88,866,674 $77,222,000 $ 96,697,076 $83,562,000 $84,762,000 Licenses and permits 2,409,000 1,981,724 2,458,400 1,553,744 2,110,900 1,603,989 2,816,000 1,925,000 Intergovernmental 1,128,000 1,359,494 1,274,660 1,269,922 1,626,000 1,651,930 1,526,000 1,567,250 Charges for services 2,382,180 2,158,138 2,209,998 3,021,149 2,937,025 4,577,344(1) 3,995,200 4,695,200(1) Fines and forfeitures 2,800,000 2,806,952 2,600,000 3,268,876 2,600,000 3,410,211 3,200,000 3,200,000 Use of money and property(4) 400,000 129,714 150,000 (1,243,570) 300,000 1,399,385 500,000 1,900,000 Contributions 200,000 200,000 200,000 350,000 200,000 200,000 200,000 200,000 Miscellaneous 1,752,000 1,560,332 1,715,000 1,849,783 1,802,000 2,653,946 1,817,000 1,916,331 Total Revenues $80,396,180 $86,174,406 79,477,058 $98,936,578 $88,797,925 $112,193,881 $97,616,200 $100,165,781 Expenditures
General government $12,846,598 $10,535,067 $12,382,423 $11,453,845 $19,332,918 $19,074,505(2) $18,101,923 $17,333,126(2) Public safety 50,686,074 44,916,957 49,411,272 53,249,352 53,852,234 55,115,459 60,537,829 60,529,529 Community development 2,281,489 2,201,949 2,975,993 2,191,278 3,524,718 2,425,221 4,456,209 4,156,209 Parks and recreation 3,710,219 2,901,385 4,648,037 3,704,975 4,909,215 4,165,633 5,895,768 5,591,768 Public works 2,393,034 1,752,479 2,107,803 1,463,847 3,076,388 2,099,928 3,485,408 2,993,408 Capital Outlay 27,450 -- 22,626 354,526(3) 25,220 14,670,128(3) 459,615 458,115 Total Expenditures $71,944,864 $62,307,837 $71,548,064 $72,417,823 $84,720,693 $97,550,874 $92,936,752 $91,062,155 Excess (deficiency) of revenues
over expenditures $ 8,451,316 $23,866,569 $7,928,994 $26,518,755 $4,077,232 $14,643,007 $4,679,448 $9,103,626 Other Financing Sources (Uses)
Transfers in(2) -- -- -- 1,467,681(2) (6,607) 7,932,039(2) 1,491,940 17,406,282(2) Transfers out (8,345,779) (8,735,843) (7,754,835) (8,907,765) (3,816,779) (7,723,899) (3,300,142) (26,325,142) Subscription acquisition -- -- -- -- -- 387,983
Total other sources (uses) $ (8,345,779) $ (8,735,843) $ (7,754,835) $(7,440,084) $(3,823,386) $ 596,123 (1,808,202) ($8,918,860) Net change in fund balance $ 105,537 $15,130,726 $ 174,159 $19,078,671 $ 253,846 $15,239,130 $2,871,246 $184,766 Beginning Fund Balance 44,643,818 44,643,818 59,774,544 59,774,544 78,853,215 78,853,215 94,092,345 94,092,345 Ending Fund Balance $44,749,355 $59,774,544 $59,948,703 $78,853,215 $79,107,061 $94,092,345 $96,963,591 $94,277,111 ______________________________________
(1) Increase is due to overtime reimbursement for police services to the City of Inglewood for various special events. (2) The City received $30.5 million in funding from the American Rescue Plan Act (ARPA). When ARPA funds need to be spent, they are posted in Other Financing Sources (Uses) - transfers in.
The increase in Expenditures – general government in fiscal years 2022-23 and 2023-24 is attributable to non-recurring ARPA eligible expenditures. (3) In Fiscal Year 2021-22, the City paid a $350,000 deposit for the escrow for the purchase of real property. In Fiscal Year 2022-23, the City purchased a parcel of property referred to as the Bank of America building for $11,135,045 and another parcel for $3,502,875. (4) Fluctuations are due to reporting of net value unrealized gains and losses beginning Fiscal year 2021-22 per required accounting rules.
Source: City of Hawthorne Budgets and Annual Comprehensive Financial Reports for Fiscal Years Ended June 30, 2021, 2022 and 2023. 31 62908452.v3
The City conducted its annual mid-year budget review. This resulted in increased General Fund revenues of $2,549,581 and expenditures of $890,403. As of July 9, 2024, the City has collected approximately 98% of estimated revenues for Fiscal Year 2023-24.
Financial Statements
Set forth in the following pages are the City’s General Fund balance sheets and statements of revenues, expenditures and changes in General Fund balance for fiscal years 2018-19 through 2022- 23, based on the City’s audited financial statements. The balance sheets and statements presented in this Official Statement are subject to the various notes attached to the City’s audited financial statements for the respective years. The City’s Annual Comprehensive Financial Report for fiscal year ended June 30, 2023, which includes the City’s 2022-23 audited financial statements, are set forth in Appendix A.
A complete copy of the City’s Annual Comprehensive Financial Reports for the prior years, can be obtained from the City’s Finance Department and are available on the City’s website.
TABLE 9
City of Hawthorne
General Fund Balance Sheets
Fiscal Years 2018-19 through 2022-23
2018-19 2019-20 2020-21 2021-22 2022-23
ASSETS
Cash and investments $30,074,866 $36,683,606 $52,393,986 $71,932,991 $85,018,951 Receivables:
Accounts 7,315,467 7,338,143 8,952,702 10,061,744 9,783,031 Taxes 90,571 188,902 186,972 569,946 489,734
Interest 49,380 28,241 6,523 94,082 374,490
Leases -- -- -- 3,509,956 6,018,438
Due from other funds 1,385,331 2,401,589 3,279,725 -- 5,872,638 Prepaid expenses -- -- 1,830,046 2,822,522 --
Inventories 52,198 80,632 70,850 69,652 67,458
Total assets $38,967,813 $46,721,113 $66,720,804 $89,060,893 $107,624,740
LIABILITIES
Accounts payable $ 887,987 $1,012,791 $1,106,482 $ 576,325 $1,642,061 Accrued liabilities 799,538 1,039,504 1,056,517 1,073,813 1,251,149 Unearned revenue 752 -- -- -- --
Deposits payable 25,000 25,000 4,783,261 5,030,558 4,699,806 Total liabilities $1,713,277 $2,077,295 $6,946,260 $6,680,696 $7,593,016
DEFERRED INFLOWS OF RESOURCES
Lease related -- -- -- 3,526,982 5,939,379
Total deferred inflow of resources -- -- -- $3,526,982 $5,939,739 FUND BALANCES:
Nonspendable $ 52,198 $ 80,632 $ 1,900,896 $ 69,652 $ 67,458 Restricted -- -- 36,529 36,529 36,529
Unassigned 37,202,338 44,563,186 57,837,119 78,747,034 93,988,358 Total Fund Balance $37,254,536 $44,643,818 $59,774,544 $78,853,215 $94,092,345 Total liabilities, Deferred Inflows &
Fund balance
$38,967,813 $46,721,113 $66,720,804 $89,060,893 $107,624,740 _____________
Source: City of Hawthorne Annual Comprehensive Financial Reports for Fiscal Years shown. 32 62908452.v3
TABLE 10
City of Hawthorne
Statements of Revenues, Expenditures and Changes in General Fund Balance Fiscal Years 2018-19 through 2022-23
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-2022 FY 2022-23 Revenues
Taxes $70,510,829 $72,522,803 $75,978,052 $88,866,674 $96,697,076 Licenses and permits 3,318,633 2,692,172 1,981,724 1,553,744 1,603,989 Intergovernmental 1,206,550 1,368,736 1,359,494 1,269,922 1,651,930 Charges for services 2,428,090 2,400,099 2,158,138 3,021,149 4,577,344(1) Fines and forfeitures 3,311,235 2,713,391 2,806,952 3,268,876 3,410,211 Use of money and property(4) 307,250 712,702 129,714 (1,243,570) 1,399,385 Contributions 148,469 201,000 200,000 350,000 200,000
Miscellaneous 1,335,242 1,813,002 1,560,332 1,849,783 2,653,946 Total Revenues $82,566,298 $84,423,905 $86,174,406 $98,936,578 $112,193,881 Expenditures
General government 12,030,929 12,002,579 $10,535,067 $11,453,845(2) 19,074,505(2) Public safety 49,160,135 51,135,361 44,916,957 53,249,352 55,115,459 Community development 2,566,027 2,284,434 2,201,949 2,191,278 2,425,221 Parks and recreation 3,767,113 3,394,445 2,901,385 3,704,975 4,165,633 Public works 2,459,130 2,221,948 1,752,479 1,463,847 2,099,928 Capital Outlay 243,571 429,304 -- 354,526(3) 14,670,128(3) Total Expenditures $70,226,905 $71,468,071 $62,307,837 $72,417,823 $97,550,874 Excess (deficiency) of revenues
over expenditures $12,339,393 $12,955,834 $23,866,569 $26,518,755 $14,643,007 Proceeds from asset disposal -- 6,947 -- -- --
Transfers in -- 221,651 -- 1,467,681(2) 7,932,039(2)
Transfers out (1,200,318) (5,795,150) (8,735,843) (8,907,765) (7,723,899) Subscription acquisition -- -- -- -- 387,983
Total other sources(uses) $ (1,200,318) $ (5,566,552) $ (8,735,843) $ (7,440,084) $ 596,123 Net change in fund balance $11,139,075 $ 7,389,282 $15,130,726 $19,078,671 15,239,130 Beginning Fund Balance 26,115,461 37,254,836 44,643,818 59,774,544 78,853,215 Ending Fund Balance $37,254,536 $44,643,818 $59,774,544 $78,853,215 $94,092,345 ______________________________________
(1) Increase is due to overtime reimbursement for police services to the City of Inglewood for various special events. (2) The City received $30.5 million in funding from the American Rescue Plan Act (ARPA). A portion of ARPA funds was posted in Other Financing Sources (Uses) - transfers in, as well as in Expenditures – general government, as ARPA eligible expenditures are spent. (3) In Fiscal Year 2021-22, the City paid a $350,000 deposit for the escrow for the purchase of real property. In Fiscal Year 2022-23, the City purchased a parcel of property referred to as the Bank of America building for $11,135,045 and another parcel for $3,502,875. (4) Fluctuations are due to reporting of net value unrealized gains and losses beginning Fiscal year 2021-22 per required accounting rules.
Source: City of Hawthorne Annual Comprehensive Financial Reports for Fiscal Years shown.
Primary General Fund Revenue Sources
Sales taxes and property taxes are the two largest sources of revenues for the City’s general fund in fiscal year 2022-23. The remaining top revenues are from business license tax, utility user tax, transient occupancy tax and franchise fees. The table below provides the amount of sales tax, property tax, business license tax, utility user tax, transient occupancy tax and franchise fee revenues and the share of General Fund revenues that each represents for fiscal year 2022-23. 33 62908452.v3
TABLE 11
City of Hawthorne
Top Revenue Sources
Fiscal Year 2022-23
Revenue Source Revenues
% of General
Fund Revenues
Increase
(Decrease) from
2021-22
% Increase
(Decrease) from
2021-22
Sales Tax(1) $40,393,795 36.0% $2,122,394 5.3
Property Tax(2) 22,825,681 20.3 1,025,699 4.5
Business License Tax 9,452,193 8.4 (4,673) 0.0
Utility Users Tax 8,792,532 7.8 1,333,189 15.2
Transient Occupancy Tax 7,891,009 7.0 1,819,642 23.1
Total Top Revenue Sources $89,355,210 $6,296,251
Total General Fund Revenues $112,193,881 100.0% $13,257,303 13.4% _________________
(1) Sales tax increase by $2 million or 5.4% from the prior fiscal year primarily due to growth in the area of building and construction and internal consumer good.
(2) Includes property taxes received by the City in-lieu of motor vehicle license fees in the amount of $12,958,501.
Source: City of Hawthorne audited financial statements for Fiscal Year Ended June 30, 2023.
Sales Taxes
A sales tax is imposed on retail sales or consumption of personal property. Sales tax revenues represented the largest source of revenue for the City in fiscal year 2022-23, comprising approximately
36.0 percent of the City’s total revenues.
Sales Tax Rates. The City’s sales tax revenue represents the City’s share of the sales and use tax, imposed on taxable transactions occurring within the City’s boundaries. The sales tax is governed by the Bradley-Burns Uniform Local Sales and Use Tax. The tax rate is established by the State Legislature. The current total sales tax rate in the City is 10.25%, which includes the 7.25% sales tax rate established by the State legislature. The aggregate tax rate in the State is six percent (6.00%). An additional one and a half percent (1.25%) is imposed in the County. Los Angeles County voters approved Measure A in 1980, Measure C in 1990, and Measure R in 2008 to finance transportation programs and improvements. The City’s share of sales tax is approximately 1% of the total City sales tax rate of 10.25%. The State’s actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis.
Property Taxes
Property taxes were the second largest revenue source to the City in fiscal year 2022-23.
Revenues from property taxes, at $22,825,681, represented 20.3 percent of the City’s General Fund revenues in fiscal year 2022-23. This amount includes property taxes received by the City in-lieu of motor vehicle license fees in the amount of $12,958,501.
The motor vehicle license fee (“VLF”) is a fee charged for the privilege of operating a vehicle on public streets. This fee is collected annually by the State’s Department of Motor Vehicles and disbursed to other governmental agencies by the State Controller. VLF was originally based on a rate equivalent to 2% of the market value of motor vehicles, which is imposed annually by the State “in-lieu” of property tax.
34 62908452.v3
In 1999, the State began reducing the VLF rate charged to vehicle owners and backfilling city and county revenue losses with state subventions. The Fiscal Year 2005 State Budget reduced the VLF from 2% to 0.65% of the value of a vehicle and deleted the requirement for backfill payments, providing instead that the amount of the backfill requirement will be met by an increase in the property tax allocation to cities and counties. In fiscal year 2022-23, the City received $12,958,501 in property tax revenues in lieu of VLF.
Proposition 13 Limitations. Article XIIIA of the State of California Constitution imposes limits on annual adjustments to real property assessed values and to the amount of ad valorem tax that may be levied on real property. See “LIMITATIONS ON TAX REVENUES AND APPROPRIATIONS – Article XIIIA.”
Tax Levies and Delinquencies. Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. Effective July 1, 1983, real property that changes ownership or is newly constructed is reassessed at the time the change in ownership occurs or the new construction is completed. If the property is reassessed at a higher value, one or more supplemental tax statements will be added to the annual tax bill. If the property is reassessed at a lower value, the property owner may receive a refund.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. If the first installment is not paid by December 10, a ten percent delinquent penalty is added to any unpaid balance. If the second installment is not paid by April 10, a ten percent penalty plus a charge of $10 is added to the unpaid balance. Since supplemental tax bills are mailed throughout the year, they may or may not be due or delinquent at the same time as annual tax bills. The same penalties and charges accrue for delinquent supplemental taxes as for delinquent annual taxes.
Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5 percent of the unpaid tax per month to the time of redemption, plus costs and a redemption fee. If taxes remain unpaid for a period of five years following tax default, the property becomes subject to the County Tax Collector’s power of sale. Properties may be redeemed under an installment plan by paying the current year’s taxes, plus an initial payment of twenty percent of the redemption amount and an installment setup fee. The installment plan of redemption allows for the payment of delinquent taxes over a five-year period beginning the date the installment plan account is opened. An installment plan account can be opened any time after the property becomes tax defaulted and within five years of that date. After the five-year period an installment plan account may not be opened, as the property becomes subject to the County Tax Collector’s power of sale.
Property taxes on the unsecured roll are due as of the January 1 lien date and, in general, become delinquent on August 31 and are thereafter subject to a ten percent penalty plus a collection fee. If unsecured taxes are unpaid on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each month until paid. The City has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the clerk of the court specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements or possessory interests belonging or assessed to the assessee. 35 62908452.v3
Assessed Valuation. The table below presents the assessed valuation (secured and unsecured) of taxable property in the City for the last ten fiscal years.
TABLE 12
City of Hawthorne
Assessed Values of All Taxable Property(1)
Fiscal Years 2014-15 through 2023-24
Fiscal Years Secured Unsecured Less Exemptions
Total Taxable
Assessed Value Direct Tax Rate
2014-15 $5,975,266,047 $271,246,528 ($38,278,306) $6,208,234,269 0.09115% 2015-16 6,360,930,083 261,718,287 (38,794,555) 6,583,853,815 0.09137 2016-17 6,761,280,688 586,347,166 (70,829,245) 7,276,798,609 0.09174 2017-18 7,149,882,995 639,095,098 (62,805,701) 7,726,172,392 0.09127 2018-19 7,532,179,160 732,745,553 (75,014,723) 8,189,909,990 0.09104 2019-20 7,971,171,054 728,823,022 (69,188,809) 8,630,805,267 0.08950 2020-21 8,394,513,934 871,235,153 (89,168,195) 9,176,580,892 0.08648 2021-22 8,771,167,546 740,382,503 (106,971,423) 9,404,578,626 0.08939 2022-23 9,143,741,870 997,321,789 (67,095,584) 10,073,968,075 0.08939 2023-24(2) 9,653,802,801 1,188,427,064 (58,950,459) 10,842,229,863 0.08517 _____________
(1) Excludes secured and unsecured assessed values of properties included in the former redevelopment project area. (2) On July 16, 2024, SpaceX founder Elon Musk tweeted on X (formerly Twitter) that SpaceX will be moving to Texas. Since then, there has been no formal announcement by the company. The City does not know if, or what date, SpaceX plans to move out of the City, nor which departments of SpaceX will locate to Texas. In addition, the City is not aware of whether SpaceX plans to sell its real property once it relocates. For Fiscal Year 2023-24, SpaceX comprised $12,639,344 of secured assessed value and $700,700,360 of unsecured assessed value. See Table 13 City of Hawthorne Top Ten Taxpayers Based on Assessed Value.
Source: City of Hawthorne Audited Financial Statements for fiscal years 2014-15 through 2022-23; City of Hawthorne for fiscal year 2023-24, based on information provided by the Los Angeles County Auditor-Controller.
Redevelopment Dissolution. The State’s Community Redevelopment Law (codified in Part 1 of Division 24 of the California Health and Safety Code) authorized the redevelopment agency of any city or county to receive an allocation of tax revenues resulting from increases in assessed values of properties within designated redevelopment project areas (the “incremental value”) occurring after the year the project area is formed. In effect, local taxing agencies, such as the City, realize tax revenues only in the assessed value of such property at the time the redevelopment project is created for the duration of such redevelopment project. Although Assembly Bill No. 26 (“AB X1 26”), enacted on June 29, 2011 as Chapter 5 of Statutes of 2011, statutorily dissolved redevelopment agencies as of February 1, 2012, the enforceable obligations of dissolved redevelopment agencies, continue to be paid from property taxes derived from such incremental value until the enforceable obligations are paid in full in accordance with Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 (“AB 1484”), enacted as Chapter 26, Statutes of 2012, and as such statutory provisions may further be amended from time to time (as amended, the “Dissolution Act”). Under the Dissolution Act, taxing entities, such as the City, are to receive distributions (in proportion to such taxing entity’s share of property tax revenues in the tax rate area for the applicable fiscal year) of residual amounts of property taxes attributable to incremental value on each June 1 and January 2, commencing June 1, 2012, after payment of (i) tax sharing obligations established previously pursuant to the Community Redevelopment Law, (ii) enforceable obligations of the successor agency to the former redevelopment agency, and (iii) an administrative cost allowance to such successor agency. As 36 62908452.v3
enforceable obligations of the former redevelopment agency and its successor agency are paid and retired, residual amounts of property tax revenues attributable to redevelopment project area incremental value are expected to increase over time.
The top ten taxpayers, based on assessed values of taxable property in the City, as shown on the 2023-24 tax roll, are set forth in the following table:
TABLE 13
City of Hawthorne
Top Ten Taxpayers Based on Assessed Value
Fiscal Year 2023-24
Rank Taxpayer
Secured
Assessed
Value
% of
Secured
Assessed
Value
Unsecured
Assessed
Value
Combined
Assessed Value
% of Total
Combined
Assessed
Value
1 Space Exploration Technologies Corp(1) $ 12,639,344 0.13% $700,700,360
2) $713,339,704 6.58%
2 Holston DC Assets LLC 112,608,000 1.17 -- 112,608,000 1.04 3 Mogul Hospitality Partners Hawthorne LLC 91,513,963 0.95 -- 91,513,963 0.84 4 DCT Cargo LLC 91,190,775 0.94 -- 91,190,775 0.84
5 Falcon Landing LLC 34,929,080 0.36 53,670,510 88,599,590 0.82 6 Costco Wholesale Corporation 66,786,978 0.69 -- 66,786,978 0.62 7 BSP Zelman Hawthorne LLC 66,677,419 0.69 -- 66,677,419 0.61 8 Hawthorne Creative LLC 61,997,640 0.64 -- 61,997,640 0.57 9 Equity Holdings LLC 60,439,650 0.63 -- 60,439,650 0.56 10 15000 Aviation Ventures LLC 57,814,819 0.60 57,814,813 0.53 Top Ten Total $655,597,668 6.80% $754,370,870 $1,410,968,538 13.01% City Total
$9,653,802,7
99 100.0%
$1,188,427,0
64 $10,842,229,863 100.00%
__________________
(1) On July 16, 2024, SpaceX founder Elon Musk tweeted on X (formerly Twitter) that SpaceX will be moving to Texas. Since then there has been no formal announcement by the company regarding the move. The City does not know if, or what date SpaceX plans to move out of the City, nor which departments of SpaceX will locate to Texas. In addition, the City is not aware of whether SpaceX plans to sell the real property it owns in the City in the event it relocates to Texas. For fiscal years ending 2019, 2020, 2021, 2022, and 2023, the City collected approximately $348,137, $393,390, $396,486, $504,008 and $606,334, respectively, in property tax revenues from SpaceX. (2) Unsecured Property Taxes are taxes on items such as business fixtures, business furniture, and business machinery.
Every year this amount varies for SpaceX due to yearly variations of projects which are at various stages of completion.
Source: City of Hawthorne.
Business License Fees
The City charges a business license fee on persons or entities conducting business within the City. During fiscal year 2022-23, business license fees were $9,452,193 representing 8.4% of the City’s general fund revenues for fiscal year 2022-34.
Utility Users Tax
The Utility User Tax (UUT) is a usage tax of 5.0% on water, natural gas, electricity, and communications services. Generally, the UUT is collected by each service provider from its customers at the time the customer pays for service. Where customers are billed by a provider, the UUT is generally listed as a separate line item on the utility bill. All UUT payments collected by a service provider are remitted to the City. These funds are then deposited by the City in its general fund and available for any lawful municipal purpose. During fiscal year 2022-23, utility user tax revenues were $8,792,532 representing 7.8% of the City’s general fund revenues for fiscal year 2022-34. 37 62908452.v3
Transient Occupancy Taxes
Revenues from the transient occupancy taxes (“TOT”) also represent a source of revenues for the General Fund. The transient occupancy tax is levied on persons staying 30 days or less in a hotel, inn, motel, tourist home or other lodging facility. The transient occupancy tax is applied to the customer’s lodging bill at a rate of 12%. The City’s transient occupancy tax revenues deposited in the General Fund were $7,891,009 in fiscal year 2022-23 representing 7.0% percent of all General Fund revenues.
Investment Policy and Portfolio
The City has adopted policies and procedures for the management of the investment of unexpended funds for the City itself and for other entities of the city, including the Authority, for which the City provides financial management services. The three basic objectives of the policies and procedures are: safety of invested funds, maintenance of sufficient liquidity to meet cash flow needs and attainment of the maximum yield possible consistent with the first two objectives.
The City's investment policy authorizes the following investments under provisions of California Government Code Section 53601:
Authorized Investment Type
Authorized by
Investment
Policy
Maximum
Maturity
Maximum
Percentage of
Portfolio
Maximum
Investment In
One Issuer
U.S. Treasury Obligation Yes 5 years None None
U.S. Agency Securities Yes 5 years 75% 30%
Banker’s Acceptances Yes 180 days 40% 30%
Commercial Paper Yes 270 days 25% 10%
Certificate of Deposit Yes 5 years None None
Medium-Term Notes Yes 5 years 30% 5%
Money Market Mutual Funds Yes N/A 20% None
Local Agency Investment Funds Yes N/A None $75 million
Negotiable Certificates of Deposit Yes 5 years 30% None Mutual Funds Yes N/A 20% 10%
Local Governmental Investment Pool Yes N/A None None
Supranational Yes 5 years 30% None
Asset Backed Securities Yes 5 years 20% None
Portfolio as of June 30, 2023. The table below shows the City’s investment portfolio, as categorized by types of investment securities:
TABLE 14
City of Hawthorne
Investment Report
as of June 30, 2023
Investment Types Less than 1 year 1 to 3 years Total
External Investment Pools - Local Agency
Investment Fund $70,405,118 -- $70,405,118
Negotiable Certificates of Deposit 294,122 $6,087,731 6,381,853 U.S. Government Bonds -- 2,281,221 2,281,221
38 62908452.v3
Med - Term Notes -- 447,460 447,460
Fidelity Money Market 3,169,731 -- 3,169,731
Held by Bond Trustee: Money Market Mutual Funds 3,762,403 -- 3,762,403 Total Investments $77,631,374 $8,816,412 $86,447,786
Source: City of Hawthorne audited financial statements for fiscal year 2022-23.
Long-Term Liabilities
The City currently has several long-term debt obligations payable from the General Fund:
(i) the City’s agreement to make semiannual lease payments to the Public Property Financing Corporation of California in connection with the execution and delivery of the: (a) 2016 Certificates of Participation, Series A, in the original principal amount of $12,645,000, all of which remain outstanding, and (b) 2016 Certificates of Participation, Series B, in the original principal amount of $17,470,000, of which $2,515,00 remain outstanding;
(ii) the City’s agreement to make semiannual lease payments to the Public Property Financing Corporation of California in connection with the Lease Agreement, dated as of August 1, 2016, representing lease payments with an original principal component in the amount of $2,730,900, of which $1,301,850 remains outstanding; and
(iii) the City’s 2019 Taxable Pension Obligation Bonds issued in the principal amount of $121,865,000, of which $108,530,000 remains outstanding.
See Note 6 in “APPENDIX A – CITY OF HAWTHORNE ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR YEAR ENDED JUNE 30, 2023.”
Retirement Pension Plans
This section contains certain information relating to the California Public Employees Retirement System (“CalPERS”). The information is derived from information produced by CalPERS, its independent accountants and actuaries. The City has not independently verified the information provided by CalPERS and makes no representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.
The annual comprehensive financial reports of CalPERS are available on its internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’s most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference herein.
Plan Descriptions. All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other). Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors two safety plans in safety risk pools. Benefit provisions under the Plan are established by State statute and the City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, 39 62908452.v3
assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov.
Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment.
Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits.
All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is one of the following: The Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA and may be amended by the California state legislature and in some cases require approval by the CalPERS Board.
The Plans’ provisions and benefits in effect at June 30, 2023, are summarized as follows:
Miscellaneous
Hire Date Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years’ service Benefit payments monthly for life monthly for life
Retirement age 50-55 52-57
Monthly benefits, as a % of eligible compensation 2.0% to 2.7% 1.0% to 2.5% Required employee contribution rates 7.710% 6.750%
Required employer contribution rates 12.34% 12.34%
Safety
Hire Date Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 3% @ 55 2.7% @ 57
Benefit vesting schedule 5 years service 5 years’ service Benefit payments monthly for life monthly for life
Retirement age 50 50-57
Monthly benefits, as a % of eligible compensation 3.0% 2.0% to 2.7% Required employee contribution rates 8.99% 13.75%
Required employer contribution rates 25.59% 13.98%
Employees Covered. At June 30, 2021 (valuation date), the following employees were covered by the benefit terms:
Miscellaneous Safety
Inactive employees or beneficiaries currently receiving benefits 348 238 Inactive employees entitled to but not receiving benefits 278 51 Active employees 174 89
Total 800 378
40 62908452.v3
Contributions. Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process.
The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2023, were $2,000,024.
For public agency cost-sharing plans covered by either the Miscellaneous or Safety risk pools, the Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2023, were $3,471,882. The actual employer payments of $2,851,665 made to CalPERS by the City during the measurement period ended June 30, 2022, differed from the City’s proportionate share of the employer’s contributions of $16,057,652 by $13,205,987 which is being amortized over the expected average remaining service lifetime in the Public Agency Cost-Sharing Multiple Employer Plan.
Net Pension Liability. The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021. A summary of principal assumptions and methods used to determine the net pension liability is as follows.
Actuarial Assumptions
Investment Rate of Return 6.90%
Inflation 2.30%
Salary Increases Varies by entry age and service
Mortality Rate Table (1) Derived using CalPERS’ Membership Data for all Funds Post Retirement Benefit Increase The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter _______________
(1) The mortality table used was developed based on CalPERS’ specific data. For more details on this table, please refer to the CalPERS experience study report on the CalPERS website.
The following table shows the changes in net pension liability over the measurement period.
Miscellaneous
Increase (Decrease)
41 62908452.v3
Total Pension
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability / (Asset)
(c) = (a) - (b)
Balance at: 6/30/2021 (Valuation Date) $214,090,005 $242,764,662 $(28,674,657) Changes Recognized for the Measurement Period:
• Service Cost
• Interest on the Total Pension Liability
• Changes of Assumptions
• Differences between Expected and Actual Experience
• Contributions from the Employer
• Contributions from Employees
• Net Investment Income
• Benefit Payments, including Refunds of Employee
Contributions
• Administrative Expense
2,662,009
14,801,624
6,297,331
(961,116)
--
--
--
--
(12,481,867)
--
--
--
--
--
1,599,394
984,017
(17,954,498)
--
(12,481,867)
(151,228)
2,662,009
14,801,624
6,297,331
(961,116)
(1,599,394)
(984,017)
17,954,498
--
--
151,228
Net Changes during 2020-21 $ 10,317,981 $ (28,004,182) $38,322,163 Balance at: 6/30/2022 (Measurement Date) $224,407,986 $214,760,480 $ 9,647,506 Safety
Increase (Decrease)
Plan Total
Pension Liability
(a)
Plan Fiduciary
Net Position
(b)
Plan Net Pension
Liability / (Asset)
(c) = (a) - (b)
Balance at: 6/30/2021 (MD) $240,341,030 $274,762,158 $(34,421,128) Balance at: 6/30/2022 (MD) 251,662,721 240,688,025 10,974,696 Net changes during 2021-22 $ 11,321,691 $ (34,074,133) $ 45,395,824 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension liability of each Plan as of the measurement date, calculated using the discount rate of 6.90 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90 percent) or 1 percentage-point higher (6.90 percent) than the current rate:
Discount Rate - 1%
(5.90%)
Current Discount Rate
(6.90%)
Discount Rate + 1%
(7.90%)
Miscellaneous Plan’s Net Pension Liability $38,342,320 $ 9,647,506 $(14,011,741) Safety Plan’s Net Pension Liability $45,728,925 $10,974,696 $(17,429,034) Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions. As of the start of the measurement period (July 1, 2021), the City’s total net pension asset was $63,095,785. For the measurement period ending June 30, 2022 (the measurement date), the City incurred a total pension expense of $52,521,784. A breakdown of the pension expense and deferred outflows and deferred inflows of resources related to each pension plan is as follows:
Miscellaneous
As of the start of the measurement period (July 1, 2021), the net pension asset is $28,674,657.
For the measurement period ending June 30, 2022 (the measurement date), the City incurred a pension expense of $3,831,825 for the miscellaneous plan. A complete breakdown of the pension expense is as follows:
Description Amount
Service Cost $2,662,009
42 62908452.v3
Interest on the Total Pension Liability 14,801,624
Recognized Changes of Assumptions 2,518,932
Differences between Expected and Actual Experience (60,064) Contributions - Employees (984,017)
Projected Earnings on Pension Plan Investments (16,384,694) Recognized Differences Between Projected and Actual
Earnings on Plan Investments 1,126,807
Administrative Expenses 151,228
Total Pension Expense $3,831,825
Safety
As of the start of the measurement period (July 1, 2021), the net pension asset for the safety plans was $(34,421,128). For the measurement period ending June 30, 2022 (the measurement date), the City incurred a pension expense of $48,689,959 for the safety plan.
As of June 30, 2023, the City has deferred outflows and deferred inflows of resources related to pensions as follows:
Miscellaneous Safety
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Differences between Expected and Actual Experience
Changes of Assumptions
Net Difference between Projected and Actual Earnings on Pension Plan Investments
Change in Employer’s Proportion
Difference in Actual vs Projected Contributions
Pension Contributions Subsequent to Measurement Date
$ 91,255
3,778,39
10,325,615
--
--
2,000,024
$ (576,670)
--
--
--
--
--
$ 454,203
1,106,582
1,733,058
26,152,682
12,945,934
3,471,882
$ (119,176)
--
--
--
(12,386,652)
(15,279,589)
--
$16,195,293 $(576,670) $45,864,341 $(27,785,417)
These amounts above are net of outflows and inflows recognized in the 2021-22 measurement period expense. The $2,000,024 and $3,471,882 reported as deferred outflows of resources related to the contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in upcoming fiscal year. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:
Fiscal Year
Ended June 30
Deferred Outflows (Inflows) of
Resources, Net
Miscellaneous Safety
2024 $3,706,266 $5,463,014
2025 2,386,937 4,765,684
2026 657,556 3,321,157
2027 6,867,840 1,057,187
Thereafter -- --
For additional information regarding the City’s retirement plans, including the long term expected rate of return, discount rate, amortization of deferred outflows and inflow of resources, and recognition of gains and losses, see Note 11 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix A.
43 62908452.v3
Other Post-Employment Benefits Other Than Pensions
Plan Description. The City provides certain postemployment health care benefits under a single employer defined benefit plan, in accordance with the various City Council Resolutions to the following three employee categories: general, fire and police.
General. All employees who have retired from a classification covered by the memorandum of understanding, are receiving retirement benefits from PERS, and have a minimum of 10 years of fulltime employment, are entitled to enroll in a PERS health plan. The City will reimburse an amount equal to the coverage for the plan in which the employee is enrolled. This benefit commences upon the employee's retirement date and ceases when the employee becomes ineligible for coverage under the PERS health benefits plan.
Fire. All employees who have retired from a classification covered by the memorandum of understanding, are receiving retirement benefits from PERS and have a minimum of 15 years of fulltime employment, are entitled to enroll in a PERS health plan. The City will reimburse an amount equal to the cost of the coverage for the plan in which the employee is enrolled. This benefit commences upon the employee's retirement date and ceases when the employee becomes ineligible for coverage under the PERS health benefits plan. The City began contracting with the County of Los Angeles beginning in February 1997. Therefore, this benefit pertained only to those employees retiring before February 1997.
Police. All employees who have retired, have at least 20 years of service in the Hawthorne Police Department, and have reached the age of 50, are entitled to enroll in a PERS health plan. The City will pay for health insurance for the retired employee and his or her dependent spouse or family less the retiree contribution of $14.15 per month for two-party coverage or $23.99 per month for family coverage.
A qualified retiree will be covered by this provision as long as he/she is eligible for PERS health insurance coverage. The dependent spouse of a qualified retiree shall be covered until he/she reaches the age of 65. Any employee who retires with less than the minimum requirements as noted above shall be offered the opportunity to continue their participation in the group health insurance (PERS) in effect at that time. The City does not provide dental, vision, Medicare Part B, or life insurance as part of the plan.
Employees Covered. As of the June 30, 2021 actuarial valuation, the following current and former employees were covered by the benefit terms under the Plan:
Active employees 260
Inactive employees or beneficiaries currently receiving benefits 273 Inactive employees entitled to but not yet receiving benefits 62 Total 595
Funding Policy. The contribution requirements of plan members and the City are established and may be amended by the City, City Council and/or the employee association. Currently, contributions are not required from plan members. If liquidation of the policy were to occur, the General Fund would be responsible for funding the outstanding OPEB liability.
The City pays for postemployment health insurance on a pay-as-you-go basis. For fiscal year 2022-23, the City paid $6,740,492 for other postemployment benefits, of which $3,240,492 was for health insurance benefits and $3,500,000 was for Trust contributions.
Total OPEB Liability. The City’s total OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation 44 62908452.v3
using the Alternative Measurement Method dated June 30, 2022 that was rolled forward to determine the June 30, 2022 total OPEB liability, based on certain actuarial methods and assumptions. For additional information regarding actuarial methods and assumptions used to determine the total OPEB liability, see Note 12 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix A.
The changes in the total OPEB liability for the Plan are as follows:
Total OPEB Liability
Balance at June 30, 2022 (6/30/2021 measurement date) $121,828,966 Changes recognized for the measurement period:
Service Cost 4,500,230
Interest on Total OPEB lability 2,693,466
Changes of assumptions (25,044,228)
Benefit Payments (3,263,442)
Net changes during 2022-23 (21,113,974)--
Balance at June 30, 2023 (6/30/2022 measurement date) $100,714,992 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2022:
1% Decrease
2.54%
Current Discount Rate
3.54%
1% Increase
4.54%
Total OPEB Liability $117,995,552 $100,714,992 $87,046,138 Sensitivity of the Total OPEB Liability to Changes in the Health Care Trend Rates The following presents the total OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2022:
1% Decrease
Current Healthcare
Cost Trend Rates 1% Increase
Total OPEB Liability $85,015,283 $100,714,992 $120,903,383 OPEB Plan Fiduciary Net Position
During the fiscal year ended June 30, 2023, the City began prefunding in the PARS Balanced Strategy with an initial contribution of $3,500,000 to a Section 115 OPEB trust in November 2022. Since the prefunding took place subsequent to the measurement date of June 30, 2022, the amount is not reflected in the plan’s fiduciary net position, rather it is shown as a deferred outflow on the governmentwide financial statements. 45 62908452.v3
For additional information regarding the City’s OPEB plan, including actuarial methods and assumptions used to determine the total OPEB lability, recognition of deferred outflows and inflows of resources, see Note 12 of the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix A.
Risk Management
The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The City established the Insurance Reserve Fund to self-insure for worker’s compensation and general liability coverage for up to a maximum of $500,000 for each workers' compensation claim and $500,000 for each general liability claim.
In 2006, the City joined Independent Cities Risk Management Authority (ICRMA), a joint powers authority of several California cities, for the purpose of pooling the City’s risk for general liability and workers’ compensation losses with those of other member cities. General liability claims that exceed the self-insured retention (SIR) are covered by ICRMA up to a maximum of $35nvest million per incident.
The City purchase commercial insurance for claims in excess of coverage provide by its SIR for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years.
All funds of the City except the fiduciary funds participate in the program and make payments to the fund based on actuarial estimates of the amounts needed to pay prior year and current year claims.
The claims liability of $5,577,645 reported in the Insurance Reserve Fund at June 30, 2023, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
Changes in the Insurance Reserve Fund's claims liability amounts in the fiscal years 2020-21, 2021-22, and 2022-23, were as follows:
Fiscal
Year
Beginning
Balance
Changes in
Estimates
Claims
Payments
Ending
Balances
Due Within
One Year
2020-21 $2,973,235 $2,718,450 $(1,379,301) $4,312,384 $ 862,477 2021-22 4,312,384 1,527,798 -- 5,840,185 1,168,036
2022-23 5,840,182 -- (262,537) 5,577,645 1,115,529
BONDOWNERS’ RISKS
INVESTMENT IN THE BONDS INVOLVES ELEMENTS OF RISK. THE FOLLOWING
SECTION DESCRIBES CERTAIN SPECIFIC RISK FACTORS AFFECTING THE PAYMENT AND SECURITY OF THE BONDS. THE FOLLOWING DISCUSSION OF RISKS IS NOT MEANT TO BE AN
EXHAUSTIVE LIST OF THE RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS AND
THE ORDER OF DISCUSSION OF SUCH RISKS DOES NOT NECESSARILY REFLECT THE RELATIVE IMPORTANCE OF THE VARIOUS RISKS. POTENTIAL INVESTORS ARE ADVISED TO
CONSIDER THE FOLLOWING FACTORS ALONG WITH ALL OTHER INFORMATION IN THIS OFFICIAL STATEMENT IN EVALUATING THE BONDS. THERE CAN BE NO ASSURANCE THAT
OTHER RISK FACTORS NOT DISCUSSED UNDER THIS CAPTION WILL NOT BECOME MATERIAL IN THE FUTURE.
46 62908452.v3
No Pledge of Taxes
General. The obligation of the City to pay the Base Rental and Additional Rental payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Rental and Additional Rental payments does not constitute a debt or indebtedness of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
The City is currently liable on other obligations payable from general revenues, which are described above under “CITY FINANCIAL INFORMATION – General Fund Long-Term Obligations.” Limitations on Taxes and Fees. Certain taxes, assessments, fees and charges presently imposed by the City could be subject to the voter approval requirements of Article XIIIC and Article XIIID of the State Constitution. Based upon the outcome of an election by the voters, such fees, charges, assessments and taxes might no longer be permitted to be imposed, or may be reduced or eliminated and new taxes, assessments fees and charges may not be approved. The City has assessed the potential impact on its financial condition of the provisions of Article XIIIC and Article XIIID of the State Constitution respecting the imposition and increase of taxes, fees, charges and assessments and does not believe that an election by the voters to reduce or eliminate the imposition of certain existing fees, charges, assessments and taxes would substantially affect its financial condition. However, the City believes that if the initiative power was exercised so that all local taxes, assessments, fees and charges that may be subject to Article XIIIC and Article XIIID of the State Constitution are eliminated or substantially reduced, the financial condition of the City, including its General Fund, could be materially adversely affected.
Although the City does not currently anticipate that the provisions of Article XIIIC and Article XIIID of the State Constitution would adversely affect its ability to pay Base Rental and its other obligations payable from the General Fund, no assurance can be given regarding the ultimate interpretation or effect of Article XIIIC and Article XIIID of the State Constitution on the City’s finances.
See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Abatement
In the event of loss or substantial interference in the use and possession by the City of all or any portion of the Leased Property caused by material damage, title defect, destruction to or condemnation of the Leased Property, Base Rental payments will be subject to abatement. Such abatement will continue until the restoration of the Leased Property to tenantable condition. See “SECURITY FOR THE BONDS – Abatement.” In the event that such component of the Leased Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of in which proceeds of rental interruption insurance, if any, will be available in lieu of Base Rental, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such component of the Leased Property or prepayment of the Bonds, there could be insufficient funds to make payments to Owners in full. It is not always possible to predict the circumstances under which abatement of rental may occur. In addition, there is no statute, case or other law specifying how such an abatement of rental should be measured. For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter, it may be that the value of the Leased Property is substantially higher or lower than its value at the time of issuance of the Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the Bonds.
If damage, destruction, title defect or eminent domain proceedings with respect to the Leased Property results in abatement of the Base Rental payments related to such Leased Property and if such 47 62908452.v3
abated Base Rental payments, if any, together with moneys from rental interruption or use and occupancy insurance, if any, (in the event of any insured loss due to damage or destruction), and eminent domain proceeds, if any, are insufficient to make all payments of principal and interest with respect to the Bonds during the period that the Leased Property is being replaced, repaired or reconstructed, then all or a portion of such payments of principal and interest may not be made.
Reduction in Base Rental payments due to abatement as provided in the Sublease does not constitute a default thereunder, and no remedy is available to the Bond Owners under the Sublease or the Indenture for nonpayment under such circumstances. See APPENDIX C.
Limited Recourse on Sublease Default
If an event of default occurs and is continuing under the Sublease, there is no remedy of acceleration of any Base Rental Payment which have not come due. The remedies provided for in the Sublease include, in addition to all other remedies provided at law, reletting the Leased Property or, without terminating the Sublease, collecting each installment of rent as it becomes due and holding the City liable therefor. If the Trustee does not terminate the Sublease, the Trustee may be required to seek a separate judgment each year for that year’s defaulted Base Rental Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds or property needed to serve the public welfare and interest could prove both expensive and time-consuming.
The Sublease permits the Trustee, as the Authority’s assignee, to take possession of and re-let the Leased Property in the event of a default by the City under the Sublease. However, due to the fact that the Leased Property serves essential governmental purposes, a court may determine to not permit such remedy to be exercised. Even if such remedy may be exercised, no assurance can be given that the Trustee could readily relet the Leased Property for rents which are sufficient to enable it to pay debt service on the Bonds in full when due.
Limitations on Remedies for Bondholders
Remedies available to the owners of the Bonds upon the occurrence of an event of default under the Sublease or the Indenture may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest and premium, if any, on the Bonds or to preserve the taxexempt status of interest on the Bonds. Remedies are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.
In addition to the limitations on Bondowner remedies contained in the Sublease and the Indenture, the rights and obligations under the Bonds, the Sublease and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights.
The opinion to be delivered by Bond Counsel, concurrently with the issuance of the Bonds, will include a qualification that the rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture, the Sublease and the Lease may be subject to bankruptcy, insolvency, reorganization, 48 62908452.v3
moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases. See “APPENDIX E — FORM OF OPINION OF BOND COUNSEL.” Limited Obligations with Respect to the Bonds
The Bonds are limited obligations of the Authority payable solely from and secured by a pledge of Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of Base Rental Payments payable by the City under the Sublease and amounts on deposit from time to time in the funds and accounts held by the Trustee. If for any of the reasons described herein, or for any other reason, the Revenues collected under the Sublease are not sufficient to pay debt service on the Bonds, the Authority will not be obligated to utilize any other of its funds, other than amounts on deposit in the funds and accounts established under the Indenture, to pay debt service on the Bonds.
The Authority has no taxing power. The obligation of the City to make Rental Payments under the Sublease does not constitute an obligation of the City which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Rental Payments under the Sublease constitutes an indebtedness of the City, State or any of its political subdivisions within the meaning of any constitutional or statutory debt limitations.
Additional Obligations of the City
General. The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the Bonds, and may in the future be subject to liabilities payable from the general fund (some of which are described below). To the extent that additional obligations are incurred by (or imposed upon) the City, the funds available to pay Base Rental payments may be decreased.
The Base Rental payments and other payments due under the Sublease (including payment of costs of repair and maintenance of the Leased Property, taxes and other governmental charges levied against the Leased Property) are payable from funds lawfully available to the City. If the amounts that the City is obligated to pay in a fiscal year exceed the City’s revenues for such year, the City may choose to make some payments rather than making other payments, including Base Rental and Additional Rental payments, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare.
Litigation. The City is subject to litigation arising in the normal course of business, the costs of which may be payable from the General Fund. See “LITIGATION.” CalPERS Obligations. Many cities and other local agencies in the State have been faced with increased payments due to CalPERS in recent years. The City, like many other cities and local agencies in the State, is responsible for payments to CalPERS for its share of employee pension costs.
Amounts owed to CalPERS for pension costs have increased in recent years and are expected to continue to increase, as CalPERS implements changes to its discount rate and other methodologies for calculating pension costs. See “CITY FINANCIAL INFORMATION – Employee Retirement System; CalPERS,” above, for additional information.
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Transient Occupancy Taxes
Transient occupancy tax revenues are typically the biggest source of General Fund revenue to the City. Transient occupancy tax revenues are based upon hotel and motel room night occupancy rates and room-night pricing, which could be impacted by a variety of factors.
For example, before final maturity of the Bonds, the City may enter into an economic recession.
In times of economic recession, overnight travel involving hotel and motels may decline and/or the pricing of hotel and motel room nights may decline, and such a decline would cause the transient occupancy tax revenues received by the City to also decline.
Natural disasters, weather and public health emergencies can also affect tourism activity in the City, which could potentially have a material adverse impact on the City’s receipt of TOT revenues. For example, fires near to the City and/or Highway 50 (the main highway into the City) have reduced TOT revenues in the past and future similar events could result in decreased TOT revenues in the future. In addition, the COVID-19 pandemic lock-down orders reduced TOT revenues, until those orders were lifted.
In addition, changes or amendments in the laws applicable to the City’s receipt of sales tax revenues, whether implemented by State legislative action or voter initiative, could have an adverse effect on transient occupancy tax revenues received by the City. For example, in November 2018, voters in the City passed Measure T, which severely restricted the number of vacation rental homes in the City. See “CITY FINANCIAL INFORMATION – Transient Occupancy Taxes” for additional details.
Sales Taxes
Sales tax revenues are the largest source of revenue to the City. Sales tax revenues are based upon the gross receipts of retail sales of tangible goods and products by retailers with taxable transactions in the City, which could be impacted by a variety of factors. For example, before final maturity of the Bonds, the City may enter into an economic recession. In times of economic recession, the gross receipts of retailers often decline, and such a decline would cause the sales tax revenues received by the City to also decline.
In addition, changes or amendments in the laws applicable to the City’s receipt of sales tax revenues, whether implemented by State legislative action or voter initiative, could have an adverse effect on sales tax revenues received by the City. For example, many categories of transactions are exempt from the statewide sales tax, and additional categories could be added in the future. Currently, most sales of food products for human consumption are exempt; this exemption, however, does not apply to liquor or to restaurant meals. The rate of sales tax levied on taxable transactions in the City or the fee charged by the CDTFA for administering the City’s sales tax could also be changed.
Property Taxes
Property taxes are a significant source of General Fund revenue to the City. Certain risks associated with property tax revenues follow.
Levy and Collection. The City does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the City’s property tax revenues, and accordingly, could have an adverse impact on the ability of the City to make Base Rental payments. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the City’s ability to pay principal of and interest on the Bonds when due.
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Reduction in Inflationary Rate. Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining assessed value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation a limited number of times.
The City is unable to predict if any adjustments to the full cash value base of real property within the City, whether an increase or a reduction, will be realized in the future.
Appeals of Assessed Values. There are two types of appeals of assessed values that could adversely impact property tax revenues:
Proposition 8 Appeals. Most of the appeals that might be filed in the City would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property must be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value.
Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value.
These market-driven appeals are known as Proposition 8 appeals.
Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
Base Year Appeals. A second type of assessment appeal is called a base year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the “base year” value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.
No assurance can be given that property tax appeals in the future will not significantly reduce the City’s property tax revenues.
Natural Calamities
General. Natural disasters could affect economic activity in the City, and could have a negative impact on City finances. There can be no assurance that the occurrence of any natural calamity would not cause substantial interference to and costs for the City or impact the Leased Property.
The occurrence of any natural calamity, including but not limited to an earthquake, uncontrolled fire or a major flood, may result in the substantial interference with the use and occupancy of the Leased 51 62908452.v3
Property, which could result in Base Rental Payments being subject to abatement. Under such circumstances, no assurance can be given that the City would have insurance or other resources available to make repairs to the Leased Property or to make Base Rental Payments under the Sublease.
Earthquakes. Like most of the State, the City is located in a seismically active area. If there were to be an occurrence of severe seismic activity in the area of the City, such an occurrence may adversely affect economic activity in the City, and could have a negative impact on City finances. The City could be at risk from strong ground motion and secondary effects related to a seismic event, including ground failure (such as landslide, liquefaction, lateral spreading, lurching and differential settlement) and seismically induced flooding (such as flooding from a tsunami or dam failure).
The City is part of the seismically active Southern California region, probably best known for the 750-mile long San Andreas Fault, which stretches from the Mexican Border to San Francisco. The City is bounded on the southwest by the Palos Verdes Fault and on the west the Newport-Inglewood Fault.
Both faults are less than five miles from the City. No Alquist-Priolo Special Studies Zones have been designated within the city limits. Much of Hawthorne lies atop late Quaternary (Pleistocene) compactto-very-dense deposits of gravel, silt, and clay. The City is not required to maintain earthquake insurance under the Sublease. Rental interruption insurance will not cover interruption of Base Rental Payments due to an earthquake.
Droughts. California is subject to droughts from time-to-time. In April 2015, for the first time in California’s history, Governor Brown directed the State Water Resources Control Board to implement mandatory water reductions in cities and towns across California to reduce water usage by 25%.
Following a wet winter in 2016-17, most of the mandatory water reductions were lifted, only to return again in 2021 and 2022 following unusually dry years. Customers in the City are subject to certain mandatory water reductions imposed by State and local water agencies.
Climate Change. City finances may be negatively impacted by climate change. Local impacts of climate change are not definitive, but parcels in the City could experience changes to local and regional weather patterns; increased risk of flooding; and water restrictions.
Risk of Uninsured Loss
The City covenants under the Sublease to maintain certain insurance policies on the Leased Property. These insurance policies do not cover all types of risk. The Leased Property could be damaged or destroyed due to a casualty for which the Leased Property is uninsured. Additionally, the Leased Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. There can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Property will be sufficient to redeem the Bonds.
Public Health Emergencies
In recent years and as a result of the COVID-19 pandemic, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. Pandemic diseases arising in the future could have significant adverse health and financial impacts throughout the world, leading to loss of jobs and personal financial hardships, and/or actions by federal, State and local governmental authorities to contain or mitigate the effects of an outbreak.
There can be no assurances that future public health emergencies and/or responses intended to slow the spread of disease, such as limiting business and travel activity, will not materially adversely 52 62908452.v3
impact the state and national economies and, accordingly, materially adversely impact the financial condition of the City and the City’s General Fund in the future. In addition, the City may experience increased personnel costs and/or reduced revenues due to the occurrence of future disease emergencies and the related impacts on economic and other activity in and around the City.
Cyber Security
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. The City employs a multi-level cyber protection scheme that includes network firewalls, server and personal computer level antivirus software, antispam/malware software, e-mail protection and intrusion protection. The City carries cybersecurity insurance. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity systems that are in place.
However, no assurance can be given that the City’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, or the administration of the Bonds. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector and other authorities for the levy and collection of taxes, and the Trustee. No assurance can be given that the City and/or the other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners.]
State Finances
The State’s financial condition and budget policies affect communities and local public agencies throughout California. State budgets are affected by regional, national or even international economic conditions and a multitude of other factors over which the City has no control. The City cannot give any assurances regarding the financial conditions of the State during any period of time. Some of the State’s budget solutions have caused in the past, and may cause in the future, increased financial stress to cities, counties and other local governments by: (i) decreasing local revenues (for example, the property tax, road improvement funding, public safety or other categorical funded initiatives), or (ii) increasing directly or indirectly demand for local programs (such as public safety or indigent health programs). In recent years, the State has faced significant financial and budgetary stress. AB X1 26 enacted in 2011, pursuant to which all redevelopment agencies in the State were dissolved, was enacted during the fiscal year 2011-12 budget process and was just one example where cities and counties throughout the State were significantly impacted. Even though California has experienced significantly improved fiscal condition during the past few fiscal years, the State is still facing continuing financial challenges and unfunded long-term liabilities.
According to the State Constitution, the Governor is required to propose a budget to the State Legislature by no later than January 10 of each year, and a final budget must be adopted by the vote of each house of the Legislature no later than June 15, although this deadline has been frequently breached in the past. Before fiscal year 2010-11, the State budget had to be adopted by a two-thirds vote of each house of the State Legislature. However, in November 2010, the voters of the State passed Proposition 25, which reduced the vote required to adopt a budget to a majority vote of each house and which provided that there would be no appropriation from the current budget or future budget to pay any salary or reimbursement for travel or living expenses for members of the Legislature for the period during which the budget was presented late to the Governor. The State budget becomes law upon the signature of the Governor, who may veto specific items of expenditure.
The Governor signed the fiscal year 2024-25 State budget on June 24, 2023. The City does not anticipate any material adverse effect on the City’s finances based on the fiscal year 2024-25 State 53 62908452.v3
budget. The City also cannot predict what measures the State will adopt to respond to any future financial difficulties. The City can provide no guarantees regarding the outcome of future State budget negotiations, the actions that will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures, or the impact that such budgets or actions will have on the City’s finances and operations.
Information about the State budget and State spending is available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the State Department of Finance, www.dof.ca.gov. An analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various official statements for State-issued bonds, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov. None of the websites referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The City makes no representation concerning, and does not take any responsibility for, the accuracy or timeliness of information posted on such websites or the continued maintenance of such websites by the respective entities.
Investment of Funds
All moneys in any of the funds or accounts held under the Indenture may be invested in Permitted Investments as provided under the Indenture. See “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” All investments, including Permitted Investments, authorized by law from time to time for investments by the Authority contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, decline in market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Indenture could have a material adverse effect on the security for the Bonds.
Future Initiative and Legislation
As discussed below under “LIMITATIONS ON TAX REVENUES AND APPROPRIATIONS,” the California’s Constitutional initiative process has resulted in the adoption of measures which pose certain limits on the ability of cities and local agencies to generate revenues, through property taxes or otherwise. From time to time, other initiative measures could be adopted, affecting the City’s ability to generate revenues and to increase appropriations. No assurances can be given as to the potential impact of any future initiative or legislation on the finances and operations of the City.
Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the City have covenanted to comply with the applicable requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended, relative to arbitrage and avoidance of characterization as private activity bonds, among other things. The interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Bonds as a result of acts or omissions of the Authority and/or the City in violation of their covenants. Should such an event of taxability occur, the Bonds are not subject to acceleration, redemption or any increase in interest rates and will remain Outstanding until maturity or until redeemed under one of the redemption provisions contained in the Indenture. See “TAX MATTERS.”
Secondary Market for Bonds
There can be no assurance that there will be a secondary market for the Bonds, or if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general 54 62908452.v3
market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated.
Additionally, pricing of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could substantially differ from the original purchase price.
LIMITATIONS ON REVENUES AND APPROPRIATIONS
There are a number of provisions in the State of California Constitution that limit the ability of the City to raise and expend revenues. Contained below is a description of some of these limitations.
In addition to the ones discussed in this section below, other initiative measures could be adopted from time to time further affecting the City’s revenues and finances.
Property Tax Limitations - Article XIIIA
California voters, on June 6, 1978, approved an amendment (commonly referred to as “Proposition 13” or the “Jarvis-Gann Initiative”) to the California Constitution. This amendment, which added Article XIIIA to the California Constitution, among other things, affects the valuation of real property for the purpose of taxation in that it defines the full cash value of property to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or any reduction in the consumer price index or comparable local data, or any reduction in the event of declining property value caused by damage, destruction or other factors.
Article XIIIA further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978. In addition, an amendment to Article XIII was adopted in August 1986 by initiative that exempts from the one percent limitation any bonded indebtedness approved by two-thirds of the votes cast by voters for the acquisition or improvement of real property.
On December 22, 1978, the California Supreme Court upheld the amendment over challenges on several state and federal constitutional grounds (Amador Valley Joint Union School District v. State Board of Equalization).
In the general election held on November 4, 1986, voters of the State of California approved two measures, Propositions 58 and 60, which further amended Article XIIIA. Proposition 58 amended Article XIIIA to provide that the terms “purchased” and “change of ownership,” for purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. Proposition 60 amended Article XIIIA to permit the Legislature to allow persons over age 55 who sell their residence to buy or build another of equal or lesser value within two years in the same county, to transfer the old residence’s assessed value to the new residence. Pursuant to Proposition 60, the Legislature has enacted legislation permitting counties to implement the provisions of Proposition 60.
Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in certain other minor or technical ways. 55 62908452.v3
Article XIIIA Implementing Legislation
Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1978.
Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based on their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.
Beginning in the 1981-82 fiscal year, assessors in California no longer record property values on tax rolls at the assessed value of 25 percent of market value, which was expressed as $4 per $100 of assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. Unless otherwise noted, all taxable property value included in this Official Statement (unless noted differently) is shown at 100 percent of market value and all tax rates reflect the $1 per $100 of taxable value.
Challenges to Article XIIIA
California trial and appellate courts have upheld the constitutionality of Article XIIIA’s assessment rules in three significant cases. The United States Supreme Court, in an appeal to one of these cases, upheld the constitutionality of Article XIIIA’s tax assessment system. The City cannot predict whether there will be any future challenges to California’s present system of property tax assessment and cannot evaluate the ultimate effect on the City’s receipt of property tax revenues should a future decision hold unconstitutional the method of assessing property.
Appropriations Limitations: Article XIIIB
On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which added Article XIIIB to the California Constitution. Article XIIIB limits the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the government entity. The “base year” for establishing such appropriations limit is the 1978-79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Revenues received in excess of the appropriations limit must be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years.
Propositions 218 and 26: Article XIIIC and Article XIIID On November 5, 1996, California voters approved Proposition 218, “the Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the California Constitution, providing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments, and property-related fees and charges.
The general financial condition of the City may be affected by provisions of Article XIIIC and Article XIIID. In particular, provisions of Article XIIIC (i) require taxes for general governmental purposes to be approved by a majority vote and taxes for specific purposes, even if deposited into the General Fund, to be approved by two-thirds vote, (ii) require any general purpose tax which the City imposed, extended or increased, without voter approval, after December 31, 1994, to be approved by majority 56 62908452.v3
vote on November 5, 1998 and (iii) provide that all taxes, assessments, fees and charges to reduction or repeal at any time through the initiative process, subject to overriding constitutional principles relating to the impairment of contracts. Provisions of Article XIIID that affect the ability of the City to fund certain services or programs that it may be required or choose to fund include (ii) adding notice, hearing, protest and, in some cases, voter approval requirements to impose, increase or extend certain assessments, fees and charges and (ii) adding stricter requirements for finding individualized benefits associated with such levies.
On November 2, 2010, California voters approved Proposition 26, the "Supermajority Vote to Pass New Taxes and Fees Act." Relevant to local governments, Proposition 26 amended Article XIIIC of the California Constitution by adding an expansive definition for the term "tax," which previously was not defined under the California Constitution. As a result, Proposition 26 requires a local government to obtain two-thirds voter approval for many fees, charges and levies that a local government was previously authorized to adopt by a majority vote of its legislative body. Specifically, Proposition 26 defines a "tax" as any levy, charge, or exaction of any kind imposed by a local government except those enumerated in seven specified exceptions, as follows:
(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege. (2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.
(3) A charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof. (4) A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property.
(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law. (6) A charge imposed as a condition of property development. (7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D.
In the event that the City cannot properly impose a charge, which constitutes a “tax” pursuant to Article XIII, the City would have to choose whether to reduce or eliminate the services financed by such tax or to finance such services from its General Fund. The foregoing discussion of Proposition 218 should not be considered an exhaustive or authoritative treatment of the provisions of Proposition 218 or the possible effects of Propositions 218 or 26. Interim rulings, final decisions, legislative proposals and legislative enactments affecting Propositions 218 and 26 may impact the City’s ability to make Rental Payments. The City does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity related to these issues.
Proposition 62
On November 4, 1986, California voters adopted Proposition 62, which requires that (i) any local tax for general governmental purposes (a “general tax”) must be approved by a majority vote of the 57 62908452.v3
electorate; (ii) any local tax for specific purposes (a “special tax”) must be approved by a two-thirds vote of the electorate; (iii) any general tax must be proposed for a vote by two-thirds of the legislative body; and (iv) proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency’s property tax allocation.
Most of the provisions of Proposition 62 were affirmed by the 1995 California Supreme Court decision in Los Angeles County Local Transportation Authority v. Guardino, which invalidated a special sales tax for transportation purposes because fewer than two-thirds of the voters voting on the measure had approved the tax. The City does not believe any of the taxes constituting City revenues are levied in violation of Proposition 62.
Unitary Property
AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property”), commencing with the 1988-89 fiscal year, will be allocated as follows: (i) each jurisdiction will receive up to 102 percent of its prior year State-assessed revenue; and (ii) if county-wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102 percent of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or benefit of the excess revenues by a specified formula.
This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any Stateassessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county.
ABSENCE OF LITIGATION
To the Authority’s and the City’s knowledge, there is no litigation pending or threatened to restrain or enjoin the issuance, execution or delivery of the Bonds, to contest the validity of the Bonds, the Indenture, the Lease, the Sublease or any proceedings of the City or the Authority with respect thereto. In the opinion of the Authority and its counsel, there is no lawsuit or claim pending against the Authority which will materially impair the Authority’s ability to enter into the Indenture or restrain or enjoin the collection of Revenues as contemplated therein. In the opinion of the City and its counsel, there is no lawsuit or claim pending against the City which will materially impair the City’s ability to enter into the Sublease or restrain or enjoin the payment of Base Rental Payments.
CONTINUING DISCLOSURE
The City has undertaken for the benefit of holders and beneficial owners of the Bonds to provide certain financial information relating to the City and other data by not later March 1 of each year (the “Annual Report”), commencing March 1, 2025 with the report for the 2023-24 fiscal year, and to provide notices of the occurrence of certain enumerated events. The Annual Report, and any notice of material event will be filed by the City or Digital Assurance Certification, LLC, as the Dissemination Agent on behalf of the City, with the Municipal Securities Rulemaking Board, through its Electronic Municipal Market Access System (referred to as “EMMA”), at www.emma.msrb.org. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in “APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT.” This undertaking has been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the “Rule”) promulgated by the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended.
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A failure by the City to comply with the provisions of the Continuing Disclosure Agreement is not an event of default under the Indenture (although the holders and beneficial owners of the Bonds do have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds.
Therefore, a failure by the City to comply with the provisions of the Continuing Disclosure Agreement may adversely affect the marketability of the Bonds on the secondary market.
A review of the City’s prior compliance with its continuing disclosure obligations under the Rule reveals several instances of filing delays with its continuing disclosure requirements during the past five years. The City has adopted a continuing disclosure policy and will work closely with the Dissemination Agent to ensure timely compliance of annual reports in the future.
LEGAL MATTERS
The legality of the issuance of the Bonds is subject to the approval of Nossaman LLP, Los Angeles, California, Bond Counsel. Bond Counsel’s opinions with respect to the Bonds will be substantially in the forms set forth in APPENDIX B of this Official Statement.
TAX MATTERS
The Internal Revenue Code of 1986, as amended (the “Code”), establishes certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to their date of issue. These requirements include, but are not limited to, provisions which limit how the proceeds of the Bonds may be spent and invested, and generally require that certain investment earnings be rebated on a periodic basis to the United States of America. The City and the Authority have made certifications and representations and have covenanted to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103 of the Code.
In the opinion of Nossaman LLP, Bond Counsel, under existing law and assuming the accuracy of such certifications and representations by, and compliance with such covenants of, the City and the Authority, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax; however, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from State of California personal income taxes. Bond counsel expresses no opinion as to any other tax consequences regarding the Bonds.
Under the Code, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding these and other such consequences. 59 62908452.v3
Bond Counsel has not undertaken to advise in the future whether any circumstances or events occurring after the date of issue of the Bonds may affect the tax status of interest on the Bonds.
Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the California legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issue of the Bonds, will not eliminate, or directly or indirectly reduce the benefit of the exclusion of interest on the Bonds from gross income for federal income tax purposes, or have an adverse effect on the market value or marketability of the Bonds. Investors should consult their own financial and tax advisors to analyze the importance of these risks.
For example, federal tax legislation enacted on December 22, 2017, reduced corporate tax rates, modified individual tax rates, eliminated many deductions, and generally eliminated the taxexempt advance refunding of tax-exempt bonds and other tax advantaged bonds, among other things.
In addition, investors in the Bonds should be aware that future legislative actions might increase, reduce, or otherwise change (including retroactively) the financial benefits and the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be adversely affected and the ability of holders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change.
Certain requirements and procedures contained or referred to in relevant documents may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as to any Bond, or the interest thereon, if any such change occurs or action is taken upon the advice or approval of bond counsel other than Nossaman LLP.
If the issue price of a Bond (the first price at which a substantial amount of the bonds of a maturity are sold to the public) is less than the stated redemption price at maturity of such Bond, the difference constitutes original issue discount, the accrual of which is excluded from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant yield method over the term of each such Bond and the basis of each Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Bonds. Purchasers who acquire Bonds with original issue discount are advised that they should consult with their own independent tax advisors with respect to the state and local tax consequences of owning such Bonds.
If the issue price of a Bond is greater than the stated redemption price at maturity of such Bond, the difference constitutes original issue premium, the amortization of which is not deductible from gross income for federal income tax purposes. Original issue premium is amortized over the period to maturity of such Bond based on the yield to maturity of that Bond (or, in the case of a Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Bond), compounded semiannually. For purposes of determining gain or loss on the sale or other disposition of such Bond, the purchaser is required to decrease such purchaser’s adjusted basis in such Bond by the amount of premium that has amortized to the date of such sale or other disposition. As a result, a purchaser may realize taxable gain for federal income tax purposes from the sale or other disposition of such Bond for an amount equal to or less than the amount paid by the purchaser for that Bond. A purchaser of that Bond in the initial public offering at 60 62908452.v3
the issue price for that Bond who holds it to maturity (or, in the case of a callable Bond, to its earlier call date that results in the lowest yield on that Bond) will realize no gain or loss upon its retirement.
Payments of interest on tax-exempt obligations, including the Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If an owner of a Bond is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes.
Prospective purchasers of the Bonds should consult their own independent tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Bonds at other than their original issuance at the respective prices indicated on the inside cover of this Official Statement should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion.
Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City, the Authority or the owners of the Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the Authority as the taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to participate in the audit or to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market value of the Bonds.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX B.
MUNICIPAL ADVISOR
The City has retained CSG Advisors Incorporated, San Francisco, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
CSG Advisors Incorporated, is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
UNDERWRITING
Samuel A. Ramirez & Co., Inc., as underwriter (the “Underwriter”), has agreed, subject to certain conditions, to purchase the Bonds at a purchase price of $__ (equal to the principal amount of the Bonds, [plus/less] original issue [premium/discount] of $__ and less an underwriter’s discount of $_).
The Underwriter intends to offer the Bonds to the public initially at the prices set forth on the inside cover page of this Official Statement, which prices may subsequently change without any requirement of prior notice.
RATINGS
S&P Global Ratings (“S&P”) has assigned its rating of “__” to the Bonds. Such rating reflects only the views of S&P and any explanation of the significance of such ratings may be obtained only from S&P. Generally, a rating agency bases its rating on the information and materials furnished to it 61 62908452.v3
and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward, suspended, or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision, suspension or withdrawal of the rating may have an adverse effect on the market price of the Bonds.
FINANCIAL STATEMENTS
The City’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2023 (the “ACFR”), attached as Appendix A hereto, was audited by Rogers, Anderson, Malody & Scott, LLP, San Bernardino, California (the “Auditor”). The Auditor was not requested to consent to the inclusion of its report in Appendix A and it has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness, or fairness of the statements made in the Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to its report. See “APPENDIX A – CITY OF HAWTHORNE ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2023.”
MISCELLANEOUS
All of the preceding description and summaries of the Bonds, the Indenture and the Sublease, other applicable agreements, legislation and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.
The Authority and the City have duly authorized the execution and delivery of this Official Statement by their duly authorized officers.
HAWTHORNE PUBLIC FINANCING AUTHORITY
By:
Vontray Norris
Executive Director
CITY OF HAWTHORNE
By:
Vontray Norris
City Manager
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APPENDIX A
CITY OF HAWTHORNE ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR YEAR ENDED JUNE 30, 2023
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APPENDIX B
FORM OF OPINION OF BOND COUNSEL
Upon issuance and delivery of the Bonds, Nossaman LLP, as Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[closing date], 2024
Hawthorne Public Financing Authority
4455 West 126th Street
Hawthorne, California 90250
Opinion of Bond Counsel
with reference to
$_____
Hawthorne Public Financing Authority
Lease Revenue Bonds
Series 2024
Ladies and Gentlemen:
We have examined (i) a record of proceedings relating to the issuance of the abovecaptioned Series 2024 Bonds (the “Bonds”) of the Hawthorne Public Financing Authority, a joint powers authority (the “Authority”), (ii) the Indenture, dated as of September 1, 2024 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), (iii) the Lease Agreement, dated as of September 1, 2024 (the “Lease”), by and between the City of Hawthorne (the “City”) and the Authority, (iv) the Sublease, dated as of September 1, 2024 (the “Sublease”), by and between the Authority and the City, (v) the Assignment Agreement, dated as of September 1, 2024 (the “Assignment Agreement”), by and between the Authority and the Trustee; and (vi) such other matters of law as we have deemed necessary to enable us to render the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon such certificates and documents without undertaking to verify the same by independent investigation. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Indenture.
The Bonds are issued under and pursuant to the Indenture, the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, as amended (the “Act”), including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act. The Bonds are issued for the purpose of assisting the City in financing the costs of design, construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvement projects.
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Based upon such examination, we are of the opinion under existing law that:
1. The Indenture has been duly and lawfully authorized, executed and delivered by the Authority. Assuming due authorization, execution and delivery by the Trustee, the Indenture is in full force and effect in accordance with its terms and is valid and binding upon the Authority and enforceable in accordance with its terms. The Indenture creates the valid pledge which it purports to create of the Revenues and certain funds established by the Indenture (including the investments, if any, thereof), subject to the provisions of the Indenture permitting the application thereof for the purposes, and on the terms and conditions set forth in the Indenture.
2. The Authority is duly authorized and entitled to issue the Bonds. The Bonds have been duly and validly authorized and issued by the Authority in accordance with the Constitution and statutes of the State of California, including the Act, and in accordance with the Indenture.
The Bonds constitute the valid and binding obligations of the Authority as provided in the Indenture, are enforceable in accordance with their terms and the terms of the Indenture and entitled to the benefits of the Act and the Indenture. The Bonds are not an obligation of the State of California, any public agency thereof (other than the Authority), or any member of the Authority and neither the faith and credit nor the taxing power of the State of California or any public agency thereof or any member of the Authority is pledged for the payment of the Bonds. The Authority has no taxing power.
3. The Authority and the City have duly authorized, executed and delivered the Lease, the Sublease, and the Assignment Agreement, as applicable. The Lease and the Sublease constitute the valid and binding agreements of the Authority and the City enforceable according to their respective terms. The obligation of the City to make Base Rental Payments during the term of the Sublease constitutes a valid and binding obligation of the City, payable from funds of the City lawfully available therefor, and does not constitute a debt of the City or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any form of taxation.
4. Interest on the Bonds is exempt from personal income taxes of the State of California.
5. Assuming compliance with the covenants described below, interest on the Bonds is excluded from gross income for federal income tax purposes. The Bonds are not “specified private activity bonds” within the meaning of Section 57(a)(5) of the Internal Revenue Code of 1986, as amended (the “Code”) and, therefore, interest on the Bonds will not be treated as an item of tax preference for purposes of the federal individual alternative minimum tax, although we observe that, for tax years beginning after December 31, 2022, such interest included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax.
The Code sets forth certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issue of the Bonds. The City has covenanted to satisfy, or take such actions as may be necessary to cause to be satisfied, each provision of the Code necessary to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103(a) of the Code.
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Certain requirements and procedures contained or referred to in the Indenture and other relevant documents may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. We express no opinion as to any Bond, or the interest thereon, if any change occurs or action is taken or omitted upon the advice or approval of any counsel other than ourselves.
Except as stated in the foregoing paragraphs numbered 4 and 5 and the paragraph immediately following paragraph 5, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds.
The opinions expressed herein are qualified to the extent that the enforceability of the Indenture, the Bonds, the Lease and the Sublease may be limited by applicable bankruptcy, insolvency, debt adjustment, receivership, fraudulent conveyance or transfer, moratorium, reorganization, arrangements or other laws affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities in the State or other laws or equitable principles affecting the enforcement of creditors’ rights generally. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. We do not express any opinion with respect to the quality of title to, or interests in, any of the real or personal property subject to the lien of the Lease or Sublease or with respect to the accuracy or sufficiency of the description of any real property contained therein and in the Indenture. Without limiting the foregoing, we have assumed compliance with all agreements and covenants contained in the Indenture.
The opinions expressed herein are based on an analysis of existing law and cover certain matters not directly addressed thereby. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof, and we have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. We have assumed the genuineness of all documents and signatures presented to us. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in such documents. No opinion is expressed in this letter regarding the accuracy, completeness or fairness of the Official Statement or any other offering material relating to the Bonds.
Respectfully submitted,
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APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX D
DTC’S BOOK-ENTRY ONLY SYSTEM
The information in this Appendix D concerning The Depository Trust Company (“DTC”), New York, New York, and DTC’s book-entry system has been obtained from DTC. The Authority and the City take no responsibility for the completeness or accuracy thereof. The City and the Authority cannot give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners: (i) payments of interest, principal or premium, if any, with respect to the Bonds, (ii) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (iii) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis without error, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations D-2
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providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all of the Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered in accordance with the provisions of the Indenture.
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
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APPENDIX F
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
1 $_______
HAWTHORNE PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024
BOND PURCHASE AGREEMENT
__________, 2024
Hawthorne Public Financing Authority
4455 West 126th Street
Hawthorne, California 90250
City of Hawthorne
4455 West 126th Street
Hawthorne, California 90250
Ladies and Gentlemen:
Samuel A. Ramirez & Co., Inc. (the “Underwriter”), hereby offers to enter into this Bond Purchase Agreement with you, the City of Hawthorne (the “City”) and the Hawthorne Public Financing Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Authority’s Lease Revenue Bonds Series 2024 (the “Bonds”). The Bonds are being issued to:
(i) pay a portion of the costs of construction and renovation of the city hall expansion and new civic center park, new public works yard, expanded senior center, police facility improvements, aquatics center and pool improvements, and certain other related capital improvements; (ii) [to purchase a municipal bond insurance policy]; and (iii) pay cost of issuance of the Bonds. This offer is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter.
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority all (but not less than all) of the $________ aggregate principal amount of the Bonds.
The purchase price for the Bonds shall be $_______ (being the principal amount of the Bonds, plus a net original issue premium in the amount of $______ and less an Underwriter’s discount in the amount of $________).
The Bonds will be dated the date of delivery thereof and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Indenture and Official Statement herein described. The Bonds will be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement.
2 [The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy (the “Policy”) to be issued concurrently with the delivery of the Bonds by ________ (the “Insurer”). As an accommodation to the Authority and City, the Underwriter will wire from the Purchase Price the premium for the Policy in the amount of $_____ directly to the Insurer on the date of Closing (defined below).]
2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Authority on August 27, 2024 authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584, et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an Indenture, dated as of September 1, 2024 (the “Indenture”), between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), and shall be as described in the Indenture.
The Bonds are limited obligations of the Authority payable primarily from and secured by certain base rental payments (the “Base Rental Payments”) to be paid by the City pursuant to a Sublease, dated as of September 1, 2024 (the “Sublease”), between the City and the Authority, for certain real property and the improvements thereon (the “Leased Property”).
3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated ________, 2024 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Authority, the City, the Underwriter or its legal counsel in accordance with the provisions of Sections 6(j) and 7(j) hereof or otherwise consented to by the Underwriter pursuant to Section 9(b)(v), are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as they deem necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold.
The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and have not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or is currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Underwriter’s role in the 3 transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any.
4. Delivery of Official Statement. If requested by the Underwriter, the Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Underwriter informs the Authority in writing of a different end of the underwriting period. “End Date” as used herein is that date which is the earlier of:
(a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or
(b) the time when the Official Statement becomes available from the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12) ends.
The Underwriter acknowledges that the “End Date” will be the date of Closing unless the Underwriter otherwise notifies the Authority and the City in writing that the Underwriter still owns some or all of the Bonds.
The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated _______, 2024, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Underwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request.
5. The Closing. At 9:00 A.M., California time, on _______, 2024, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Nossaman LLP, Los Angeles, California (“Bond Counsel”), or another place to be mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer of immediately 4 available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.”
6. City Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that:
(a) The City is a public body, corporate and politic, duly organized and operating pursuant to the laws of the State of California (the “State”) with power and authority to enter into and perform its duties under the Sublease, the Continuing Disclosure Agreement, dated as of September 1, 2024 (the “Continuing Disclosure Agreement”) between the City and U.S. Bank Trust Company, National Association, as dissemination agent, the Lease Agreement, dated as of September 1, 2024 (the “Lease”), between the City and the Authority, the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”).
(b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in a security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents. (c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against cities in the State. (d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement.
(e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Sublease, or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement as of its 5 date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Official Statement, nor is there any basis for any such action, suit, proceeding or investigation.
(f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing, the information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Leased Property and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. The Underwriter shall be responsible for all costs relating to such qualification of the Bonds under blue sky or similar laws.
(h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the City’s finances, the Leased Property, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, 6 the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Leased Property, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect.
(l) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Tax Certificate.
(m) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein.
(n) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement.
(o) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal course of its operations, incur any material liabilities, direct or contingent, secured by or payable from the City’s general fund. (p) The City will undertake, pursuant to the Continuing Disclosure Agreement, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Except as disclosed in the Preliminary Official Statement and Official Statement, the City and its related entities have not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years.
(q) The financial statements of, and other financial information regarding the City in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth and the audited financial statements have been prepared in accordance with generally accepted accounting principles applicable to cities.
7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that:
(a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, 7 power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder.
(b) By all necessary official action, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, the Sublease, the Lease and the Assignment Agreement, dated as of September 1, 2024 (the “Assignment Agreement”), between the Authority and the Trustee (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied and will at the Closing, be in compliance in all respects, with the terms of the Authority Documents. (c) The Bonds, when issued in accordance with the Indenture, will be valid and binding limited obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California.
(d) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions thereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents.
(e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been 8 received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect:
(i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Sublease and to pledge the Base Rental Payments for repayment of the Bonds; (iii) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or
(iv) challenging the ability of the Authority to sell the Bonds to the Underwriter.
(f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject.
(g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein.
(h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act.
(i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. 9 (j) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the Authority will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Sublease, as amended from time to time.
(k) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter and Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading.