Hesperia City Council
June 6, 2023

Attachment 3Attachment 3NEW ISSUE - FULL BOOK-ENTRY INSURED BONDS RATING: S&P: “__” Attachment 3
Attachment 3
UNINSURED BONDS RATING: S&P: “__”
See “RATINGS.”
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2023 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2023 Bonds may be subject to the corporate alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS.” $[PAR]*
Hesperia Joint Public Finance Authority
2023 Refunding Lease Revenue Bonds
Dated: Date of Delivery Due: November 1, as shown on inside cover Authority for Issuance. The Hesperia Joint Public Finance Authority (the “Authority”) is issuing the bonds captioned above (the “2023 Bonds”) pursuant to an Indenture dated as of July 1, 2023 (the “Indenture”), between the Authority and U.S. Bank Trust Company, National Association, as trustee for the 2023 Bonds (the “Trustee”).

Use of Proceeds. The proceeds of the 2023 Bonds will be used to (i) prepay in full the lease payments payable by the City under a Property Lease dated as of October 1, 2013, between the Authority as lessor and the City as lessee, and thereby cause the Authority to defease and redeem all of its outstanding 2013 Refunding Lease Revenue Bonds (Refinancing of 2005 Civic Plaza Financing), and (ii) pay the costs of issuing the 2023 Bonds. See “REFUNDING PLAN.” Security for the 2023 Bonds. Under the Indenture, the 2023 Bonds will be payable solely from and secured by Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of lease payments (“Base Rental”) to be made by the City pursuant to a Property Lease, dated as of July 1, 2023 (the “Lease”), between the Authority and the City, for the leasing of certain real property (the “Leased Property”). Under the Property Lease, the City covenants to take such action as necessary to include the Base Rental payments in its annual budgets and make all necessary appropriations for such payments (subject to abatement under certain circumstances as described in this Official Statement). The Authority will not establish a debt service reserve fund for the 2023 Bonds. See “SECURITY FOR THE 2023 BONDS.” Bond Terms; Book-Entry Only. The 2023 Bonds will bear interest at the rates shown on the inside cover page, payable semiannually on May 1 and November 1 of each year, commencing on November 1, 2023, and will be issued in fully-registered form without coupons in integral multiples of $5,000. The 2023 Bonds will be issued in book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Purchasers of the 2023 Bonds will not receive certificates representing their interests in the 2023 Bonds. Payments of the principal of, premium, if any, and interest on the 2023 Bonds will be made to DTC, which is obligated in turn to remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2023 Bonds. See “THE 2023 BONDS – General Provisions.” Redemption. The 2023 Bonds are subject to redemption prior to maturity. See “THE 2023 BONDS – Redemption.” Bond Insurance. The scheduled payment of principal of and interest on certain maturities of the 2023 Bonds, when due, will be guaranteed under a municipal bond insurance policy to be issued by ______ (“[INSURER]”) concurrently with the delivery of the 2023 Bonds. The City will determine the maturities of the 2023 Bonds to be so insured in connection with the pricing of the 2023 Bonds. See “BOND INSURANCE,” and “APPENDIX G – SPECIMEN MUNICIPAL BOND INSURANCE POLICY.” [Bond Insurer Logo]
Additional Bonds. Under the Indenture, the Authority may establish one or more other issues of bonds on a parity with the 2023 Bonds in the future if certain conditions are satisfied. See “SECURITY FOR THE 2023 BONDS – Additional Bonds.” THE 2023 BONDS ARE SPECIAL 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 BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE 2023 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.

MATURITY SCHEDULE
(see inside cover)
This cover page contains certain information for quick reference only. it is not a summary of this issue of 2023 Bonds. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the purchase of the 2023 Bonds.

The 2023 Bonds are offered when, as and if issued and received by the Underwriter and subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed upon for the Authority and the City by Jones Hall, A Professional Law Corporation, as Disclosure Counsel, and the Underwriter by its counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. Certain legal matters will be passed upon for the City and the Authority by Aleshire & Wynder LLP, as City Attorney. It is anticipated that the 2023 Bonds will be delivered in book-entry only form through the facilities of DTC in New York, New York on or about July [11], 2023.

The date of this Official Statement is: ________, 2023

MATURITY SCHEDULE
$[PAR]*
Hesperia Joint Public Finance Authority
2023 Refunding Lease Revenue Bonds

Base CUSIP†: _______
Maturity
(November 1)
Principal
Amount
Interest
Rate
Yield
Price
CUSIP†
Number
$____ - ____% Term 2023 Bonds due November 1, 20__; Yield ____%; Price ____ ; CUSIP†: ___ $____ - ____% Term 2023 Bonds due November 1, 20__; Yield ____%; Price ____ ; CUSIP†: ___ *Preliminary, subject to change.
† 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) 2023 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.

HESPERIA JOINT PUBLIC FINANCE AUTHORITY
Board of Directors
Brigit Bennington, Chair
Larry Bird, Vice Chair
Rebekah Swanson, Board Member
Allison Lee, Board Member
Cameron Gregg, Board Member

CITY OF HESPERIA
City Council
Brigit Bennington, Mayor, District 4
Larry Bird, Mayor Pro Tem, District 5
Rebekah Swanson, Council Member, District 1
Allison Lee, Council Member, District 2
Cameron Gregg, Council Member, District 3
City and Authority Officials
Nils Bentsen, City Manager and Executive Director(1)
Rachel Molina, Assistant City Manager(1)
Casey Brooksher, Director of Administrative Services and Treasurer Melinda Sayre, Director of Governmental Services and Secretary ___________________________________

PROFESSIONAL SERVICES
City Attorney
Aleshire & Wynder LLP
Irvine, California
Bond Counsel and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Municipal Advisor
Fieldman, Rolapp & Associates, Inc.

Irvine, California
Trustee
U.S. Bank Trust Company,
National Association
Los Angeles, California
Verification Agent
Causey Demgen & Moore P.C.

Denver, Colorado
[INSERT REGIONAL LOCATION MAPS]

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2023 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2023 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, the Authority or any other parties described in this Official Statement since the date of this Official Statement.

Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2023 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2023 Bonds.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market prices of the 2023 Bonds at levels above those that might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2023 Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. 2023 Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2023 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Estimates and Projections. 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,” “budget” or other similar words.

The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors 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 those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur.

Insurer Disclaimer. _______ (“[INSURER”]) makes no representation regarding the 2023 Bonds or the advisability of investing in the 2023 Bonds. In addition, [INSURER] has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding [INSURER] supplied by the [INSURER] and presented under the heading “BOND INSURANCE” and “APPENDIX G – SPECIMEN MUNICIPAL BOND INSURANCE POLICY.” City Website. The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement.

TABLE OF CONTENTS
Page Page
INTRODUCTION 1
General 1
Security for the 2023 Bonds 2
No Debt Service Reserve Fund 2
Bond Insurance 2
Limited Obligation 2
Additional Bonds 3
The Authority 3
The City 3
Professionals Involved in the Offering 3
Forward-Looking Statements 4
Risk Factors 4
Summaries Not Definitive 4
REFUNDING PLAN 5
Refunding of 2013 Bonds 5
Estimated Sources and Uses of Funds 6
THE LEASED PROPERTY 8
Description and Location 8
Modifications of Leased Property 10
Substitution of Leased Property 10
Removal of Leased Property 11
Addition of Leased Property 12
Amendments to Property Lease 13
THE 2023 BONDS 14
General Provisions 14
Transfer, Registration and Exchange 15
Redemption 15
Book-Entry Only System 17
DEBT SERVICE SCHEDULE 18
SECURITY FOR THE 2023 BONDS 19
Pledge of Revenues 19
Allocation of Revenues by Trustee; Application of Funds 20 No Debt Service Reserve Fund 21
Additional Bonds 21
Base Rental 22
Additional Rental 23
Fair Rental Value 24
Source of Payments; Covenant to Appropriate 24
Abatement 24
Property Insurance 25
Default; Remedies 26
THE AUTHORITY 27
THE CITY 27
BOND INSURANCE 28
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS 29 Limitations on Revenues 29
Statutory Revenue Limitations – Proposition 62 32
Proposition 1A 32
Proposition 22 33
Unitary Property 33
Possible Future Initiatives 33
BOND OWNERS’ RISKS 34
Limited Obligations 34
Abatement 34
Limitation on Remedies 35
Limitation on Trustee’s Obligations under the Indenture 35 Release of Property; Additional Bonds 36
Insurance on the Leased Property 36
Condemnation of the Leased Property 37
Value of the Leased Property 37
No Acceleration Upon Default 37
Early Prepayment Risk 37
Bankruptcy Risks 37
State Law Limitations on Appropriations 38
Limitations on Taxes and Fees 38
Additional Obligations of the City 39
Property Taxes 39
Public Health Emergencies 40
Certain Risks Associated with Sales Tax and Other Local Tax Revenues 41 Increasing Retirement Related Costs 41
Hazardous Substances 42
Natural Hazards 42
Climate Change 43
Cyber Security 43
Litigation 44
Changes in Law; Voter Initiatives 44
Loss of Tax-Exemption 45
Bond Insurance 45
Secondary Market for 2023 Bonds 45
TAX MATTERS 46
Federal Tax Status 46
Tax Treatment of Original Issue Discount and Premium 46 California Tax Status 47
Other Tax Considerations 47
CERTAIN LEGAL MATTERS 47
ABSENCE OF MATERIAL LITIGATION 48
FINANCIAL STATEMENTS 49
RATINGS 49
CONTINUING DISCLOSURE 50
UNDERWRITING 50
PROFESSIONAL FEES 50
MUNICIPAL ADVISOR 51
EXECUTION 51

TABLE OF CONTENTS
(Continued)
APPENDIX A: CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION APPENDIX B: SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX C: ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2022 APPENDIX D: FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX E: FORM OF OPINION OF BOND COUNSEL
APPENDIX F: DTC AND THE BOOK-ENTRY ONLY SYSTEM
APPENDIX G: SPECIMEN MUNICIPAL BOND INSURANCE POLICY
__________________________________

OFFICIAL STATEMENT
__________________________________
$[PAR]*
Hesperia Joint Public Finance Authority
2023 Refunding Lease Revenue Bonds

INTRODUCTION
The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the “2023 Bonds”) by the Hesperia Joint Public Finance Authority (the “Authority”). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Indenture (as defined below).

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 and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the 2023 Bonds to potential investors is made only by means of the entire Official Statement.

General
The Authority is issuing the 2023 Bonds under Articles 10 and 11 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “State”), commencing with Section 6584 (the “Bond Law”), a resolution adopted by the Board of Directors of the Authority on June 6, 2023, a resolution adopted by the City Council (the “City Council”) of the City of Hesperia, California (the “City”) on June 6, 2023, and an Indenture (the “Indenture”), dated as of July 1, 2023, between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The 2023 Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York (“DTC”), or its nominee. DTC, or its nominee, will act as securities depository for the 2023 Bonds. Purchasers of the 2023 Bonds will not receive certificates representing the 2023 Bonds that are purchased. See “THE 2023 BONDS – Book-Entry Only System” and “APPENDIX F – DTC and the Book-Entry Only System.” The 2023 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity as described in this Official Statement. See the caption “THE 2023 BONDS – Redemption.” The 2023 Bonds are being issued to (i) prepay in full the lease payments payable by the City under a Property Lease dated as of October 1, 2013 (the “2013 Property Lease”), between the Authority as lessor and the City as lessee, and thereby cause the Authority to defease and redeem all of its outstanding 2013 Refunding Lease Revenue Bonds (Refinancing of 2005 Civic Plaza Financing) (the “2013 Bonds”), and (ii) pay the costs of issuing the 2023 Bonds. See “REFUNDING PLAN.” Security for the 2023 Bonds
The 2023 Bonds will be payable solely from and secured by Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of lease payments (the “Base Rental”) to be made by the City pursuant to a Property Lease, dated as of July 1, 2023, between the City and the Authority (the “Property Lease”) for the use and occupancy of certain real property and improvements thereon (the “Leased Property”). See “THE LEASED PROPERTY.” Under the Property Lease, the City covenants to take such action as necessary to include the Base Rental payments in its annual budgets and to make all necessary appropriations for such Base Rental payments (subject to abatement under certain circumstances described in the Property Lease). See “SECURITY FOR THE 2023 BONDS – Source of Payments; Covenant to Appropriate.” Base Rental payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City’s right to use and occupy the Leased Property or any portion thereof. See “SECURITY FOR THE 2023 BONDS – Abatement” and “BOND OWNERS’ RISKS – Abatement.” Abatement of Base Rental payments under the Property Lease, to the extent payment is not made from alternative sources as described in this Official Statement, would result in all Bond Owners receiving less than the full amount of principal of and interest on the 2023 Bonds. To the extent that moneys in any of the funds and accounts established under the Indenture or proceeds of insurance are available, Base Rental payments (or a portion thereof) may be made during periods of abatement.

To provide an upfront site lease payment to facilitate the refunding plan, the City and the Authority will enter into a Site and Facilities Lease dated as of July 1, 2023 (the “Site Lease”), under which the City will lease the Leased Property to the Authority. Concurrently, the City and the Authority will enter into the Property Lease, under which the Authority will lease the Leased Property back to the City. See “THE LEASED PROPERTY.” No Debt Service Reserve Fund
The Authority will not establish a debt service reserve fund for the 2023 Bonds.

Bond Insurance
The scheduled payment of principal and interest on certain maturities of the 2023 Bonds (the “Insured 2023 Bonds”), when due, will be guaranteed under a municipal bond insurance policy (the “Insurance Policy”) to be issued concurrently with the delivery of the 2023 Bonds by ________ (“[INSURER]”). The City will determine the maturities of the 2023 Bonds to be so insured in connection with the pricing of the 2023 Bonds. See “BOND INSURANCE” and “APPENDIX G – SPECIMEN MUNICIPAL BOND INSURANCE POLICY.” Limited Obligation
THE 2023 BONDS ARE SPECIAL 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 BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE 2023 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.

Additional Bonds
Under the Indenture, the Authority may establish one or more other issues of bonds on a parity with the 2023 Bonds in the future (“Additional Bonds” and together with the 2023 Bonds, the “Bonds”), and may issue and deliver such Additional Bonds in such principal amount as shall be determined by the Authority if certain conditions are satisfied. See “SECURITY FOR THE 2023 BONDS – Additional Bonds.” The Authority
The Authority is a joint exercise of powers authority organized and existing pursuant to the provisions of Article 1 and Article 4 of Chapter 5 of Division 7 of Title 1 of the Government code of the State of California (the “Act”) and a Joint Exercise of Powers Agreement, dated October 2, 2012 (the “Joint Powers Agreement”), by and between the City and the Hesperia Water District (the “Water District”). See “THE AUTHORITY.” The City
The City is situated in the County. The City encompasses approximately 75 square miles, and is located 35 miles north of the City of San Bernardino and 90 miles northeast of the City of Los Angeles. The City is bisected by California State Highway 395 and Interstate 15. The City is bordered to the north by the City of Victorville and on the east by the Town of Apple Valley and to the south by the San Bernardino mountains.

The City is governed by a five-member City Council under the Council-Manager form of government. For information about the City, including general demographic information and financial information relating to the General Fund of the City, see “Appendix A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION.” Professionals Involved in the Offering
Fieldman, Rolapp & Associates, Inc., Irvine, California, has acted as municipal advisor to the Authority and the City (the “Municipal Advisor”) in connection with the offering of the 2023 Bonds. U.S. Bank Trust Company, National Association, Los Angeles, California, will act as Trustee with respect to the 2023 Bonds. Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) is underwriting the 2023 Bonds.

All proceedings in connection with the issuance of the 2023 Bonds are subject to the approval of Jones Hall, A Professional Law Corporation, San Francisco, California, as Bond Counsel. Certain legal matters will be passed upon for the Authority and the City by Aleshire & Wynder LLP, as City Attorney, and by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Underwriter’s Counsel.

Forward-Looking Statements
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors 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. Although such expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Neither Authority nor the City is obligated to issue any updates or revisions to the forward-looking statements if, or when, its expectations, or events, conditions or circumstances on which such statements are based change.

Risk Factors
Certain events could affect the ability of the City to make the Base Rental payments when due. See the caption “BOND OWNERS’ RISKS” for a discussion of certain factors that should be considered, in addition to other matters that are set forth in this Official Statement, in evaluating an investment in the 2023 Bonds.

Summaries Not Definitive
The summaries of and references to documents, statutes, reports and other instruments in this Official Statement do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by the complete document, statute, report or instrument. Copies of the documents described in this Official Statement will be available from the City for a reasonable copying fee at City Hall, 9700 Seventh Avenue, Hesperia, California 92345.

REFUNDING PLAN
Refunding of 2013 Bonds
The 2013 Bonds maturing on or after October 1, 2024 are subject to optional redemption prior to maturity on or after October 1, 2023 at the option of the Authority, as a whole or in part on any date, at a redemption price equal to the principal amount of 2013 Bonds to be redeemed, plus accrued but unpaid interest to the redemption date, without premium.

On the date the 2023 Bonds are issued, pursuant to an Escrow Deposit and Trust Agreement dated as of July 1, 2023 (the “Escrow Agreement”), among the City, the Authority and U.S. Bank Trust Company, National Association, as escrow agent (the “Escrow Agent”) and trustee of the 2013 Bonds, the Authority will cause to be delivered a portion of the proceeds of the 2023 Bonds which, together with moneys relating to the 2013 Bonds, will be deposited by the Escrow Agent in the escrow fund established under the Escrow Agreement (the “Escrow Fund”), on behalf of the City and for the benefit of the owners of the outstanding 2013 Bonds.

The Escrow Agent will invest a portion of the funds on deposit in the Escrow Fund in federal securities and will hold the remainder in cash, uninvested. From the moneys on deposit in the Escrow Fund and the investment earnings thereon, the Escrow Agent will pay (i) the regularly scheduled principal of and interest on the outstanding 2013 Bonds maturing on October 1, 2023, and (ii) the principal of the outstanding 2013 Bonds maturing after October 1, 2023, plus interest with respect thereto accrued through October __, 2023, without premium. The outstanding 2013 Bonds are described in the following table.

Maturity Date
(October 1)
Principal
Amount
Interest
CUSIP
(Base: 42806H)
2023
$460,000

4.000%
BH2
2024*
500,000

3.750
BJ8
2025*
535,000

4.000
BK5
2026*
575,000

4.000
BL3
2027*
620,000

4.250
BM1
2028*
665,000

4.250
BN9
2031* T
2,305,000

4.750
BP4
2035* T
3,950,000

5.000
BQ2
* To be redeemed on October 1, 2023.

T: Term 2013 Bonds.

The sufficiency of the deposits in the Escrow Fund for such purposes will be verified by Causey Demgen & Moore P.C., Denver, Colorado (the “Verification Agent”). Assuming the accuracy of such computations, as a result of the deposit and application of funds as provided in the Escrow Agreement, all of the outstanding 2013 Bonds will be discharged pursuant to the provisions of the indenture relating to the 2013 Bonds as of the date of issuance of the 2023 Bonds.

The amounts held by the Escrow Agent in the Escrow Fund are pledged solely to the payment of the outstanding 2013 Bonds. Neither the funds deposited in the Escrow Fund, nor any interest thereon, will be available for the payments of principal of or interest on the 2023 Bonds.

Estimated Sources and Uses of Funds
The estimated sources and uses of funds relating to the 2023 Bonds are as follows:

Sources:

Amount
Principal
$
Plus: Original Issue Premium
Plus: Available Funds relating to 2013 Bonds
Less: Underwriter’s Discount

TOTAL SOURCES
$
Uses:

Escrow Fund (1)
$
Costs of Issuance (2)

TOTAL USES
$
To be used to defease and redeem the outstanding 2013 Bonds. See “REFUNDING PLAN – Refunding of 2013 Bonds.” Includes, among other things, the fees and expenses of Bond Counsel, Disclosure Counsel, the Trustee, and the Municipal Advisor, Insurance Policy premium, rating agency fees, and printing the preliminary and final Official Statements.

[INSERT PHOTOS OF PARK AND LIBRARY]

THE LEASED PROPERTY
Description and Location
Base Rental payments will be made by the City under the Property Lease for the use and occupancy of certain real property and improvements thereon. Initially, such property will consist of the City’s (i) City Hall and (ii) Civic Plaza Park. The Leased Property includes both the parcels on which these facilities are situated and the buildings and other improvements thereon. In the Property Lease, the City and Authority agree and determine that the total Base Rental payments represent the fair rental value of the Leased Property. See “BOND OWNERS’ RISKS – Limitations on Remedies” for a discussion of the limitations on remedies with respect to the Leased Property.

The City also owns the Hesperia Branch Library. It is maintained jointly by the City and the County and operated by the San Bernardino County Library system pursuant to an unrecorded Lease Agreement by and between the City and the County related to the Hesperia Branch Library, the term of which commenced on October 1, 2006 (the “County Library Lease Agreement”). On the date the 2023 Bonds are issued, the Hesperia Branch Library will not be part of the Leased Property subject to the leasehold interest under the Property Lease. However, the City currently intends to substitute the Hesperia Branch Library for City Hall, if and when it receives a written subordination from the County subordinating the County’s interests under the County Library Lease Agreement to the Property Lease and the Site Lease, subject to the satisfaction of certain other conditions precedent in the Property Lease. See “– Substitution of Leased Property.” No assurance can be provided that the City will substitute the Hesperia Branch Library for City Hall or the timing thereof.

Photos of City Hall, Civic Plaza Park and Hesperia Branch Library are included in the immediately preceding pages. Descriptions of the City Hall, Civic Plaza Park and Hesperia Branch Library follow below.

City Hall. Located on a 4.6-acre parcel in the Civic Center area of Hesperia, City Hall is a two-story building totaling approximately 58,828 gross square feet. City Hall houses the City Manager’s Office, the City Clerk’s Office and the following additional City Departments: Building & Safety, Community Relations, Development Services, Economic Development, Engineering, Finance, Human Resources/Risk Management, Information Technology, Management Services, Planning and Purchasing. It also houses the City Council Chambers, other office space, reception area and conference rooms.

Completed in 2006, City Hall shares the architectural style of the nearby Hesperia Police Station, Hesperia Branch Library and San Bernardino County Government Center. It is constructed with reinforced concrete curtain exterior walls and a heavy steel frame, flat roof. It is served by 100% sprinkler protection, automatic and manual fire alarms and a security system. Other building services include modern elevator, heating, air conditioning, electrical and plumbing systems. The parcel contains surface parking with approximately 226 parking stalls.

City Hall was completed at a total cost of $19,352,415, including land acquisition costs of approximately $321,383. The fair rental value of City Hall, when added to the fair rental value of the remaining Leased Property, is equal to or greater than the Base Rental payable under the Property Lease.

Civic Plaza Park. Located in the Civic Center area to the west of the Hesperia Branch Library and Hesperia City Hall, the Hesperia Civic Plaza Park is an outdoor community gathering place and host to a variety of activities for the community including the City’s annual Christmas tree lighting ceremony, the Hesperia Community Farmers’ Market, the Fall Safety Fair and Costume Contest, community 5k event, a free Summer Concert series and a free Movies in the Park series.

The park covers approximately five acres and incorporates Eighth Avenue as hardscape for parking and display purposes. A circular “Civic Green” lawn area is provided at the north end of the park. This area allows numerous passive and non-organized events. Other features of the park include central steel-framed trellis structures with adjacent seating; the vacated Eighth Avenue terminates in a large circular “quad” which is used for a Farmers’ Market, car shows, and similar outdoor events; a permanent Christmas tree used for the City’s annual holiday celebration; an amphitheater with seating for 800; walking paths within the park and along the perimeter used by pedestrians and their pets (with dog-waste dispensers located in several locations); and a wind-powered generator providing “green” energy. All landscaping is irrigated using an electronic “water-budget” system, and is dual-plumbed for use of reclaimed water when it becomes available. The park also includes three fountains, one of which features a 6,200-pound, spinning, black granite globe as its centerpiece. The American Public Works Association’s Southern California chapter (comprising Los Angeles, San Bernardino, Riverside and Orange Counties) named the park their 2008 “Project of the Year.” The park is owned by the City, and is jointly maintained and operated by the City and the Hesperia Recreation and Park District pursuant to a joint use agreement. The site is patrolled by on-site security personnel under contract by the City, and periodically by deputies from the Hesperia Police Station, which is located directly across Smoke Tree Street.

Completed in 2008, the final project cost was $4.6 million. The fair rental value of the park, when added to the fair rental value of the remaining Leased Property, is equal to or greater than the Base Rental payable under the Property Lease.

Hesperia Branch Library. Located on a four-acre parcel adjacent to Hesperia City Hall at 9650 Seventh Avenue, the Hesperia Branch Library is a one-story building covering 20,102 square feet. It is the only public library in the City with the next closest public library located approximately six miles north in Victorville. In addition to a library, the building houses offices, a conference room, a community room and restrooms.

The Hesperia Branch Library is housed in a 20,000 square foot building (with expansion capabilities to 40,000 square feet) and features a 3,488 square foot patio, on-site parking, drainage detention system and landscaping. The interior of the Hesperia Branch Library includes a “Community Meeting Room” with a capacity for over 200 people; a “Heritage Room” for periodicals and city-oriented archived items; adult and children reading areas; and a fireplace among other amenities.

The Hesperia Branch Library is owned by the City, maintained jointly by the City and the County, and operated by the San Bernardino County Library system. The County Library Lease Agreement has an initial term until September 30, 2026, with two 5-year extensions available.

The building design utilizes tilt-up concrete construction techniques, and incorporates a space-frame roof line to resemble a silhouette of the nearby San Gabriel and San Bernardino mountains. The concrete tilt-up design was selected to signify permanence and continuity for all city/government functions. Its north-south building alignment help frame the adjacent park, and incorporates the park features with common use of building materials. The building has a reinforced concrete curtain wall exterior and a metal, monoslope roof. It is 100% sprinkler-protected, has both automatic and manual fire alarms and carries a ISO Class fire suppression rating of “4” (Masonry Non-Combustible). Security cameras are in place along the perimeter of the building, and the site is patrolled by on-site security personnel under contract with the City.

Completed in 2006, the development cost of the library was approximately $8,524,000, including land acquisition of approximately $276,000 and improvement costs of approximately $8,248,000.

As previously described, on the date the 2023 Bonds are issued, the Hesperia Branch Library will not be part of the Leased Property subject to the leasehold interest under the Property Lease. However, the City currently intends to substitute the Hesperia Branch Library for City Hall, if and when it receives a written subordination from the County subordinating the County’s interests under the County Library Lease Agreement to the Property Lease and the Site Lease, and subject to the satisfaction of certain other conditions precedent in the Property Lease.

Modifications of Leased Property
Under the Property Lease, the City has the right during the term of the Property Lease to make additions, alterations or improvements or to attach fixtures, structures or signs to the Leased Property if said additions, alterations, improvements, fixtures, structures and signs are necessary or beneficial for the use of the Leased Property by the City. In addition, the City may remove any fixture, structure or sign added by the City, but such release shall be accomplished so as to leave the Leased Property in substantially the same condition as it was in before the fixture, structure or sign was attached.

The Property Lease further provides that in the event the City shall at any time during the term of the Property Lease cause any changes, alterations, additions, 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 a mechanic’s, materialman’s or other lien against the Leased Property or the Authority’s interest therein, and will cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien, it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall forthwith pay and discharge said judgment.

Substitution of Leased Property
General. Under the Property Lease, whenever the City determines that the annual fair rental value of substitute real property and improvements thereon (the “Substitute Leased Property”) is at least equal to the maximum annual Base Rental payments and Additional Rental payments yet unpaid thereunder and that the Substitute Leased Property is available for beneficial use and occupancy by the City, the City may amend the Property Lease to establish the Substitute Leased Property as the Leased Property thereunder upon compliance with all of the conditions described below. After a Substitution, all or a portion of the Leased Property originally leased thereunder shall be released from the leasehold thereunder, as appropriate. The Authority and the City shall also make any amendments needed to be made to the Property Lease, and shall enter into any necessary site or ground leases in connection with such Substitution. Such amendments may be made without the consent of Bondowners.

The Property Lease states that no Substitution shall take place under the Property Lease until the City delivers to the Authority and the Trustee the following:
(a) A certificate of the City stating that: (i) the annual fair rental value of the Substitute Leased Property is no less than the maximum annual Base Rental and Additional Rental remaining unpaid under the Property Lease at the time of Substitution; (ii) the remaining useful life of such Substitute Leased Property is at least equal to the remaining term of the Property Lease; and (iii) the City will, at the time of the Substitution, have beneficial use and occupancy of the Substitute Leased Property. (b) An Opinion of Bond Counsel to the effect that the amendment described in paragraph (c) below has been duly authorized, executed and delivered and the Property Lease as so amended represents a valid and binding obligation of the City and the Authority and that the Substitution will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes or the exemption of interest on the Bonds from State of California personal income tax. (c) The City shall cause to be recorded in the Office of the San Bernardino County Recorder an executed amendment to the Property Lease containing an amended Exhibit A thereto, or a memorandum reflecting such amendment to Exhibit A. (d) A CLTA standard form policy of title insurance in substantially the same form as delivered in connection with the issuance and delivery of the Bonds in at least the amount of the aggregate principal amount of outstanding Bonds at the time of the Substitution insuring the City’s leasehold interest in the Substitute Leased Property thereunder, together with an endorsement thereto making such policy payable to the Trustee for the benefit of the Owners, and also together with a certificate of the City to the effect that the exceptions, if any, contained in such policy do not interfere with the beneficial use and occupancy of the Substitute Leased Property by the City. (e) The City shall provide written notice to each rating agency then rating the Bonds of the proposed Substitution.

The Property Lease further states that in connection with a substitution of the Hesperia Branch Library for the City Hall as the Substitute Leased Property in place of the City Hall, the City shall not be required to comply with the requirements described in paragraphs (b) and (e) above. See “– Description and Location.” Release of Leased Property
Under the Property Lease, the City has the option at any time and from time to time during its term to release from the Property Lease any portion of the Leased Property; provided that the City shall satisfy all of the following requirements which conditions precedent to such release:
(a) No event of default has occurred and is continuing under the Property Lease. (b) The City shall file with the Authority and the Trustee an amended Exhibit A to the Property Lease which deletes the legal description of such Leased Property. (c) The City shall cause to be recorded in the Office of the San Bernardino County Recorder a copy of an executed amendment to the Property Lease containing an amended Exhibit A thereto, or a memorandum reflecting such amendment to Exhibit A. (d) The City shall cause to be filed with the Trustee an Opinion of Bond Counsel to the effect that the amendment described in paragraph (c) above has been duly authorized, executed and delivered and the Property Lease as so amended represents a valid and binding obligation of the City and the Authority and that the release of Leased Property will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes or the exemption of interest on the Bonds from State of California personal income tax. (e) The City shall file with the Authority and the Trustee a certificate stating that (i) the annual fair rental value of the remaining Leased Property, taking into consideration the release of the applicable portion of the Leased Property, is no less than the maximum annual Base Rental and Additional Rental remaining unpaid under the Property Lease at the time of such release and (ii) the useful life of the remaining Leased Property is at least as long as the remaining term of the Property Lease. (f) The City shall provide written notice to each rating agency then rating the Bonds of the proposed release.

Addition of Leased Property
Under the Property Lease, the City may, at any time it deems it necessary or advisable, amend the Property Lease, and enter into any necessary or advisable site or ground lease, to add additional property to the property originally leased thereunder. No such addition shall take place thereunder until the City delivers to the Authority and the Trustee the opinion described in paragraph (b) under the subcaption “– Substitution of Leased Property” above, provided that in such instance the opinion shall relate to the addition of Leased Property and not the substitution of Leased Property. If the addition to the Leased Property (the “Addition”) is being done in connection with the issuance of Additional Bonds, the following requirements will apply:
(a) A certificate of the City with respect to clauses (i) and (ii) below stating that: (i) the annual fair rental value of the Leased Property (including the Addition) is no less than the maximum annual Base Rental and Additional Rental remaining unpaid under the Property Lease at the time of such Addition; (ii) the remaining useful life of such Leased Property (including the Addition) is at least equal to the remaining term of the Property Lease; and (iii) the City will, at the time of the Addition, have beneficial use and occupancy of all of the Leased Property. (b) An Opinion of Bond Counsel to the effect that the amendment to the Property Lease has been duly authorized, executed and delivered and the Property Lease as so amended represents a valid and binding obligation of the City and the Authority and that the Addition will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes or the exemption of interest on the Bonds from State of California personal income tax. (c) The City shall cause to be recorded in the Office of the San Bernardino County Recorder an executed amendment to the Property Lease containing an amended Exhibit A thereto, or a memorandum reflecting such amendment to Exhibit A. (d) A CLTA standard form policy of title insurance in substantially the same form as delivered in connection with the issuance and delivery of the Bonds in at least the amount of the aggregate principal amount of outstanding Bonds at the time of the Addition insuring the City’s leasehold interest in the Addition to the Leased Property thereunder, together with an endorsement thereto making such policy payable to the Trustee for the benefit of the Owners, and also together with an opinion of counsel to the City to the effect that the exceptions, if any, contained in such policy do not interfere with the beneficial use and occupancy of the Leased Property by the City. (e) The City shall provide written notice to each rating agency then rating the Bonds of the proposed addition.

Amendments to Property Lease
The Authority and the City may at any time amend or modify any of the provisions of the Property Lease, but only: (a) with the prior written consents of the Owners of a majority in aggregate principal amount of the Outstanding Bonds; or (b) without the consent of the Trustee or any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes:
(i) to add to the covenants and agreements of the City contained in the Property Lease, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power reserved to or conferred upon the City in the Property Lease; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained therein, to conform to the original intention of the City and the Authority; (iii) to modify, amend or supplement the Property Lease in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Code; (iv) to amend the description of the Leased Property to reflect accurately the property originally intended to be included therein, or in connection with any substitution, release or addition of property under the Property Lease; (v) to obligate the City to pay additional amounts of Base Rental in connection with the issuance of Additional Bonds in accordance with the Indenture; or (vi) in any other respect whatsoever as the Authority and the City deem necessary or desirable, if in the opinion of Bond Counsel such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds.

No such modification or amendment may (a) extend or have the effect of extending any Base Rental payment date or reducing any Base Rental payment or any premium payable upon the prepayment thereof, without the express consent of the Owners of the affected Bonds, or (b) modify any of the rights or obligations of the Trustee without its written assent thereto. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” THE 2023 BONDS
General Provisions
The 2023 Bonds will be dated their date of delivery and issued in fully registered form without coupons in denominations of $5,000 or any integral multiple of $5,000. The 2023 Bonds will mature in the amounts and on the dates, and bear interest at the annual rates (calculated on the basis of a 360-day year of twelve 30-day months), set forth on the inside cover page of this Official Statement.

Interest on the 2023 Bonds will be payable on May 1 and November 1 in each year, beginning November 1, 2023 (each an “Interest Payment Date”). Principal on the 2023 Bonds will be payable on the dates and in the amounts set forth on the inside front cover of this Official Statement.

Interest with respect to each 2023 Bond shall accrue from the Interest Payment Date next preceding the date of authentication thereof, unless (i) it is authenticated after a Record Date and before the close of business on the immediately following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date, or (ii) it is authenticated on or before the Record Date immediately preceding the first Interest Payment Date in which event interest with respect thereto shall be payable from its dated date; provided, however, that if at the time of authentication of any 2023 Bond, interest with respect thereto is in default, interest with respect thereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment or from its dated date if no interest has been paid or made available for payment.

Interest with respect to any 2023 Bond shall 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 of the Trustee, sent on such Interest Payment Date to the Owner by first-class mail, postage prepaid, at his address as it appears on the registration book maintained by the Trustee, or, upon written request of an Owner of at least $1,000,000 in aggregate principal amount of 2023 Bonds received by the Trustee on or prior to the Record Date, by wire transfer in immediately available funds to an account with a financial institution within the continental limits of the United States of America designated by such Owner. Payments of defaulted interest shall be paid by check to the Owners as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the Owners by first class mail not less than 10 days prior thereto.

The Indenture defines “Record Date” to mean the 15th day of the calendar month immediately preceding the month in which an Interest Payment Date occurs regardless of whether or not such day is a Business Day.

Notwithstanding the foregoing, while the 2023 Bonds are subject to the book-entry system, the principal and interest and any prepayment premium with respect to the 2023 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2023 Bonds. See “– Book-Entry Only System” below.

Transfer, Registration and Exchange
See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the 2023 Bonds.

Redemption*
Optional Redemption. The 2023 Bonds maturing on or before November 1, _____, are not subject to optional redemption prior to maturity. The 2023 Bonds maturing on or after November 1, ____ are subject to optional redemption prior to maturity on or after November 1, ____, at the option of the Authority, as a whole or in part on any date, as set forth in a Request of Authority, from such maturities as are selected by the Authority, from amounts deposited with the Trustee by the Authority from any funds available therefor other than those described in the subcaption “– Mandatory Redemption from Insurance or Condemnation Proceeds” below, at a redemption price equal to the principal amount of 2023 Bonds to be redeemed, plus accrued but unpaid interest to the redemption date, without premium.

Mandatory Redemption from Insurance or Condemnation Proceeds. The Trustee shall, on such date as is set forth in a Request of the Authority, redeem the Bonds, including the 2023 Bonds, as a whole, or in part by lot within any maturity if less than all of the Bonds of a particular maturity are to be redeemed, from proceeds of insurance or proceeds of eminent domain proceedings, upon the terms and conditions of, and as provided for in the Indenture at the principal amount thereof and accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The 2023 Bonds maturing on November 1, 20__ (the “Term Bonds”) shall be subject to mandatory redemption from mandatory Sinking Account Payments, in part, by lot, on November 1, 20__, and on each November 1 thereafter to and including November 1, 20__, from money on hand in the Principal Fund at a redemption price equal to the principal amount of the Term Bonds to be redeemed, plus accrued interest on the Term Bonds to be redeemed to the redemption date, without premium. The principal amount of the Term Bonds to be redeemed and the redemption dates are set forth in the following schedule:

Redemption Date
(November 1)
Principal
Amount
*
_______________
*Maturity
Mandatory Sinking Account Payments shall be adjusted as directed by the Authority in the event of a partial redemption as described under the subcaptions “– Optional Redemption” and “– Mandatory Redemption from Insurance or Condemnation Proceeds.” Purchase In-Lieu of Redemption. In lieu of redemption of the 2023 Bonds, amounts on deposit in the Revenue Fund (to the extent not required to be deposited by the Trustee in the Interest Fund or the Principal Fund pursuant to the Indenture during the current Bond Year) may also be used and withdrawn by the Authority, upon the Request of the Authority delivered to the Trustee, at any time for the purchase of such Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Authority may in its discretion determine. The par amount of any of Term Bonds so purchased by the Authority in any twelve-month period ending on November 1 in any year shall be credited towards and shall reduce the par amount of such Term Bonds required to be redeemed pursuant to the Indenture on the next succeeding November 1.

Selection of Bonds for Redemption. For purposes of selecting Bonds for redemption, Bonds will be deemed to be composed of $5,000 portions or any integral multiple thereof. Unless otherwise directed by the Authority, whenever less than all of the Outstanding Bonds of more than one series are called for redemption at any one time, the Trustee will select the Outstanding Bonds or portions thereof to be redeemed from the Outstanding Bonds on a pro rata basis among series.

Whenever less than all the Outstanding Bonds of the same issue maturing on any one date are called for redemption as described in the subcaptions “– Optional Redemption” and “– Mandatory Redemption from Insurance or Condemnation Proceeds” above at any one time, the Trustee will select the Bonds or portions thereof to be redeemed from the Outstanding Bonds maturing on such date not previously selected for redemption, on a pro rata basis.

Notice of Redemption. Notice of redemption shall be mailed by the Trustee by first class mail, not less than 20 nor more than 60 days prior to the redemption date to (i) the respective Owners of Bonds designated for redemption at their addresses appearing on the Bond registration books of the Trustee, (ii) the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access website and (iii) the Securities Depositories.

Each notice of redemption shall state the date of such notice, the Bonds to be redeemed, the date of issue of such Bonds, the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses and telephone number or numbers of the Trustee), the CUSIP number (if any) of the maturity or maturities, the interest rate and maturity date of each Bond to be redeemed, and, if less than all of any such maturity, the distinctive certificate numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of such Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Each notice relating to optional redemption or mandatory redemption from insurance or condemnation proceeds as described in the subcaptions “– Optional Redemption” and “– Mandatory Redemption from Insurance or Condemnation Proceeds” above, respectively, shall further state that such redemption may be rescinded by the Authority on or prior to the date set for redemption.

The Trustee will mail by certified mail with return receipt requested a second notice of redemption 60 days after the scheduled redemption date to Owners who failed to surrender their Bonds on such redemption date.

Failure by the Trustee to give notice pursuant to the Indenture to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access website or any one or more of the Securities Depositories or the insufficiency of any such notice will not affect the sufficiency of the proceedings for redemption. The failure of any Bondowner to receive any redemption notice mailed to such Bondowner and any defect in the notice so mailed will not affect the sufficiency of the proceedings for redemption.

The Authority will have the right to provide a conditional redemption notice and to rescind any notice of optional redemption or mandatory redemption from insurance or condemnation proceeds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds 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 Trustee shall mail notice of rescission of redemption in the same manner notice of redemption was originally provided.

Partial Redemption. Upon surrender of any Bond redeemed in part only, 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 authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same interest rate and maturity.

Effect of Redemption. When notice of redemption has been duly given, and moneys for payment of the redemption price are deposited with the Trustee, the Bonds so called for redemption shall, on the redemption date designated in such notice, become due and payable at the redemption price specified in such notice, and from and after the date so designated interest on the Bonds so called for redemption shall cease to accrue, said Bonds shall cease to be entitled to any lien, benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof.

Book-Entry Only System
The 2023 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 2023 Bonds are subject to the book-entry system, the principal, interest and any prepayment 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 2023 Bonds. Purchasers of the 2023 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.

DEBT SERVICE SCHEDULE
The table below shows annualized debt service payments on the 2023 Bonds, assuming no optional redemption or special mandatory redemption from insurance or condemnation proceeds.

Year Ending
June 30
Principal
Interest
Total
Debt Service
Total:

SECURITY FOR THE 2023 BONDS
The principal of and interest on the 2023 Bonds are not a debt of the Authority (except to the limited extent described in this Official Statement) 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 2023 Bonds and certain provisions of the Indenture and the Property Lease. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a more complete summary of the Indenture and the Property Lease.

Pledge of Revenues
Under the Indenture, the Authority pledges and assigns to the Trustee and grants to the Trustee a lien on and security interest in all right, title and interest of the Authority in and to all of the following, which lien and security interest, except as otherwise expressly set forth in the Indenture, shall be prior in right to any other pledge, lien or security interest created by the Authority therein:
(i) the Revenues,
(ii) all moneys and investments (excluding amounts required to pay rebate) held from time to time by the Trustee under the Indenture, and (iii) earnings on amounts included in provisions (i) and (ii) above, subject to any limitations under the Code for the equal and proportionate benefit and security of the Bonds, all of which, regardless of the time or times of their authentication and delivery or maturity, shall be, with respect to the security provided thereby, of equal rank without preference, priority or distinction as to any Bond over any other Bond or Bonds, except as to the timing of payment of the Bonds. The Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding, except that out of Revenues there may be apportioned and paid such sums, for such purposes, as are expressly permitted by the provisions of the Indenture concerning the allocation of Revenues to special funds. “Revenues” are defined in the Indenture as (i) the Base Rentals set forth in the Property Lease which are received by the Trustee for the benefit of the Owners of the Bonds and (ii) other amounts received by the Trustee for the benefit of the Owners of the Bonds.

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 shall be paid directly to the Trustee and all of the Revenues collected or received by the Authority shall 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 shall be deposited by the Authority with the Trustee within one Business Day after the receipt thereof. All such Revenues shall be immediately deposited by the Trustee upon the receipt thereof in a special fund, designated as the “Revenue Fund.” The Revenue Fund shall be maintained by the Trustee, separate and apart from all other funds, so long as any of the Bonds remain Outstanding. All moneys at any time deposited in the Revenue Fund shall be held by the Trustee in trust for the benefit of the Owners from time to time of the Bonds and shall be disbursed, allocated and applied solely for the uses and purposes set forth in the Indenture, as described below under the subcaption “– Allocation of Revenues by Trustee; Application of Funds.” THE 2023 BONDS ARE SPECIAL 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 BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE 2023 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS UNDER THE PROPERTY LEASE CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.

Allocation of Revenues by Trustee; Application of Funds Transfers from the Revenue Fund. Under the Indenture, upon receipt of Revenues, the Trustee shall deposit all Revenues in the Revenue Fund. The Trustee shall deposit all moneys in the Revenue Fund in one or more of the funds set forth below, each of which the Trustee shall establish, maintain and hold in trust, and the moneys in each of which shall be disbursed and applied only as authorized in the Indenture. Revenues shall be so deposited in the following order of priority, the requirements of each such fund at the time of deposit to be satisfied before any transfer is made to any fund subsequent in priority:
(a) Interest Fund. The Trustee, on or before the Business Day next preceding each Interest Payment Date, shall deposit in the Interest Fund an amount which, together with any balance then on deposit in the Interest Fund, shall be sufficient to pay the aggregate amount of interest becoming due and payable on the Outstanding Bonds on the next succeeding Interest Payment Date.

Any moneys in the Interest Fund not then required for the payment of interest on the next succeeding Interest Payment Date shall be carried forward and applied to the payment of interest on any subsequent Interest Payment Date. Moneys in the Interest Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds when due and payable (including accrued interest on any Bonds redeemed or purchased prior to maturity), subject, however, to the provisions of the Indenture regarding reimbursement of rental. (b) Principal Fund. The Trustee, on or before the Business Day next preceding each Principal Payment Date and on or before each Sinking Account Payment Date, after making the deposit into the Interest Fund on such date, shall deposit in the Principal Fund an amount which, together with any balance then on deposit in the Principal Fund, equals the principal of the Bonds then due or required to be paid on such Principal Payment Date or Sinking Account Payment Date with respect to the Bonds in accordance with the terms of the Indenture.

Any moneys in the Principal Fund not then required for the payment of such principal on such Principal Payment Date or Sinking Account Payment Date shall be carried forward and applied to the payment of principal on any subsequent Principal Payment Date or Sinking Account Payment Date. Moneys in the Principal Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds when due and payable, subject, however, to the provisions of the Indenture regarding reimbursement of rental. (c) Surplus Revenue Fund. After making the deposits to the Interest Fund and the Principal Fund described above, the Trustee, on or before the Business Day immediately preceding each Principal Payment Date, shall deposit any remaining Revenues in the Surplus Revenue Fund. The Trustee shall, immediately upon making each deposit in the Surplus Revenue Fund, determine if any moneys then in the Surplus Revenue Fund are required for the payment of principal of or interest on the Bonds on such Principal Payment Date or the next succeeding Interest Payment Date or for the replenishment of a debt service reserve fund (if any) so that amounts on deposit therein are not less than the required amount, and shall hold any such moneys in the Surplus Revenue Fund for transfer to the Interest Fund, the Principal Fund or such debt service reserve fund as so needed. Except as provided above, moneys in the Surplus Revenue Fund are not pledged to the Bonds and shall be paid to, or at the direction of, the City within 60 Business Days after each Principal Payment Date. (d) Insurance and Eminent Domain Proceeds Fund. The net proceeds resulting from any insurance claim or eminent domain proceedings and payable to the Trustee shall be deposited in the Insurance and Eminent Domain Proceeds Fund and applied as set forth in the Indenture.

No Debt Service Reserve Fund
The Authority will not establish a debt service reserve fund for the 2023 Bonds.

Additional Bonds
Under the Indenture, in addition to the 2023 Bonds, the Authority may, by Supplemental Indenture, establish one or more other issues of Additional Bonds on a parity with the 2023 Bonds, and may issue and deliver such Additional Bonds in a principal amount as may be determined by the Authority, but only upon compliance by the Authority with the provisions of the Indenture regarding the proceedings for issuing Additional Bonds, and subject to the following specific conditions which are conditions precedent to the issuance of Additional Bonds:
(a) Such Additional Bonds shall have been authorized to finance or refinance acquisition and/or construction of additional capital assets for the City, and the issuance thereof shall have been determined and declared by the Authority, in a Supplemental Indenture, to be necessary for that purpose. (b) The Authority and the City shall be in compliance with all covenants and undertakings set forth in the Indenture, the Property Lease and the Site Lease. (c) The aggregate principal amount of Bonds issued and at any time Outstanding under the Indenture may not exceed any limit imposed by law, by the Indenture or by any Supplemental Indenture. (d) Such Additional Bonds shall be equally and ratably secured by the Revenues with all other Bonds authorized under the Indenture. A series of Additional Bonds may be issued without a corresponding deposit into a debt service reserve fund. (e) The Authority shall have entered into an amendment to the Property Lease, in and by which the City obligates itself in the manner provided in the Property Lease to make Base Rental payments for the lease of the Leased Property at the times and in the amounts sufficient to provide for the payment of the principal of and interest on such Additional Bonds as such principal and interest become due and to make all other payments in the manner provided in the Property Lease, and the City must certify in writing that such Base Rental payments, as amended, in any Lease Year shall not exceed the fair rental value of the Leased Property. (f) If necessary to ensure that the Base Rental payable after the issuance of Additional Bonds does not exceed the fair rental value of the Leased Property in any Lease Year, the Authority and the City must amend the Property Lease to add additional property to the Leased Property. (g) In the event that the Additional Bonds are being issued to finance the construction of a to-be-built project, such project is to be part of the Leased Property prior to its completion and the City has determined that the project must be completed for the Base Rental payments after the issuance of the Additional Bonds to not exceed the fair rental value of the Leased Property in any Lease Year, the Supplemental Indenture authorizing the issuance of such Additional Bonds shall require the deposit into a separate account an amount sufficient to pay interest on such Additional Bonds through a date which is not less than six months after the anticipated completion date of the project.

In addition, the Indenture requires the City to send written notice of the issuance of such Additional Bonds to each rating agency then rating the Bonds.

Base Rental
Requirement to Make Base Rental Payments. Under the Property Lease, the City is required to pay to the Authority, as Base Rental for the use and occupancy of the Leased Property (subject to the provisions of the Property Lease concerning the extension of the lease term, fair rental value, rental abatement and eminent domain) the amounts at the times specified in and in accordance with the Base Rental Payment Schedule set forth in the Property Lease.

Base Rental shall be payable on each “Base Rental Payment Date” (defined as April 15 and October 15 of each year, beginning October 15, 2023) during the term of the Property Lease.

Base Rental shall be for the use and occupancy of the Leased Property for the Lease Year in which such April 15 and October 15 occurs, provided that the Base Rental paid on any April 15 and October 15 shall only be for that portion of the applicable period that the City has use and occupancy of all or a portion of the Leased Property. If the term of the Property Lease is extended, the payments of Base Rental shall continue to and including such time as the Property Lease terminates in accordance with its terms.

Payment in Installments. Each installment of Base Rental payable under the Property Lease and each installment of Additional Rental (as described below) payable under the Property Lease shall be paid in lawful money of the United States of America to or upon the order of the Authority at the principal corporate trust office of the Trustee in Los Angeles, California, or such other place as the Authority designates.

Except as otherwise provided in the Property Lease, any installment of Base Rental or Additional Rental accruing under the Property Lease which is not paid when due shall bear interest at the highest interest rate on any outstanding Bond or such lesser rate as may be permitted by law. Notwithstanding any dispute between the Authority and the City, 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 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, shall be credited against subsequent rental payments due under the Property Lease or, at the City’s option, refunded at the time of such determination.

Offsets and Credits. Notwithstanding any dispute between the Authority and the City, the City is obligated to make all rental payments when due under the Property Lease without deduction or offset of any kind and may not withhold any rental payments pending the final resolution of such dispute. The City will receive a credit for any Base Rental payment if and to the extent a credit is due to the City due to abatement.

Additional Rental
Under the Property Lease, the City is also required to pay to the Authority (but only after payment of Base Rental), as Additional Rental thereunder, such amounts as are required by the Authority for the payment of the following:
(a) All taxes, assessments or governmental charges of any type or nature charged to the Authority or affecting the Leased Property or the respective interests or estates of the Authority or the City therein, or affecting the amount available to the Authority from rentals received under the Property Lease for the retirement of the Bonds (including taxes, assessments or governmental charges assessed or levied by any governmental agency or district having power to levy taxes, assessments or governmental charges), and any and all costs and expenses incurred by the Authority in taking whatever steps may be necessary, upon written request by the City, to contest any proposed valuation, the amount of any proposed tax or assessment, or to take steps necessary to recover any tax or assessment paid. (b) To the extent permitted by law, all reasonable administrative costs of the Authority relating to the Leased Property including, but without limiting the generality of the foregoing, salaries, wages, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture, fees of auditors, accountants, attorneys or engineers, and all other necessary and reasonable administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Bonds or of the Indenture or to defend the Authority and its members, officers, agents and employees. (c) Insurance premiums for all insurance required under the Property Lease and not obtained by the City. (d) Amounts, if any, required to be rebated by the Authority to the United States of America under the Indenture.

Fair Rental Value
The payments of the Base Rental and Additional Rental during the term of the Property Lease shall constitute the total rental for the City’s use and occupancy of the Leased Property for the Lease Year in which such payments are scheduled to be made, and the City and the Authority have agreed and determined that such total rental represents the fair rental value of the Leased Property. In making such determination, consideration has been given to the costs of financing and leasing of the Leased Property by the Authority, the uses and purposes which may be served by the Leased Property, and the benefits which shall accrue to the Authority, the City and the general public therefrom.

The Property Lease further states that, notwithstanding any other provision thereof, in the event that rental payments due thereunder shall be abated partially for any period of time, the rental payments due for such period of time shall not exceed the fair rental value of that portion of the Leased Property available for use and occupancy by the City during such period of time. See “– Abatement” below.

Source of Payments; Covenant to Appropriate
Under the Property Lease, the City will covenant to take such action as may be necessary to include all Base Rental payments and Additional Rental due under the Property Lease in its annual budgets and to make necessary annual appropriations for all such rental payments. These covenants shall be deemed to be and be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements agreed to be carried out and performed by the City in the Property Lease.

Abatement
During any period in which by reason of material damage to or destruction of the Leased Property, or condemnation of or defects in the title of the Leased Property, there is substantial interference with the use and occupancy by the City of any portion of the Leased Property, or the City is otherwise not able to use or enjoy the benefit of the Leased Property, rental payments due under the Property Lease shall be subject to abatement proportionately. Under the Property Lease, the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other rights to terminate the Property Lease by virtue of any such interference or lack of use and the Property Lease shall continue in full force and effect.

Subject to the provisions of the Property Lease concerning fair rental value, in the case of abatement relating to the Leased Property, the amount of abatement shall be in that proportion which the value of that portion of the Leased Property rendered unusable bears to the value of the whole of the Leased Property. The City shall calculate the amount to be abated and shall provide the Authority and the Trustee with a certificate setting forth its calculation and the basis for such calculation. Such abatement shall continue for the period commencing with the date on which there is substantial interference with the use and occupancy by the City of the Leased Property and ending with the substantial completion of the work of repair or replacement of the Leased Property so damaged or destroyed; and the term of the Property Lease shall be extended by the period during which the rental is abated under the Property Lease, except that the term shall in no event be extended beyond for the period commencing with the date on which the Leased Property is not available for use and occupancy and ending with the date on which the Leased Property is available for use and occupancy; and the term of the Property Lease shall be extended by the period during which the rental is abated, except that the term may in no event be extended beyond the date specified in the Property Lease.

The Property Lease provides that notwithstanding the foregoing, the City shall still be obligated to apply amounts legally available to the City for payments due under the Property Lease, despite the interference with the use and occupancy, including without limitation: amounts available that have been deposited in and transferred from the Revenue Fund under the Indenture, amounts available from any capitalized interest account, any debt service reserve fund maintained under the Indenture and the Surplus Revenue Fund proceeds of rental interruption insurance; proceeds of any condemnation proceedings; and proceeds of hazard insurance, other property insurance, and title insurance.

Insurance
General Liability Insurance. Under the Property Lease, the City is required to maintain or cause to be maintained, throughout the term of the Property Lease, general liability insurance naming the Authority, its members, officers, agents and employees, the Trustee and the City and its officers, agents and employees as insured parties. Said policy or policies shall insure said parties against liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent.

Property Insurance. Under the Property Lease, throughout the term of the Property Lease, the City is required to maintain or cause to be maintained fire and lightning (i.e., property) insurance (with an extended coverage endorsement and with a vandalism and malicious mischief endorsement) on all structures constituting any part of the Leased Property in an amount equal to the lesser of (i) one hundred percent of the replacement cost of such structures or (ii) an amount equal to the then principal amount of the Outstanding Bonds. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Said extended coverage endorsement shall, as nearly as possible, cover loss or damage by such events as explosion, windstorm, hail, riot, civil commotion, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such endorsement, and shall include earthquake coverage if available at reasonable cost from reputable insurers in the judgment of the City.

Rental Interruption Insurance. Under the Property Lease, the City is required to maintain or cause to be maintained, throughout the term of the Property Lease, rental income interruption insurance in an amount not less than the maximum total Base Rental payable by the City pursuant to the Property Lease during any consecutive 24 month period, plus the Additional Rental expected to be payable pursuant to the Property Lease for such period, to insure against loss of rental income from the Leased Property caused by perils covered by the property insurance required by the Property Lease as described in the subcaption “– Property Insurance” above.

Title Insurance. Under the Indenture, the Authority is required to provide, or cause the City to provide, upon the delivery of the Bonds, a title insurance policy or policies with endorsement so as to be payable to the Trustee for the use and benefit of the Bondowners. Such policy or policies shall be in the amount of the aggregate principal amount of the Bonds initially issued pursuant to the Indenture, and shall insure the Authority’s leasehold interest in the Leased Property, and the City’s leasehold therein, subject only to Permitted Encumbrances. The lease agreement between the City and the San Bernardino County Library system relating to the Hesperia Library Branch will constitute a Permitted Encumbrance.

Alternative Insurance Programs. All insurance required to be maintained pursuant to the Property Lease may be maintained either separately or as a part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of participation by the City in a joint powers agency or other program providing pooled issuance.

Application of Net Proceeds. The Trustee, as assignee of the Authority under the Indenture, has the right to receive the net proceeds resulting from any insurance claim or eminent domain proceedings and payable to the Trustee. As provided in the Indenture, the Trustee will deposit all such proceeds in the Insurance and Eminent Domain Proceeds Fund and any such proceeds which are not applied to repair, rebuild or replace the Leased Property will be applied to the redemption of 2023 Bonds under certain circumstances set forth in the Indenture. See also “THE 2023 BONDS – Redemption – Mandatory Redemption from Insurance or Condemnation Proceeds.” See “APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for further provisions regarding required insurance coverage for the Leased Property and the application of proceeds resulting from any insurance claim or eminent domain proceedings payable to the Trustee.

Default; Remedies
Under the Property Lease, the City shall be deemed to be in default thereunder (i) if it shall (A) fail to pay any rental payable thereunder when the same becomes due and payable, time being expressly agreed to be of the essence in the Property Lease, or (B) fail to keep, observe or perform any other term, covenant or condition contained therein to be kept or performed by the City; or (ii) upon the happening of any of the events described in the following paragraph.

If (1) the City’s interest in the Property Lease or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority as provided for in the Property Lease; or (2) the City or any assignee shall file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such acts 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 the City’s debts or obligations, or offers to the City’s creditors to effect a composition or extension of time to pay the City’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the City’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the City, or if a receiver of the business or of the property or assets of the City shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the City shall make a general or any assignment for the benefit of the City’s creditors; or (3) the City shall abandon or vacate any portion or portions of the Leased Property, then the City shall be deemed to be in default under the Property Lease with respect to that portion or portions of the Leased Property to which the default relates.

Under the Property Lease, the Authority may exercise any and all remedies available pursuant to law (other than those specifically waived therein) or granted pursuant to the Property Lease upon the occurrence of any default. The Property Lease further provides that the City shall not be in default in the observance or performance of any covenant, condition or agreement in the Property Lease on its part to be observed or performed, other than as referred to in clauses (i)(A), or (ii) of the first paragraph of this section, unless the City shall have failed, for a period of 30 days or such additional time as is reasonably required, to correct any such default after notice by the Authority to the City properly specifying wherein the City has failed to perform any such covenant, condition or agreement.

Neither the Authority nor the Trustee may accelerate the Base Rental payments or otherwise declare any Base Rental payments not then in default to be immediately due and payable.

Upon any such default, the Authority shall have the right to collect each installment of rent as it becomes due and enforce any other terms or provision hereof to be kept or performed by the City; notwithstanding the foregoing, the Authority waives the right to re-enter or re-let the Leased Property. See “BOND OWNERS’ RISKS – Limitations on Remedies” and See “APPENDIX B − SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”

THE AUTHORITY
The City and the Water District formed the Authority pursuant to the provisions of the Act and the Joint Powers Agreement to assist them from time to time in connection with their respective financing programs, including the acquisition, construction and improvement of public capital improvements and other programs of such member.

The members of the City Council serve as the governing board of the Authority, the City Manager serves as Executive Director of the Authority, the Director of Government Services serves as Secretary of the Authority, the Director of Administrative Services serves as the Treasurer and the City Attorney serves as counsel to the Authority. The Authority is a separate entity constituting a public instrumentality of the State.

THE CITY
For information about the City, including general demographic information and financial information relating to the General Fund, see “Appendix A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION.”

BOND INSURANCE
The following information has been furnished by [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 from bond insurer]

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS The constitutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.

Limitations on Revenues
Article XIIIA of the California Constitution. Article XIIIA of the State Constitution, adopted and known as Proposition 13, was approved by the voters in June 1978 and has been amended on occasions, including most recently on November 7, 2000 to reduce the voting percentage required for the passage of school bonds. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to one percent of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State statutes. Section 1(b) of Article XIIIA provides that the one-percent limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition, or (iii) bonded indebtedness incurred by a school district or community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters voting on the proposition.

Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of real property as shown on the 1975-76 fiscal year tax bill, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. Legislation implementing Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 1% base tax levied by each county and taxes to pay debt service on indebtedness approved by the voters as described above. Such legislation further provides that each county will levy the maximum tax permitted by Article XIIIA, which is $1.00 per $100 of assessed market value.

Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be reassessed when it is purchased, newly constructed or undergoes a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the City.

Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.

Articles XIIIC and XIIID of the California Constitution.

General. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges.

On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article XIIIC define “taxes” that are subject to voter approval as “any levy, charge, or exaction of any kind imposed by a local government,” with certain exceptions.

Taxes. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City (“general taxes”) require a majority vote; taxes for specific purposes (“special taxes”), even if deposited into the City’s General Fund, require a two-thirds vote. The voter approval requirements of Article XIIIC reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs.

Property-Related Fees, Charges and Assessments. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs. These provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a “special benefit,” as defined in Article XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.

Reduction or Repeal of Taxes, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City’s General Fund. If such repeal or reduction occurs, the City’s ability to pay debt service on the 2023 Bonds could be adversely affected.

Burden of Proof. Article XIIIC provides that local government “bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.” Similarly, Article XIIID provides that in “any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance” with Article XIIID.

Impact on City’s General Fund. The approval requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs.

The City does not believe that any material source of General Fund revenue is subject to challenge under Proposition 218 or Proposition 26.

Judicial Interpretation. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination.

Expenditures and Appropriations. In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and local governments are subject to an annual “appropriations limit” or “Gann Limit” imposed by Article XIIIB of the State Constitution, which effectively limits the amount of such revenues that government entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” exclude tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds.

Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in cases of emergency; however, the appropriations limit for the three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.

The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services.

Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceed the aggregate limit, the excess must be returned to the local government’s taxpayers through tax rate or fee reductions over the following two years.

Statutory Revenue Limitations - Proposition 62
Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988.

Following its adoption by the voters, various provisions of Proposition 62 were declared unconstitutional at the appellate court level. On September 28, 1995, however, the California Supreme Court, in Santa Clara County Local Transportation Authority v. Guardino, upheld the constitutionality of the portion of Proposition 62 requiring a two–thirds vote in order for a local government or district to impose a special tax and, by implication, upheld a parallel provision requiring a majority vote in order for a local government or district to impose any general tax. The Guardino decision did not address whether it should be applied retroactively. In response to Guardino, the California Legislature adopted Assembly Bill 1362, which provided that Guardino should apply only prospectively to any tax that was imposed or increased by an ordinance or resolution adopted after December 14, 1995. Assembly Bill 1362 was vetoed by the Governor; hence the application of the Guardino decision on a retroactive basis remains unclear.

Proposition 62, as an initiative statute, does not have the same level of authority as a constitutional initiative. It is analogous to legislation adopted by the State Legislature, except that it may be amended only by a vote of the State’s electorate. However, Proposition 218, as a constitutional amendment, is applicable to charter cities and supersedes many of the provisions of Proposition 62.

Proposition 1A
Proposition 1A, proposed by the Legislature in connection with the State’s fiscal year 2004-2005 Budget, approved by the voters in November 2004 and generally effective in fiscal year 2006-2007, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in fiscal year 2008-2009, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the motor vehicle license fee rate currently in effect, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates.

Proposition 1A may result in increased and more stable City revenues. The magnitude of such increase and stability is unknown and would depend on future actions by the State. However, Proposition 1A could also result in decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing spending on other State programs or other action, some of which could be adverse to the City.

Proposition 22
Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 amended the state Constitution to eliminate or reduce the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. This Proposition was intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes.

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 fiscal year 1988-89, are allocated as follows: (i) each jurisdiction will receive up to 102% of its prior year State–assessed revenue; and (ii) if county–wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or benefit of the excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.

The provisions of AB 454 constitute neither an elimination of the assessment of any State–assessed 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.

Possible Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City’s ability to expend revenues. There is no assurance that the California electorate or Legislature will not at some future time approve additional limitations.

BOND OWNERS’ RISKS
The following describes certain special considerations and risk factors affecting the payment of and security for the 2023 Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any 2023 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors in the 2023 Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the 2023 Bonds. There can be no assurance that other considerations will not materialize in the future.

Limited Obligations
The 2023 Bonds are limited obligations of the Authority payable solely from and secured solely by the Revenues pledged therefor under the Indenture, together with amounts on deposit from time to time in certain funds and accounts held by the Trustee. Revenues consist primarily of Base Rental payments. If for any of the reasons described below, or for any other reason, the Authority does not receive sufficient Base Rental payments to pay debt service on the 2023 Bonds, the Authority will not be obligated to utilize any other of its funds, other than amounts on deposit in certain funds and accounts established under the Indenture, to pay debt service on the 2023 Bonds.

The Base Rental payments are not secured by any pledge of or lien on taxes or other revenue of the City, but are payable from all funds lawfully available to the City. Under the Indenture, the Authority may issue Additional Bonds secured by and payable from Revenues on a parity with the 2023 Bonds in the future if certain conditions are satisfied. See “SECURITY FOR THE 2023 BONDS – Additional Bonds.” In addition, the City has the capacity to enter into other obligations that may constitute additional obligations against its revenues. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other obligations before making Base Rental payments; in that case, the failure to pay Base Rental payments in full would constitute a default under the Property Lease (see “– Additional Obligations of the City” below). The same result could occur if, because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues; in that case, the failure to pay Base Rental payments in full would constitute a default under the Property Lease. The City must adopt a balanced Budget each year, and has covenanted in the Property Lease to budget for, appropriate and make the Base Rental payments in each year that it has possession and use of the Leased Property.

Abatement
Under California law, the obligation of the City to make Base Rental payments is contingent upon the availability of the Leased Property for use and occupancy by the City. The Base Rental payments are subject to abatement in an amount determined by the City such that the resulting Base Rental payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. The Base Rental payments will be abated proportionately during any period in which by reason of material damage or destruction, there is substantial interference with the use and occupancy of any portion of the Leased Property by the City, and such abatement will continue until substantial completion of the work of repair or replacement of the portion of the Leased Property damaged or destroyed. Any abatement of Base Rental payments could affect the Authority’s ability to pay debt service on the 2023 Bonds. However, there will be no abatement of Base Rental payments under the Property Lease to the extent that the proceeds of property insurance, rental interruption insurance or condemnation proceeds are available to pay Base Rental payments that would otherwise be abated.

In the event Base Rental payments are abated, no assurances can be given that the proceeds of property insurance (which is not required to be available to cover earthquake damage) or rental interruption insurance will be sufficient to pay the debt service on the 2023 Bonds during the period of such abatement. See “SECURITY FOR THE 2023 BONDS − Abatement” and “APPENDIX B − SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Notwithstanding the provisions of the Property Lease specifying the extent of abatement in the event of the City’s failure to have full use and occupancy of the Leased Property, such provisions may be superseded by operation of law, and, in such event, the resulting Base Rental payments of the City may not be sufficient to pay all of the remaining principal and interest with respect to the 2023 Bonds.

Limitation on Remedies
The enforcement of any remedies provided for in the Property Lease and in the Indenture could prove to be both expensive and time-consuming. In addition, in the Property Lease the Authority waives the right to re-enter or re-let the Leased Property. Accordingly, re-entry or re-letting of the Leased Property is not an available remedy under the Property Lease and the only remedy against the City with respect to the Leased Property would be to recover the Base Rental payments and other monetary charges as they become due. In addition, the Trustee may not terminate the City’s right to possession of the Leased Property, regardless of whether the City has abandoned it. Because of this, in the event of a bankruptcy by the City, the Trustee will have limited ability to compel the payment of Base Rental payments with respect to the Leased Property. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a description of the remedies contained in the Property Lease and the Indenture.

In addition to the limitations on remedies contained in the Property Lease and the Indenture, the rights and remedies provided in those documents may be limited by and are subject to provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect creditors’ rights generally. The various legal opinions to be delivered concurrently with the issuance of the 2023 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors’ rights, including equitable principles. See “– Bankruptcy Risks” below.

Limitation on Trustee’s Obligations under the Indenture The Trustee has no obligation to advance its own funds to pursue any remedies. As a consequence, the Trustee’s willingness and ability to pursue any of the remedies provided in the Indenture or Property Lease may be dependent upon the availability of funds from an interested party. There can be no assurance that the Trustee will be willing and able to perform its duties under the Indenture.

Release of Property; Additional Bonds
The Authority and the City may amend the Property Lease to substitute or release a portion of the Leased Property upon compliance with all of the conditions set forth in the Property Lease. After a substitution or release, the portion of the Leased Property for which the substitution or release has been effected will be released from the leasehold encumbrance of the Property Lease.

Although the Property Lease requires, among other things, that the annual fair rental value of the property which remains subject to the Property Lease following such release is no less than the maximum annual Base Rental and Additional Rental remaining unpaid under the Property Lease at the time of such release, it does not require that the Leased Property have an annual fair rental value equal to the annual fair rental value of the Leased Property prior to the substitution or release of any portion thereof. Thus, a portion of the Leased Property could be replaced with less valuable real property, or could be released altogether. Such a substitution or release could have an adverse impact on the security for the 2023 Bonds, particularly if an event requiring abatement of the Base Rental payments were to occur subsequent to such substitution or release. See “THE LEASED PROPERTY – Substitution of Leased Property” and “– Release of Lease Property.” Moreover, the Authority and the City are permitted to amend the terms of the Property Lease, without the Trustee’s consent, for certain purposes that include obligating the City to pay additional amounts of Base Rental in connection with the issuance of Additional Bonds in accordance with the Indenture. See “SECURITY FOR THE 2023 BONDS – Additional Bonds.” As previously described, on the date the 2023 Bonds are issued, the Hesperia Branch Library will not be part of the Leased Property subject to the leasehold interest under the Property Lease. However, the City currently intends to substitute the Hesperia Branch Library for City Hall, if and when, it receives a written subordination from the County subordinating the County’s interests under the County Library Lease Agreement to the Property Lease and the Site Lease, and subject to the satisfaction of certain other conditions precedent in the Property Lease. See “THE LEASED PROPERTY – Description and Location” and “– Substitution of Leased Property.” Insurance on the Leased Property
Under the Property Lease, the City is required to maintain through the term of the Property Lease policies of insurance covering loss or damage to the Leased Property at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) an amount equal to the then principal amount of the Outstanding Bonds. If the Leased Property is damaged or destroyed, there can be no assurance that the insurance proceeds will be sufficient to repair or restore the Leased Property, or to redeem or defease all of the then-Outstanding 2023 Bonds. In addition, neither the Authority nor the City can provide any assurance as to whether the provider of an insurance policy will pay under such policy. See the caption “SECURITY FOR THE 2023 BONDS – Insurance” for a description of the insurance coverages that are required by the Property Lease. See “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION – FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Risk Management” for a description of the City’s current insurance coverages. Certain risks, such as earthquakes, are not required to be covered under the Property Lease and the City is not required to maintain such coverage during the term of the Property Lease.

Condemnation of the Leased Property
If all or a portion of the Leased Property were condemned, there can be no assurance that any such award or payment will be sufficient at the time to prepay or defease all of the then-Outstanding 2023 Bonds. If the award in a condemnation of the entire Leased Property is less than the amounts remaining on such Outstanding 2023 Bonds, then the Owners will be paid less than the amounts remaining on such Outstanding 2023 Bonds. See “– Abatement” above.

Value of Leased Property
The security under the Property Lease extends only to the Authority’s leasehold interest in the Leased Property granted under the Site Lease and is subject to the restrictions of the Site Lease. The Leased Property has not been appraised in connection with the issuance of the 2023 Bonds.

No Acceleration Upon Default
In the event of a default, there is no remedy of acceleration of the total Base Rental payments for the term of the Property Lease. Any suit for money damages would be subject to the legal limitations on remedies against cities and counties in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. See “APPENDIX B – SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS.” Early Prepayment Risk
Early payment of the Base Rental payments and early redemption of the 2023 Bonds may occur in whole or in part, without premium, from insurance or condemnation proceeds, on any date, if the Leased Property, or a portion thereof, is lost, destroyed or damaged beyond repair or taken by eminent domain and if the City exercises its right to prepay the Base Rental payments in whole or in part pursuant to the provisions of the Property Lease and the Indenture.

Bankruptcy Risks
The rights of the owners of the 2023 Bonds and the enforceability of the Authority’s obligation to make payments on the 2023 Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights under currently existing law or laws enacted in the future, and may also be subject to the exercise of judicial discretion under certain circumstances.

Under existing law, the City is eligible to file for bankruptcy. Should the City file for bankruptcy, there could be adverse effects on the holders of the 2023 Bonds. In a bankruptcy of the City, the Authority or the Trustee as its assignee and the owners of the 2023 Bonds may be prohibited from taking any action against the City, any official of the City, or any property of the City (including the Leased Property) to enforce the terms of the Property Lease, unless the consent of the bankruptcy court is first obtained. The bankruptcy court is not required to give its consent. This prohibition on action may even prohibit the Trustee from using funds in its possession to make payments on the 2023 Bonds. As a result, Owners may experience temporary delays or reductions in the payment of the 2023 Bonds.

In a bankruptcy case, a plan of adjustment for the City could be confirmed that would allow for enforcement of the Property Lease, but the priority, interest rate, payment terms, collateral, maturity dates, payment sources, covenants and other terms or provisions of the Property Lease and the 2023 Bonds may be altered by the bankruptcy court. Such a plan could be confirmed even over the objections of the Authority or the Trustee as its assignee and the owners of the 2023 Bonds, and without their consent. Additionally, the resulting plan could adjust some or all of the City’s financial obligations, which include the City’s lease payment obligations under the Property Lease to and the City’s obligation to fund certain retirement benefits.

The adjustment plans approved by the Bankruptcy Courts in connection with the bankruptcies of the cities of Vallejo, San Bernardino and Stockton resulted in significant reductions in the amounts payable by the cities under lease revenue obligations substantially identical or similar to the 2023 Bonds. The City can provide no assurance about the outcome of the bankruptcy cases of other California municipalities of the nature of any adjustment plan it if were to file for bankruptcy.

In addition, if the Property Lease is determined to constitute a “true lease” by the bankruptcy court (rather than a financing lease providing for the extension of credit), the City could choose not to perform under the Property Lease and the claim of the owners of the 2023 Bonds could be substantially limited. An allowable claim could be substantially less than the amount of the 2023 Bonds outstanding, resulting in the owners of the 2023 Bonds suffering a substantial loss.

The opinions of counsel, including Bond Counsel, delivered in connection with the issuance and delivery of the 2023 Bonds will be so qualified. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the owners of the 2023 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.

In addition, as previously described, in the event of a bankruptcy by the City, the Trustee will have limited ability to compel the payment of Base Rental payments with respect to the Leased Property. See “– Limitation on Remedies.” State Law Limitations on Appropriations
Article XIIIB of the California Constitution limits the amount that local governments can appropriate annually. The ability of the City to make Base Rental payments may be affected if the City should exceed its appropriations limit. The State may increase the appropriation limit of cities in the State by decreasing the State’s own appropriation limit. The City does not anticipate exceeding its appropriations limit in the foreseeable future. See “CONSTITUTIONAL AND STATUTORY LIMITATION ON TAXES AND APPROPRIATIONS – Limitations on Revenues – Expenditures and Appropriations.” 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 payments 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.” Additional Obligations of the City
The City has existing obligations payable from its General Fund. The City is permitted to enter into other obligations which constitute additional charges against its revenues, including additional rental payable from a lease of the Leased Property, without the consent of Owners of the 2023 Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Base Rental payments to the Owners of the 2023 Bonds may decline. See “SECURITY FOR THE 2023 BONDS – Additional Bonds” and “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION – FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Outstanding Debt of the General Fund.” The Base Rental payments and other payments due under the Property Lease (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 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.

Property Taxes
Levy and Collection. 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 Base Rental payments when due.

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, in form prescribed by the State Board of Equalization, 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.

Public Health Emergencies
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. On February 11, 2020, the World Health Organization (“WHO”) announced the official name for the outbreak of the disease known as COVID-19 (“COVID-19”), an upper respiratory tract illness. COVID-19 has since spread across the globe.

To date, the City’s General Fund revenues have not been adversely affected by the COVID-19 pandemic. In addition, as of the date of this Official Statement, the City does not anticipate that the COVID-19 pandemic will materially adversely affect its ability to make Base Rental payments under the Property Lease in the foreseeable future. However, because the COVID-19 pandemic is ongoing, there can be no assurance that absences of employees or City leadership due to COVID-19 will not adversely impact City operations. Furthermore, the ultimate impact of COVID-19 on the City’s operations and finances and the economy, real estate market and development within the City is not fully known, and it may be some time before the full adverse impact of the COVID-19 outbreak is known.

There could be future COVID-19 outbreaks or other public health emergencies that could have material adverse effects on the City’s operations and finances. See “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION.” Certain Risks Associated with Sales Tax and Other Local Tax Revenues For Fiscal Year 2021-22, sales tax revenues were the largest source of General Fund revenue of the City (representing approximately 31% of the total General Fund revenues for such Fiscal Year. See “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION – FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Sales and Use Taxes.” 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, 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. To date, the City’s sales tax revenues have not been significantly impacted by the COVID-19 pandemic.

In addition, changes or amendments in the laws applicable to the City’s receipt of sales tax revenues or other local taxes, whether implemented by State legislative action or voter initiative, could have an adverse effect on sales tax revenues received by the City. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Limitations on Revenues – Article XIIIC and Article XIIID of the California Constitution.” 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 California Department of Tax and Fee Administration for administering the City’s sales tax could also be changed.  See “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION – FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Sales and Use Taxes.” Increasing Retirement Related Costs
The City is required to make contributions to the California Public Employees’ Retirement System (“CalPERS”) for employees and retirees of the City and retirees of the Hesperia Fire Protection District. Such obligations are a significant financial obligation of the City and could increase in the future. Actual contribution rates will depend on a variety of factors, including but not limited to actual investment returns and future changes to benefits or actuarial assumptions. The City notes that pension contributions in future years may increase as a result of investment losses in CalPERS’ portfolio. There can be no assurances that actual increases in required contributions will not be higher than the amounts which are currently projected. See “APPENDIX A – CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION – FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Employee Retirement System.” Hazardous Substances
Owners and operators of real property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances area also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect assessed values of property in the City and the operations and finances of the City.

Natural Hazards
The value of the Leased Property, and the financial stability of the City, can be adversely affected by a variety of factors, particularly those which may affect infrastructure and other public improvements and private improvements and the continued habitability and enjoyment of such improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth movements, landslides and floods and climatic conditions such as droughts. In the event that one or more of such conditions occur, such occurrence could cause damages of varying seriousness to the land and improvements and the value of property in the City could be diminished in the aftermath of such events. A substantial reduction of the value of such properties could affect the ability or willingness of the property owners to pay their property taxes. See “– Abatement” above.

Seismic. Like most regions in the State, the City is in an area of significant seismic activity. There are numerous earthquake faults near the City, including the San Andreas, Garlock, North Frontal, Cleghorn, Cucamonga, Helendale and San Jacinto earthquake faults. All of these have the potential to generate moderate to large earthquakes that will cause ground shaking within the City. The North Frontal fault, given its location relative to the City, has the potential to cause the most severe shaking in the City. Loss estimation modeling indicates that a maximum magnitude 7.2 earthquake on this fault would be a worst-case scenario for the City. In addition to ground shaking, earthquakes may generate surface fault rupture, ground failure in the form of liquefaction or slope failure, and secondary effects such as catastrophic dam failures, fires, and hazardous materials releases.

If there were to be an occurrence of severe seismic activity in the City, there could be an abatement or adverse impact on the City’s ability to pay the Base Rental payments. The Property Lease does not require that the City maintain earthquake insurance with respect to the Leased Property. See “SECURITY FOR THE 2023 BONDS – Insurance.” Also see “THE LEASED PROPERTY” for information about the structural design of the Leased Property.

Flood. Like most of southern California, the City is subject to unpredictable seasonal rainfall, with periods of intense and sustained precipitation occurring every few years. The extent of possible flooding in the Mojave River, Antelope Wash, Oro Grande Wash and Summit Valley areas has been analyzed through flood insurance studies. Inundation due to a 100-year flood (a flood that has a one percent probability of being equaled or exceeded in any given year) can occur in these areas of the City. However, the entire Hesperia area has not been studied and the flood zones are incomplete. None of the Leased Property is located in the 100-year floodplain.

There are three dams and numerous water storage tanks in or near the City the failure of which in an earthquake or other calamity could cause inundation of portions of the City. The three dams are the Mojave Forks Dam, Cedar Springs Dam and Lake Arrowhead Dam.

Wildfires. In recent years, wildfires have caused extensive damage throughout the State. In some instances, entire neighborhoods have been destroyed. Several of the fires that occurred in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events. The Leased Property is not in an area classified as a Very High Fire Hazard Severity Zone by California Department of Forestry and Fire Protection, also known as CalFire.

Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. Property damage due to wildfire could result in a significant decrease in the market value of property in City and in the ability or willingness of property owners to pay property taxes.

Drought. As with much of the State, the City experiences recurring drought as a result of its climate conditions. Droughts impact public health and safety related to both water supply and wildfire risk. On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. On March 24, 2023, the Governor eased the emergency drought restrictions imposed as a result of the Governor’s 2021 declaration. There can be no assurance that subsequent declarations will not impose mandatory water use restrictions should dry conditions persist in future years.

Climate Change
The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the City is difficult to predict, but it could be significant and it could have a material adverse effect on the General Fund by requiring greater expenditures to counteract the effects of climate change or by changing the operations and activities of City residents and business establishments.

Cyber Security
The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal, private, or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage.

The City is also reliant on other entities and service providers in connection with the administration of the 2023 Bonds, including without limitation the California Department of Tax and Fee Administration for the collection and distribution of sales taxes, the County for the levy and collection of property taxes, and the Trustee.

On November 28, 2021 the City detected a cybersecurity incident that impacted its network. Upon becoming aware of the incident, the City notified law enforcement and conducted an internal investigation to assess the nature and scope of the compromise. The investigation concluded on January 7, 2022, and confirmed that certain data had been accessed and acquired by an unauthorized third-party. The investigation further concluded that such data may have contained personal information of certain persons. As of the date of this Official Statement, the City has not experienced a material financial impact as a result of such incident.

In an effort to reduce the likelihood of additional cyber incidents in the future, the City has implemented additional security features to its network, conducted employee trainings and hired third-party consultants to monitor the network and notify the City of any suspicious activity. 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 2023 Bonds. Nor can any assurance be given that the other entities the City relies on will not be affected by cyber threats and attacks in a manner that may affect the Bond owners.

Litigation
The City is and may become a party to litigation that has the potential to have an impact on the City’s General Fund. Although the City maintains certain insurance policies that provide coverage under certain circumstances and with respect to certain types of incidents, the City cannot predict what types of liabilities may arise in the future and whether these may adversely affect the ability of the City to pay Base Rental payments under the Property Lease when due.

Changes in Law; Voter Initiatives
The State Legislature may in the future enact legislation that will amend or create laws resulting in a reduction of moneys securing or available to pay the 2023 Bonds. Similarly, the State electorate could adopt initiatives or the State Legislature could adopt legislation with the approval of the electorate amending the State Constitution. Subject to overriding federal constitutional principles, such initiatives or legislation could have the effect of reducing revenues of the City available to make Base Rental payments and therefore the Authority’s ability make debt service payments on the 2023 Bonds when due.

The Taxpayer Protection and Government Accountability Act (the “Taxpayer Protection Act”) is an initiative measure that has gathered sufficient signatures and may appear on a statewide ballot in the future. The ballot measure proposes amendments to the California Constitution that impose significant restrictions on state and local governments with respect to their abilities to raise revenues. The proposal includes expanding the legal definition of “taxes” to include some charges that state and local governments currently treat as fees and other charges, and requires that local special taxes be approved by two-thirds of the electorate. In a recent analysis, the California Legislative Analyst’s Office predicted the measure would result in “[l]ower annual state and local revenues, potentially substantially lower, depending on the future actions of the Legislature, local governing bodies, voters, and the courts.” If the Taxpayer Protection Act is approved by the electorate, there can be no assurance that the City’s revenues will not be significantly affected.

Loss of Tax-Exemption
As discussed under the caption “TAX MATTERS,” interest on the 2023 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2023 Bonds were issued, as a result of future acts or omissions of the Authority or the City in violation of their respective covenants in the Property Lease and the Indenture. Should such an event of taxability occur, the 2023 Bonds are not subject to special redemption and will remain Outstanding until maturity or until redeemed under other provisions set forth in the Indenture.

Bond Insurance
In the event of default of the payment of the scheduled principal of or interest on the Insured 2023 Bonds when all or some becomes due, the Trustee on behalf of any owner of the Insured 2023 Bonds will have a claim under the Insurance Policy for such payments. [INSURER] may direct and must consent to any remedies with respect to the Insured 2023 Bonds and [INSURER]’s consent may be required in connection with amendments to any applicable documents relating to the 2023 Bonds. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” The long-term ratings on the Insured 2023 Bonds are dependent in part on the financial strength of [INSURER] and its claims paying ability. [INSURER]’s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of [INSURER] and the ratings on the Insured 2023 Bonds will not be subject to downgrade and such event could adversely affect the market price of the Insured 2023 Bonds or the marketability (liquidity) for the Insured 2023 Bonds. See the caption “RATINGS” herein.

The obligations of [INSURER] are unsecured contractual obligations and in an event of default by [INSURER], the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies.

None of the City, the Authority or the Underwriter has made independent investigation into the claims paying ability of [INSURER] and no assurance or representation regarding the financial strength or projected financial strength of [INSURER] is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the City to make the payments on the Insured 2023 Bonds and the claims paying ability of [INSURER], particularly over the life of the investment. See “BOND INSURANCE” herein for further information regarding [INSURER] and the Insurance Policy, which includes further instructions for obtaining current financial information concerning [INSURER].

Secondary Market for 2023 Bonds
There can be no guarantee that there will be a secondary market for the 2023 Bonds or, if a secondary market exists, that any 2023 Bonds can be sold for any particular price. Occasionally, because of general 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, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.

TAX MATTERS
Federal Tax Status
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2023 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2023 Bonds may be subject to the corporate alternative minimum tax.

The opinions set forth in the preceding paragraph are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the 2023 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Authority and the City have made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2023 Bonds.

Tax Treatment of Original Issue Discount and Premium
If the initial offering price to the public at which a 2023 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2023 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “bond premium” for purposes of federal income taxes and State of California personal income taxes.

Under the Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2023 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2023 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2023 Bond. The Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2023 Bonds who purchase the 2023 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2023 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2023 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2023 Bonds is sold to the public.

Under the Code, bond premium is amortized on an annual basis over the term of the 2023 Bond (said term being the shorter of the 2023 Bond’s maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2023 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2023 Bond is amortized each year over the term to maturity of the 2023 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2023 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2023 Bonds.

California Tax Status
In the further opinion of Bond Counsel, interest on the 2023 Bonds is exempt from California personal income taxes.

Other Tax Considerations
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 2023 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the 2023 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.

The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2023 Bonds, or as to the consequences of owning or receiving interest on the 2023 Bonds, as of any future date. Prospective purchasers of the 2023 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Owners of the 2023 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2023 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2023 Bonds, the ownership, sale or disposition of the 2023 Bonds, or the amount, accrual or receipt of interest on the 2023 Bonds.

The proposed form of opinion of Bond Counsel with respect to the 2023 Bonds to be delivered on the date of issuance of the 2023 Bonds is set forth in “APPENDIX E – FORM OF OPINION OF BOND COUNSEL.”

CERTAIN LEGAL MATTERS
Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, will render an opinion with respect to the validity of the 2023 Bonds, the form of which is set forth in “APPENDIX E – FORM OF OPINION OF BOND COUNSEL.” Jones Hall, A Professional Law Corporation, takes no responsibility for the accuracy or completeness of the data provided by the City or others and has not undertaken to make an independent verification or does not assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. Bond Counsel will receive compensation from the Authority and the City contingent upon the sale and delivery of the 2023 Bonds.

Certain legal matters will also be passed upon for the City and the Authority by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. Certain legal matters will be passed upon for the City and the Authority by Aleshire & Wynder LLP, as City Attorney. In addition, certain legal matters will be passed on for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Underwriter’s Counsel. The fees payable to Jones Hall and counsel to the Underwriter are contingent upon the sale and delivery of the 2023 Bonds.

Furthermore, from time to time, Jones Hall, A Professional Law Corporation, serves as counsel to the Underwriter with respect to transactions other than the issuance of the 2023 Bonds.

ABSENCE OF MATERIAL LITIGATION
To the best knowledge of the City, there is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served on and received by the City or, to the knowledge of the City, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Property Lease, the Site Lease or the Indenture, or upon the financial condition, assets, properties or operations of the City.

Neither the City nor the Authority is in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by the Property Lease, the Site Lease or the Indenture, or the financial conditions, assets, properties or operations of the City, including but not limited to the payment and performance of the City’s obligations under the Property Lease.

There are a number of lawsuits and claims pending against the City for which the City is either self-insured or insured in varying degrees by commercial insurance, or which in the aggregate, if determined adversely to the City, could have a material adverse impact on the City’s finances in the future. However, the City does not expect any such suits or claims to have a material adverse effect on the City’s ability to make payments under the Property Lease. Such lawsuits include a case filed by the County in San Bernardino County Superior Court against the City seeking indemnification for damages relating to a housing discrimination case filed in federal court by the United States against the City, the San Bernardino Sherriff’s Department and the County relating to the City’s prior Crime-Free ordinance. The housing discrimination case was settled by agreement in December 2022. A settlement conference is scheduled in the County’s indemnification action against the City for June 13, 2023. The County made an initial demand for indemnification against the City in the amount of $900,000.

FINANCIAL STATEMENTS
CliftonLarsonAllen, LLP, Irvine, California (the “Auditor”), audited the financial statements of the City for the Fiscal Year ended June 30, 2022. The audit was conducted in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. See “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2022.” The City has not requested nor did the City obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the City.

RATINGS
S&P Global Ratings (“S&P”) has assigned a rating of “__” to the 2023 Bonds. S&P has also assigned a rating of “__” to the Insured 2023 Bonds based upon the delivery of the Insurance Policy by [INSURER] at the time the Insured 2023 Bonds are issued. See the caption “BOND INSURANCE” herein.

A rating is not a recommendation to buy, sell or hold securities. Future events could have an adverse impact on the rating of the 2023 Bonds, and there is no assurance that any credit rating that is given to the 2023 Bonds will be maintained for any period of time or that a rating may not be qualified, downgraded, lowered or withdrawn entirely by S&P if, in the judgment of S&P circumstances so warrant, nor can there be any assurance that the criteria required to achieve the rating on the 2023 Bonds will not change during the period that the 2023 Bonds remain outstanding.

Any qualification, downward revision, lowering or withdrawal of the rating on the 2023 Bonds may have an adverse effect on the market price of the 2023 Bonds. Such rating reflects only the current view of S&P (which could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, S&P bases its ratings on information and materials furnished to them (which may include information and material from the City that is not included in this Official Statement) and on investigations, studies and assumptions by S&P.

The City has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the 2023 Bonds with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System. See the caption “CONTINUING DISCLOSURE” and Appendix D. Notwithstanding such covenant, information relating to rating changes on the 2023 Bonds may be publicly available from S&P prior to such information being provided to the City and prior to the date by which the City is obligated to file a notice of rating change. Purchasers of the 2023 Bonds are directed to S&P and its website and official media outlets for the most current ratings with respect to the 2023 Bonds after the initial issuance of the 2023 Bonds.

CONTINUING DISCLOSURE
The City (on behalf of the Authority and itself) will covenant for the benefit of owners of the 2023 Bonds to provide certain financial information and operating data relating to the City (the “Annual Report”), by not later than the date that is nine months after the end of the City’s fiscal year (currently March 31 based on the City’s fiscal year end of June 30), commencing March 31, 2024 with the report for the fiscal year ending June 30, 2023, and to provide notices of the occurrence of certain listed events. The Annual Report and the notices of enumerated events will be filed by the City with the Municipal Securities Rulemaking Board through Electronic Municipal Access System (“EMMA”). The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is summarized below under the caption “APPENDIX D – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).

The City and certain related entities previously entered into certain disclosure undertakings under the Rule in connection with the issuance of long-term obligations. During the past five years, the City complied with such undertakings in all material respect, except that the City failed to include the annual information required to be filed by the City with the California Debt and Investment Advisory Commission for the City of Hesperia Community Facilities District No. 2005-1 (Belgate Development Restructuring) Special Tax Refunding Bonds, Series 2014 in the annual reports for such bonds for Fiscal Years 2017-18 through 2019-20. [The City has filed supplemental annual reports on EMMA to correct such failures.] In order to ensure compliance with its disclosure undertakings for its outstanding bonds and the 2013 Bonds, the City has established processes that it believes will be sufficient to ensure compliance in the future with respect to its each of its disclosure undertakings, including the Continuing Disclosure Certificate to be executed in connection with the 2023 Bonds.

UNDERWRITING
The 2023 Bonds are being purchased pursuant a bond purchase agreement by and among the Authority, the City, and the Underwriter. The Underwriter has agreed to purchase the 2023 Bonds at a purchase price of $_______ (which is equal to the par amount of the 2023 Bonds, plus original issue premium of $_______, and less an underwriter’s discount of $_______).

The Underwriter may offer the 2023 Bonds to the public at the offering prices set forth on the cover page of this Official Statement. The Underwriter may offer and sell to certain dealers and others at a price lower than the offering prices stated on the cover page hereof. The offering price may be changed from time to time by the Underwriter.

PROFESSIONAL FEES
In connection with the issuance of the 2023 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2023 Bonds. Those professionals include Jones Hall, A Professional Law Corporation, the Underwriter, Stradling Yocca Carlson & Rauth, a Professional Corporation, as Underwriter’s Counsel, and the Municipal Advisor.

MUNICIPAL ADVISOR
The City has retained the Municipal Advisor in connection with the offering of the 2023 Bonds. All financial and other information presented in this Official Statement has been provided by the City and others from their records. Unless otherwise footnoted, the Municipal Advisor takes no responsibility for the accuracy or completeness of the data provided by the City or others and has not undertaken to make an independent verification or does not assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor has assisted the City with the structure, timing and terms for the sale of the 2023 Bonds. The Municipal Advisor provides municipal advisory services only and does not engage in the underwriting, marketing, or trading of municipal securities or other negotiable instruments. The fee of the Municipal Advisor is contingent upon the successful closing of the 2023 Bonds.

EXECUTION
The execution of this Official Statement and its delivery have been authorized by the Board of Directors of the Authority and the City Council of the City.

HESPERIA JOINT PUBLIC FINANCE AUTHORITY
By:

Executive Director

CITY OF HESPERIA
By:

City Manager

APPENDIX A

CITY OF HESPERIA GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION The 2023 Bonds are payable solely from moneys of the City of Hesperia (the “City”) as described in this Official Statement. The taxing power of the City, the County of San Bernardino (the “County”), the State of California (the “State”) or any political subdivision thereof is not pledged to the payment of the 2023 Bonds.

DEMOGRAPHIC INFORMATION
Location
The City is situated in the County. The City encompasses approximately 75 square miles, and is located 35 miles north of the City of San Bernardino and 90 miles northeast of the City of Los Angeles. The City is bisected by California State Highway 395 and Interstate 15. The City is bordered to the north by the City of Victorville and on the east by the Town of Apple Valley and to the south by the San Bernardino mountains.

Population
The following table shows population estimates for the City and the County as of January 1 for the five most-recently completed calendar years.

CITY OF HESPERIA AND COUNTY OF SAN BERNARDINO

POPULATION
As of January 1 of 2019 through 2023
Year
City of
Hesperia
Percent Change
San Bernardino
County
Percent Change
2019
95,085
--%
2,165,876
--%
2020
99,877

5.0 2,181,654

0.7 2021
99,949

0.1 2,179,007
(0.1)
2022
99,855
(0.1)
2,180,777

0.1 2023
100,041

0.2 2,182,056

0.1 Source: California State Department of Finance, Demographic Research Unit.

Personal Income
Effective buying income (“EBI”) is designated as personal income less personal tax and non-tax payments. Personal income is the aggregate of wages and salaries, other labor income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of Owner-occupants of non-farm dwellings), dividends paid by corporations, personal interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local, non-tax payments (such as fines, fees, penalties), and personal contributions for social insurance. Effective buying income is a bulk measure of market potential. It indicates the general ability to buy and is essential in comparing, selecting and grouping markets on that basis.

The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2019 through 2023.

CITY, COUNTY, STATE AND UNITED STATES

PERSONAL INCOME
For Calendar Years 2019 through 2023
Year
Area
Total Effective Buying Income (000s’ Omitted)
Median Household Effective Buying Income
2019
City of Hesperia
$1,643,893
$46,464
San Bernardino County
42,984,313
52,631
California
1,183,264,399
62,637
United States
9,017,967,563
52,841
2020
City of Hesperia
$1,783,352
$50,422
San Bernardino County
46,025,841
56,502
California
1,243,564,816
65,870
United States
9,487,165,436
55,303
2021
City of Hesperia
$1,861,008
$53,854
San Bernardino County
48,859,973
59,285
California
1,290,894,604
67,956
United States
9,809,944,764
56,790
2022
City of Hesperia
$2,007,122
$58,778
San Bernardino County
54,797,008
66,785
California
1,452,426,153
77,058
United States
11,208,582,541
64,448
2023
City of Hesperia
$2,096,711
$58,670
San Bernardino County
57,619,256
67,680
California
1,461,799,662
77,175
United States
11,454,846,397
65,326
Source: Claritas, LLC.

Employment
The Riverside San Bernardino Ontario Metropolitan Statistical Area (the “MSA”) is comprised of San Bernardino and Riverside Counties. The unemployment rate in the Riverside-San Bernardino-Ontario MSA was 4.5 percent in March 2023, unchanged from a revised 4.5 percent in February 2023, and above the year-ago estimate of 4.2 percent. This compares with an unadjusted unemployment rate of 4.8 percent for California and 3.6 percent for the nation during the same period. The unemployment rate was 4.6 percent in Riverside County, and 4.5 percent in San Bernardino County.

The following table presents the annual average distribution of persons in various wage and salary employment categories for the MSA for calendar years 2018 through 2022 (the most recent year for which annual data is available).

Riverside San Bernardino Ontario MSA
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
2018
2019
2020
2021
2022
Civilian Labor Force (1)
2,045,000
2,074,500
2,088,600
2,118,200
2,045,000
Employment
1,956,800
1,989,700
1,880,500
1,961,800
1,956,800
Unemployment
88,200
84,800
208,100
156,400
88,200
Unemployment Rate

4.3%

4.1%

10.0%

7.4%

4.3%
Wage and Salary Employment: (2)
Agriculture
14,500
15,400
14,100
13,900
14,500
Mining and Logging
1,200
1,200
1,300
1,400
1,200
Construction
105,200
107,200
104,900
109,200
105,200
Manufacturing
99,800
100,600
95,100
94,800
99,800
Wholesale Trade
66,100
67,700
65,600
67,000
66,100
Retail Trade
181,200
180,700
168,800
177,600
181,200
Trans., Warehousing, Utilities
132,100
146,600
172,500
198,600
132,100
Information
11,400
11,500
9,400
9,600
11,400
Finance and Insurance
25,300
24,800
24,600
24,400
25,300
Real Estate and Rental and Leasing
19,300
20,200
19,500
20,500
19,300
Professional/Business Services
152,000
158,700
155,400
167,300
152,000
Educational and Health Services
239,500
250,300
248,700
253,300
239,500
Leisure and Hospitality
170,600
175,900
141,300
158,900
170,600
Other Services
45,800
46,200
40,200
43,000
45,800
Federal Government
20,700
21,100
22,100
21,100
20,700
State Government
30,600
31,100
31,300
31,500
30,600
Local Government
205,900
209,000
194,600
191,000
205,900
Total, All Industries (3)
1,521,100
1,568,100
1,509,300
1,583,000
1,521,100
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.

Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding.

Source: State of California Employment Development Department.

The table below shows the largest employers in the City as of June 30, 2022.

CITY OF HESPERIA

LARGEST EMPLOYERS
(As of June 30, 2022)
Employer
Number of Employees
% of Total City-wide Employment
Hesperia Unified School District
2,910

7.70%
County of San Bernardino
547

1.45 Wal-Mart Supercenter
425

1.12 Slater Brothers Markets (3 locations)
331

0.88 Super Target
275

0.73 Arizona Pipeline Company
226

0.60 City of Hesperia
166

0.44 In-N-Out
161

0.43 Robar Enterprises
135

0.36 Hesperia Recreation & Park District
130

0.34 Source: City of Hesperia Fiscal Year 2021-22 Annual Comprehensive Financial Report.

The 25 largest employers in the County as of May 1, 2023, are shown (in alphabetical order) below.

COUNTY OF SAN BERNARDINO

LARGEST EMPLOYERS
(As of May 1, 2023)
Employer Name
Location
Industry
Amazon Fulfillment Ctr
Redlands
Mail Order Fulfillment Service
Amazon Fulfillment Ctr
San Bernardino
Mail Order Fulfillment Service
Arrowhead Regional Medical Ctr
Colton
Hospitals
Bear Mountain
Big Bear Lake
Skiing Centers & Resorts
Big Bear Mountain Resorts
Big Bear Lake
Resorts
Burlington Distribution Ctr
San Bernardino
Distribution Centers (whls)
California State Univ Sn
San Bernardino
Schools-Universities & Colleges Academic
Dignity Health Cmnty Hosp-Sn
San Bernardino
Hospitals
Environmental Systems Research
Redlands
Geographics Information Systems
Fedex Ground
Bloomington
Delivery Service
Inland Empire Health Plan
Rancho Cucamonga
Health Plans
Loma Linda Univ Health Board
Loma Linda
Univ/Clg-Governing Body/Regent/Trustee
Loma Linda University Med Ctr
Loma Linda
Hospitals
Mountain High Ski Resort
Wrightwood
Skiing Centers & Resorts
Ontario International Airport
Ontario
Airports
Ontario-Montclair School Dist
Ontario
School Districts
Patton State Hospital
Patton
Hospitals
Redlands Community Hospital
Redlands
Hospitals
San Antonio Regional Hospital
Upland
Hospitals
San Bernardino County Sch Supt
San Bernardino
Schools & Educational Services NEC
San Bernardino County Sheriff
San Bernardino
County Government-General Offices
St Bernardine Medical Ctr
San Bernardino
Hospitals
St Mary’s Medical Ctr
Apple Valley
Hospitals
Transportation Department
San Bernardino
State Government-Regulation & Administration-
YRC Freight
Bloomington
Trucking-Motor Freight
Source: California Employment Development Dept., America’s Labor Market Information System (ALMIS) Employer Database, 2023 2nd edition.

Construction Activity
The following table provides a summary of residential building permit valuations and nonresidential building permit valuations, and the total number of all building permit valuations in the City during the past five fiscal years for which information is available.

CITY OF HESPERIA BUILDING PERMIT ACTIVITY
For Calendar Years 2018 Through 2022
(Valuation in Thousands of Dollars)
2018
2019
2020
2021
2022
Permit Valuation
New Single-family
$91,350.1
$43,234.1
$33,881.9
$50,092.3
$69,344.5
New Multi-family
13,910.1
21,356.1
31,393.7
20,752.3
209.3
Res. Alterations/Additions
4,253.3
3,944.3
2,499.3
2,728.4
4,862.1
Total Residential
109,513.5
68,534.5
67,774.5
73,573.0
74,415.9
New Commercial
New Industrial
3,857.3
10,975.6
2,821.1
2,368.6
74,207.0
New Other
1,925.0

0.0 3,299.6

0.0 0.0
Com. Alterations/Additions
4,808.9
5,624.5
8,817.9
9,005.6
15,413.3
Total Nonresidential
9,709.6
13,498.6
4,467.3
4,842.6
7,956.6
20,300.8
30,098.7
19,405.9
16,216.8
97,576.9
New Dwelling Units
Single Family
219
206
165
255
326
Multiple Family
124
225
278
226
2 TOTAL
343
431
443
481
328
Source: Construction Industry Research Board, Building Permit Summary.

See the letter of transmittal accompanying the City’s financial statements for the fiscal year ended June 30, 2022, for a discussion of building permit activity for family homes within the City for fiscal years 2012-13 through 2022-23 in “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022.”

CITY GOVERNMENT AND ADMINISTRATION
Municipal Government
The City was incorporated on July 1, 1988, under the laws of the State and enjoys all the rights and privileges afforded to a general law city. The City is governed by a five-member City Council under the Council-Manager form of government. Policy-making and legislative authority are vested in the governing council, consisting of the mayor and four other members. All Council Members are elected to a four-year term and the City does not have term limits. Regular elections are conducted in November of even numbered years and, beginning with the general municipal election held in November 2018, the City implemented a by-district system of elections, whereby each Council Member represents one district or area within the City. Most recently, in 2022, the general municipal election for Districts 2, 3, and 4 was cancelled due to insufficient nominees. In accordance with the State of California Elections Code, on August 24, 2022, the City Council conducted a special meeting to appoint members to the open seats in Districts 2, 3, and 4.

The Mayor is appointed annually by and among the members of the City Council. The City Council is responsible for, among other things, passing ordinances and resolutions, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and resolutions of the governing council and for overseeing the day-to-day operations of the government.

The current members of the City Council and their respective term expiration dates are as follows:

Name and Office
Term Expires
Rebekah Swanson, Council Member, District 1
January 2024
Allison Lee, Council Member, District 2
January 2026
Cameron Gregg, Council Member, District 3
January 2026
Brigit Bennington, Mayor, District 4
January 2026
Larry Bird, Mayor Pro Tem, District 5
January 2024
Key Personnel
Brief biographies of the City Manager, Assistant City Manager and the Director of Administrative Services follow below.

Nils Bentsen, City Manager. Nils Bentsen is the City Manager of the City, having been appointed by the City Council in 2015. Mr. Bentsen is committed to pursuing organizational efficiency while placing a special emphasis on customer service. To accomplish this, Mr. Bentsen reorganized City divisions and departments to better meet the needs of the organization and its citizenry and customers. Prior to his appointment by the City Council, Mr. Bentsen served with the San Bernardino County Sheriff’s Department for over 25 years, retiring as Captain. His life-long commitment to public safety is driven by his passion for public service. Mr. Bentsen has announced that he will retire as City Manager effective June 18, 2023.

Rachel Molina, Assistant City Manager. Rachel Molina is the Assistant City Manager of the City overseeing Development Services Department, and the Economic Development and Community Relation Divisions. Ms. Molina began her career at the City as a Senior Office Assistant in 2007 and was promoted up through the organization serving in many capacities including, Public Information Officer, Assistant to the City Manager, and Deputy City Manager. Ms. Molina holds a master’s degree in Public Administration from California Baptist University and a bachelor’s degree in Organizational Leadership from Chapman University. Ms. Molina is also a proud graduate of Hesperia High School. The City Council has appointed Ms. Molina as City Manager effective June 19, 2023.

Casey Brooksher, Director of Administrative Services. Casey Brooksher is the Administrative Services Director of the City and oversees the areas of Finance, Information Technology, and Human Resources. Mr. Brooksher was appointed to serve as the Director of Finance of the City in February 2018 and assumed the Administrative Services Director position in July 2021. Mr. Brooksher first started with the City as an intern during August 2003 and has held various positions within the Finance Division. Mr. Brooksher holds a master’s degree in Business Administration, as well as a bachelor’s degree in Business Administration from California State University, San Bernardino, California.

Services and Facilities
The City, including its component districts, employs approximately 181 full-time employees (not including contract police services). Services provided include the construction and maintenance of streets and other infrastructure; community services, including building and safety, code compliance, and animal control; as well as water, wastewater, and recycled water services. In addition to general government activities, the City Council also serves as the Board of Directors for the Hesperia Water District, Hesperia Housing Authority, Hesperia Community Development Commission, Hesperia Public Financing Authority, Hesperia Public Facilities Corporation, the Hesperia Joint Public Finance Authority, and the Hesperia Fire Protection District (the “Fire District”). Therefore, these activities have been included as an integral part of the City’s financial statements where appropriate. Additional information on these entities can be found in Note 1 in the notes to the financial statements.

In 2018, the boundaries of the Fire District were annexed into the San Bernardino County Fire Protection District. As a result of the annexation, the Fire District’s functions were transferred to the San Bernardino County Fire Protection District, which assumed all of the rights duties, responsibilities, liabilities and other matters of the Fire District, except the retirement liabilities associated with the former employees of the Fire District which were assumed by the City, and approximately 1.5% of the property tax revenues generated within the former boundaries of the Fire District are remitted to the City. A portion of such property tax revenues are remitted to the City pursuant to a revenue sharing agreement entered into by the City, the Fire District and the San Bernardino County Fire Protection District in connection with the annexation. See “FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND – Property Taxes – Pass-Through Revenue Sharing Agreement.” The City contracts with the San Bernardino County Sheriff’s Department for its police services. The law enforcement and public safety services provided through the contract include, patrol operations, traffic enforcement, detective services, problem-oriented policing and community outreach programs. Fire protection for the City is provided by the San Bernardino County Fire Department. The County Fire Department is a full service department, providing to the community fire suppression, fire prevention and planning, disaster preparedness, hazardous materials management and emergency medical services.

Public Health Emergency – COVID-19
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. The COVID-19 outbreak is ongoing. However, to date, the City’s General Fund revenues have not been materially adversely affected by the COVID-19 pandemic. In addition, as of the date of this Official Statement, the City does not anticipate that the COVID-19 pandemic will materially adversely affect its ability to make Base Rental payments under the Property Lease in the foreseeable future.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package designed to help the United States’ economy recover from the adverse impacts of the COVID-19 pandemic. The City received approximately $24.4 million in funding under the ARP Act. The City intends to utilize all such funding to finance the construction of wastewater pipes and other improvements to the wastewater system of the Hesperia Water District (the “Water District”). The pipes and other improvements are intended to permit the Water District to connect to a planned wastewater treatment plant intended to accommodate projected population growth in the City and local community. See “BOND OWNERS’ RISKS – Public Health Emergencies” in the forepart of this Official Statement.

FINANCIAL INFORMATION RELATING TO THE CITY’S GENERAL FUND Accounting Policies and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (“GASB”). The accounts of the City are organized into separate funds to account for different activities. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which the spending activities are controlled. The City’s general fund and other governmental fund types use the modified accrual basis of accounting. All of the City’s other funds, including proprietary fund types and fiduciary fund types, use the accrual basis of accounting. Combined financial statements of the City and its component units are produced following the close of each fiscal year of the City ended June 30 (each, a “Fiscal Year”). The basis of accounting for all funds is more fully explained in the “Notes to the Basic Financial Statements” contained in “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022.” The City Council employs an independent certified public accountant who audits at least annually the financial statements of the City in accordance with GAAP, including tests of the accounting records and other auditing procedures as such accountant considers necessary. As soon as practicable, after the end of the Fiscal Year, a final audit and report is submitted by the independent auditor to the City Council. The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues and expenditures or expenses, as appropriate.

Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. See “APPENDIX C – Annual Comprehensive Financial Report of the City for the Year Ended June 30, 2022 – Note 1” for a description of the significant accounting policies of the City. See the caption “– Financial Statements” for a discussion of the City’s audited financial statements for Fiscal Year 2021-22.

The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund because there are legal restrictions on their use.

The General Fund is the largest citywide fund and is a major governmental fund. It underwrites most citywide operations either directly as the “net city cost” of General Fund budgets, or indirectly through contributions to other funds. The City maintains 37 individual governmental funds. Other major governmental funds include the American Rescue Plan Act Special Revenue Fund which is used to account for funds received from ARP Act due to the COVID-19 pandemic, City Projects Capital Projects Fund is used to account for funds designated for various capital projects, including the acquisition and construction of major capital facilities, throughout the City, and Debt Service Funds which are used to account for the accumulation of resources and the payment of bond principal and interest from governmental resources.

It is expected that debt service on the 2023 Bonds will be paid from amounts in, or transferred from, the General Fund. Information on the remaining governmental funds of the City as of June 30, 2022, is set forth in Appendix C.

Fiscal Policies
Reserve Policy. The City Council has adopted a cash reserve policy for the General Fund that requires that a minimum of two months of the annual expenditures be held in cash to provide funding to meet operational appropriation requirements in the event that the City experiences shortfalls in the level of anticipated revenues or unanticipated expenses. Cash reserves are calculated as the ratio of cash and cash equivalents to the total individual annual expenditures. Under the reserve policy, it is the responsibility of the City Council to maintain a sufficient level of reserve funds to provide for the orderly provision of services to the citizens of the City. The City Council has the authority to decide the circumstances under which the reserves can be used. The City Manager may, from time to time, make recommendations as to the level of reserve funds necessary for prudent fiscal management. Reserve levels are required to be reviewed at least annually during the budget process to ensure that they are consistent with the conditions faced by the City. All uses of reserves require a resolution of the City Council or will be incorporated in the annual adopted budget. The City’s reserve policy provides that, if the rare situation arises where a portion of the City’s reserves are to be utilized to fund operations, the equivalent amount will be returned as reserves in the next available budget.

As of June 30, 2022, the reserve balance in the General Fund was approximately $22.1 million, or 8.8 months of the General Fund expenditures for Fiscal Year 2022-2023. The City anticipates using approximately $4 million of such balance, together with other funds on hand, to establish two tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code by June 30, 2023. See “– Unfunded Liability Policy” below.

Revenue Policy. The City Council has adopted a policy that recurring expenditures will be funded by recurring revenue. It provides that recurring expenditure increases that exceed recurring revenue growth should not be approved. Any new or expanded programs should be required to identify new funding sources and/or offsetting reductions in expenditures.

Capital Improvement Policy. The City Council has adopted a capital improvement policy pursuant to which the City will identify the estimated costs and potential funding sources for each capital project having a long life expectancy and costing $5,000 or more prior to its submittal to the City Council for approval. Prior to a capital project being included in the annual budget, a determination must be made that the project is an appropriate use of the funds and that there is sufficient funding available.

Budgeting Policy – Police Services. To ensure adequate funding for law enforcement services, the City Council has adopted a policy that the annual Police Department budget will equal or exceed 53% of average General Fund audited operating expenditures in the three most recent audited fiscal years. The General Fund operating budget is comprised of all expenditures less transfers out, debt service, and capital outlay. Should the Police Department budget exceed 53% of the General Fund operating budget and the City is unable to balance the budget without the use of reserves, the City Manager is authorized by the City Council to negotiate with the County of San Bernardino Sheriff’s Department to identify cost savings to maintain the City Council approved percentage. In addition, should the annual Police Department budget be less than 53% of the General Fund operating budget, the City Manager is authorized to add additional level of services, be that personnel, programs, or equipment. The City’s operating budget for Fiscal Years 2022-23 and 2023-24 complies with said policy.

Unfunded Liability Policy. The City anticipates establishing the following by June 30, 2023: (1) a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code (the “City Miscellaneous Plan 115 Trust”) held by Alta Trust Company, as trustee, for the purpose of funding the City’s retirement obligations to the California Public Employees’ Retirement System (“CalPERS”) with respect to the City’s Miscellaneous Employee Pension Plan; (2) a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code (the “Fire District Safety Plan 115 Trust”) held by Alta Trust Company, as trustee, for the purpose of funding the City’s retirement liabilities associated with the former employees of the Fire District under the safety plan maintained by the Fire District (which liabilities were assumed by the City in connection with the annexation of the boundaries of the Fire District into the San Bernardino County Fire Protection District in 2018); and (3) a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code (the “OPEB 115 Trust”) held by Alta Trust Company, as trustee, for the purpose of funding the City’s postemployment benefit obligations (“OPEB”) under a single-employer defined benefit health-care plan (the “OPEB Plan”).

The City Council has adopted an unfunded liability policy pursuant to which the City will annually contribute a minimum of 5% of the amount determined by CalPERS’ actuaries that is required to finance any unfunded accrued liability (the “UAL”). Under the policy, the City will review the annual CalPERS actuarial valuations and include a minimum of 5% of said amount in its annual budget for transfer to each of the City Miscellaneous Plan 115 Trust and Fire District Safety Plan 115 Trust. In addition, under the unfunded liability policy, each fiscal year, the City will deposit into the OPEB 115 Trust a minimum of 15% of the total required City contributions to the OPEB plan for the previous fiscal year.

See “– Employee Retirement System” and “– Other Post-Employment Retirement Benefits” for additional information regarding the City Miscellaneous Plan 115 Trust and Fire District Safety Plan 115 Trust, and OPEB 115 Trust, respectively.

Budgetary Process and Administration
General Fund revenue is for the normal operations of and services provided by the City that are not specifically accounted for in other funds. The annual budget serves as the foundation for the City’s financial planning and control. Each year the budget development guidelines, for use in preparing the next year’s budget, are reviewed and updated. These guidelines are structured to reflect the City Council’s goals and objectives and to provide the framework in which the City’s budget is prepared. Annually, the proposed budget is submitted to the City Council and a public hearing is conducted to obtain citizen comments. Prior to the beginning of the new fiscal year, the City Council adopts the annual budget at a public meeting.

A first quarter and mid-year budget review is conducted for the City Council to determine the status of projected revenues, expenditures, and other financial situations, along with consideration of needed budget amendments. A fourth quarter appropriation review is conducted and budget amendments are presented to the City Council as needed.

The City’s budget policy is that all appropriations lapse at fiscal year-end. Outstanding encumbrance balances at fiscal year-end require re-approval by the City Council. The City Council may amend the budget at any time during the fiscal year. The City Manager may authorize budget transfers between line items and programs within a fund, as long as the total budget for each fund has not exceeded the amount approved by the City Council. The level of budgetary control is set at the fund level to ensure compliance with the budget as approved by the City Council; therefore, any budgetary changes at the fund level require City Council approval.

Budgets for Fiscal Years 2022-23 and 2023-24
Adopted Fiscal Year 2022-23 Budget. The City Council adopted the City’s operating budget for Fiscal Year 2022-23 (the “Fiscal Year 2022-23 Budget”) on June 22, 2022. The Fiscal Year 2022-23 Budget reflects a balanced General Fund budget. The Fiscal Year 2022-23 Budget includes 101.22 positions budgeted to be funded by the General Fund, an increase of 13.6% from the City’s adopted operating budget for Fiscal Year 2021-22 (the “Fiscal Year 2021-22 Budget”).

The Fiscal Year 2022-23 Budget projects General Fund revenues to increase by $5.1 million to $44.3 million compared to the Fiscal Year 2021-22 Budget of $39.2 million. In the Fiscal Year 2022-23 Budget, approximately $40 million (or 90%) of the City’s budgeted General Fund revenues for Fiscal Year 2022-23 are projected to be derived from sales and use taxes, franchise taxes, transient occupancy taxes, property taxes, special assessments, property transfer taxes, commercial cannabis taxes, intergovernmental revenues and charges for services. As of the date of this Official Statement, the City estimates that such revenues will total approximately $43.8 million (compared to $40 million set forth in the Fiscal Year 2022-23 Budget). See Table 1 for the Fiscal Year 2022-23 Budget. See also Tables 4a and 4b for a summary of the major sources of General Fund revenues of the City for the last five Fiscal Years and the amounts the City estimates it will receive in Fiscal Year 2022-23 from such sources as of the date of this Official Statement.

The Fiscal Year 2022-23 Budget projected an increase in General Fund expenditures of $5.5 million to $41.7 million compared to the Fiscal Year 2021-22 Budget of $36.2 million. The increase in General Fund expenditures projected in the Fiscal Year 2022-23 Budget is primarily due to an increase in budgeted General Fund expenditures for salaries and benefits (which increased by approximately $2.1 million or 20% compared to the Fiscal Year 2021-22 Budget), contractual expenditures (which increased by approximately $1.4 million or 33% compared to the Fiscal Year 2021-22 Budget), and police expenses (which increased by approximately $1.4 million or 7% compared to the Fiscal Year 2021-22 Budget). As of the date of this Official Statement, the City estimates that its General Fund expenditures for Fiscal Year 2022-23 will total approximately $41.8 million, in line with the budgeted expenditures for such fiscal year.

Proposed Fiscal Year 2023-24 Budget. The City Council is anticipated to adopt the City’s operating budget for Fiscal Year 2023-24 on June 20, 2023. The City’s operating budget for Fiscal Year 2023-24 as currently anticipated to be adopted by the City on such date is hereinafter referred to as the “Fiscal Year 2023-24 Proposed Budget” and is anticipated to reflect a balanced General Fund budget. The City’s operating budget for Fiscal Year 2023-24 as adopted by the City Council on June 20, 2023, may differ from the Fiscal Year 2023-24 Proposed Budget described in this Official Statement. The Fiscal Year 2023-24 Proposed Budget includes 102.60 positions budgeted to be funded by the General Fund, an increase of 1.36% from the Fiscal Year 2022-23 Budget.

The Fiscal Year 2023-24 Proposed Budget projects General Fund revenues to increase by approximately $2.2 million to $47.5 million compared to the Fiscal Year 2022-23 Budget of $44.3 million. In the Fiscal Year 2023-24 Proposed Budget, approximately $43.2 million (or 91%) of the City’s budgeted General Fund revenues for Fiscal Year 2023-24 are projected to be derived from sales and use taxes, franchise taxes, transient occupancy taxes, property taxes, special assessments, property transfer taxes, commercial cannabis taxes, intergovernmental revenues and charges for services. See Table 1 for the Fiscal Year 2023-24 Proposed Budget. See also Table 4b for a summary of the major sources of General Fund revenues of the City that are included in the Fiscal Year 2023-24 Proposed Budget.

The Fiscal Year 2023-24 Proposed Budget projects an increase in General Fund expenditures of $3.4 million to $45.1 million compared to the Fiscal Year 2021-22 Budget of $41.7 million. The increase in General Fund expenditures projected in the Fiscal Year 2022-23 Proposed Budget is due primarily to a net increase in the City manager and management services departments (resulting in a net increase of $1.4 million), police (resulting in an increase of $1.3 million) and development services (resulting in an increase of $1 million), offset by a reduction in expenditures for equipment and vehicles (resulting in a decrease of $298,000).

Comparison of Budget to Actual Performance
Set forth in Table 1a are the General Fund budgets for Fiscal Years 2020-21 through 2022-23 (as originally adopted and not reflecting any mid-Fiscal Year budget adjustments) and the Fiscal Year 2023-24 Proposed Budget, as well as the audited General Fund results for Fiscal Years 2020-21 through 2021-22 and estimated unaudited General Fund results for Fiscal Year 2022-23.

Table 1b shows actual General Fund expenditures by type for Fiscal Years 2019-20 and 2020-21 and budgeted General Fund expenditures by type for Fiscal Years 2021-22 and 2022-23.

Table 1a

CITY OF HESPERIA
Summary of General Fund Budgets and Actual Results
For Fiscal Years 2020-21 through 2023-24
Adopted Budget
2020-21
Audited
2020-21
Adopted Budget
2021-22
Audited
2021-22
Adopted Budget
2022-23
Estimated
2022-23 Actuals(1)
Proposed
Budget 2023-24(2)
Revenues:

Taxes
$16,187,858
$21,464,989
$19,349,341
$23,814,083
$22,642,204
$23,820,412
$23,580,859
Licenses and permits
225,084
262,816
289,140
289,932
242,660
247,410
237,650
Fines and forfeits
862,200
1,146,202
911,800
1,488,889
908,600
1,297,724
1,025,040
Use of money and property
94,688
72,862
54,555
(152,077)
19,600
311,819
338,600
Intergovernmental
12,271,611
12,588,659
12,885,437
13,165,905
13,831,969
14,573,437
15,629,905
Charges for services
2,268,983
4,592,541
3,127,193
5,979,828
4,168,441
5,732,252
3,985,627
Grants
44,856
2,479,850
62,102
102,336
81,369
104,502
131,086
Other revenue
2,534,226
2,562,197
2,562,862
2,554,671
2,401,064
2,456,075
2,538,024
Total Revenues
$34,489,506
$45,170,116
$39,242,430
$47,243,567
$44,295,907
$48,543,631
$47,466,791
Expenditures:

Current:

General Government
City council
$698,407
1,366,912
$796,307
1,102,159
798,121
792,086
819,204
City manager
3,848,857
3,314,042
3,151,071
3,059,619
3,705,173
3,657308
1,686,530(3)
Management services
4,953,056
4,271,621
5,221,969
6,012,945
6,856,131
6,736,326
10,241,069 (3)
Public safety- police
17,716,736
18,080,456
19,125,786
18,682,407
20,588,911
20,601,680
21,949,108
Development services
6,291,176
6,507,481
7,631,163
8,080,695
9,224,512
9,559,300
10,243,023
Debt Service:

Interest
--
--
--
622
--
--
--
Principal
--
--
--
84,719
--
--
--
Capital outlay:

Land Improvements
--
--
--
--
200,000
--
--
Buildings and improvements
--
--
--
71,592
30,000
22,705
145,000
Equipment and vehicles
177,756
177,290
271,542
423,740
345,590
469,569
47,730
Leases
--
--
--
178,588
--
--
--
Total Expenditures
$33,685,988
$33,717,802
$36,197,838
$37,697,086
$41,748,438
$41,838,974
$45,131,664
Revenues over expenditures
$803,518
$11,452,314
$3,044,592
$9,546,481
$2,547,469
$6,704,657
$2,335,127
Other Financing Sources (Uses):

Transfers In
$252,000
$252,000
$200,000
$200,000
$200,000
$200,000
$--
Transfers Out
(7,154,068)
(7,116,453)
(3,462,224)
(2,592,224)
(2,572,890)
(2,572,890)
(2,385,133)
Sale of capital assets
--
--
--
--
--
--
--
Insurance proceeds
--
--
--
30,636
--
--
--
Issuance of lease
--
--
--
178,588
--
--
--
Total Other Sources (Uses)
$(6,902,068)
$(6,864,453)
$(3,262,224)
$(2,183,000)
$(2,372,890)
$(2,372,890)
$(2,385,133)
Net change in fund balances
(6,098,550)
4,587,861
(217,632)
7,363,481
174,579
4,331,767
(50,006)
Fund balances, July 1
$15,892,307
$22,083,076(4)
$29,446,557
Fund balances, June 30
$20,480,168(4)
$29,446,557
$33,778,324
Represents unaudited estimated results; subject to change.

Represents Fiscal Year 2023-24 Proposed Budget as anticipated to be adopted by the City Council on June 20, 2023; subject to change.

Commencing in Fiscal Year 2023-24, the City’s Information Technology Division will be under the supervision of the Director of Administrative Services instead of the City Manager. As a result, expenditures for such division will be recognized as part of management services, instead of City manager expenditures resulting in corresponding changes in budgeted expenditures for such Fiscal Year.

In Fiscal Year 2021-22, the City restated the fund balance of the General Fund at July 1, 2021 record the deposit of self-insurance in the fund financial statements instead of an adjustment for the government-wide financial statements.

Source: City of Hesperia.

Table 1b

CITY OF HESPERIA
General Fund Expenditures By Type
Fiscal Years 2019-20 through 2021-22
Audited
2019-20
Audited
2020-21
Adopted Budget
2021-22
Revised Adopted Budget
2021-22
Adopted Budget
2022-23
% of Adopted Budget
2022-23
% Change From Adopted Budget 2021-22
Salaries and Benefits
Salaries
$6,134,423
$5,788,303
$6,773,777
$7,272,620
$ 8,030,305
19%
19%
Benefits
3,073,140
3,178,984
3,569,267
3,640,763
4,425,725
11%
24%
Total Salaries and Benefits
$9,207,563
$8,967,287
$10,343,044
$10,913,383
$12,456,030
30%
20%
Materials & Operations
1,203,759
1,209,463
1,769,999
1,556,861
2,068,897
5%
17%
Contractual
3,330,144
4,495,205
4,262,242
4,678,587
5,670,892
14%
33%
Police Contractual
16,856,131
17,513,021
18,775,634
18,775,634
20,176,408
48%
7%
Other Operating
1,340,579
1,384,591
775,377
915,971
1,025,496
2%
32%
Capital Outlay
37,987
154,034
271,542
446,760
350,715
1%
29%
Total General Fund Expenditures
$31,976,163
$33,723,602
$36,197,838
$37,287,196
$41,748,438
100%
15%
Source: City of Hesperia.

Financial Statements
A copy of the most recent audited financial statements of the City (the “Financial Statements”) for the Fiscal Year ended June 30, 2022, audited by CliftonLarsonAllen, LLP, Irvine, California (the “Auditor”), is included as Appendix C to this Official Statement. The Auditor’s letter dated December 12, 2022 is set forth therein. The Financial Statements are public documents and are included within this Official Statement without the prior approval of the Auditor. Accordingly, the Auditor has not performed any post-audit analysis of the financial condition of the City, nor has the Auditor reviewed or audited this Official Statement.

Certain financial information that is set forth in this Official Statement is derived from the Financial Statements and the City’s audited financial statements for prior years (excluding certain non-cash items and after certain other adjustments) and is qualified in their entirety by reference to such statements, including the notes thereto. The Auditor has not reviewed or audited such financial information or any other portion of this Official Statement.

In the Financial Statements, data relating to governmental funds such as the General Fund focus on current financial resources, which emphasize near-term inflows and outflows of expendable resources as well as balances of expendable resources at the end of each Fiscal Year.

The City’s accounting and budgeting records for general governmental operations are maintained on a modified accrual basis. The City’s governmental fund financial statements are reported using the current financial resources measurement focus and modified accrual basis of accounting. All governmental funds utilize a “current financial resources” measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. Revenues are recognized as soon as they are both measurable and available. Revenues considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when liabilities are incurred, as under accrual accounting; however, debt service payments (principal and interest), unpaid vacation, compensatory time, and claims and judgments are recorded only when payment is due.

The following table shows the City’s audited General Fund balance sheets at June 30 of the years 2018 through 2022.

Table 2

CITY OF HESPERIA
General Fund Balance Sheets
June 30 of the years 2018 through 2022
At June 30
2018
2019
2020
2021
2022
Assets:

Cash and cash equivalents
$4,173,461
$7,668,879
$7,350,053
$15,281,489
$16,940,718
Restricted investments
--
--
--
--
4,000,000
Accounts receivable
1,473,790
1,866,822
2,039,717
2,384,914
2,532,469
Allowance for accounts receivable
--
--
--
--
(187,359)
Prepaid items
141,775
--
--
--
--
Accrued interest
11,659
25,600
22,141
10,254
32,709
Due from other governmental agencies
1,562,376
1,949,048
4,618,476
2,868,871
3,004,420
Deposits for self-insurance
--
--
--
--
542,901
Leases receivable
--
--
--
--
57,138
Inventory
13,318
15,966
14,709
17,553
18,080
Due from other funds(1)
1,032,705
1,125,696
1,199,234
1,140,018
3,415,592
Advance to other funds(2)
2,000,324
2,650,324
3,146,324
3,703,324
4,173,324
Total Assets
$10,409,408
$15,302,335
$18,390,654
$25,406,423
$34,529,992
Liabilities:

Accounts payable and other current liabilities
$1,152,874
$1,268,218
$1,357,989
$1,735,625
$1,777,523
Deposits
6,000
6,000
6,000
1,653,653
1,735,289
Due to other governments
192,155
--
--
107,460
4,370
Due to other funds
98,124
28,252
23,540
6,722
135,801
Total Liabilities
$1,449,153
$1,302,470
$1,387,529
$3,503,460
$3,652,983
Total Deferred Inflows of Resources
$732,898
$919,478
$1,110,818
$1,422,795
$1,430,452
Fund Balance:

Nonspendable
Deposits to self-insurance
$ --
$ --
$ --
$ --
$542,901
Prepaid items
141,775
--
--
--
--
Inventory
13,318
15,966
14,709
17,553
18,080
Advances to other funds
2,000,324
2,650,324
3,146,324
3,703,324
4,173,324
Assigned
Self-insurance
150,000
150,000
150,000
-
--
Unassigned(3)
5,921,940
10,264,097
12,581,274
16,759,291
24,712,252
Total fund balances
$8,227,357
$13,080,387
$15,892,307
$20,480,168
$29,446,557
Total Liabilities and Fund Balances
$10,409,408
$15,302,335
$18,390,654
$25,406,423
$34,529,992
The balance at June 30, 2022 consists primarily of receivables from the California Department of Tax and Fee Administration for sales and use taxes totaling approximately $2.7 million.

Represent interfund loans from the General Fund to other funds to cover negative cash balances in such other funds.

Unassigned fund balance at June 30, 2022, includes approximately $22.1 million set aside pursuant to the City’s cash reserve policy for the General Fund, of which approximately $4 million is anticipated to be used to establish the City Miscellaneous Plan 115 Trust and Fire District Safety Plan 115 Trust. See “– Fiscal Policies – Reserve Policy” above.

Source: City of Hesperia audited financial statements for Fiscal Years ended June 30, 2018 through June 30, 2022.

The following table shows the operational results of the General Fund for Fiscal Years 2017-18 through 2021-22 and estimated unaudited results for Fiscal Year 2022-23.

Table 3

CITY OF HESPERIA
Statement of General Fund Revenues, Expenditures and Changes in Fund Balance For Fiscal Years 2017-18 through 2022-23 (Estimated)
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Audited
2021-22
Estimated Unaudited
2022-23(1)
Revenues:

Taxes
$15,304,690
$17,751,449
$17,721,574
$21,464,989
$23,814,083
$23,820,412
Licenses and permits
232,351
255,400
284,948
262,816
289,932
247,410
Fines and forfeits
909,468
915,427
1,366,432
1,146,202
1,488,889
1,297,724
Use of money and property
55,620
128,133
184,491
72,862
(152,077)
311,819
Intergovernmental
11,271,037
11,168,527
11,883,595
12,588,659
13,165,905
14,573,437
Charges for services
2,718,676
2,759,290
3,026,004
4,592,541
5,979,828
5,732,252
Grants
19,931
18,419
22,760
2,479,850
102,336
104,502
Other revenue(2)
2,488,513
2,675,013
2,908,466
2,562,197
2,554,671
2,456,075
Total Revenues
$33,000,286
$35,671,658
$37,398,270
$45,170,116
$47,243,567
$48,543,631
Expenditures
Current:

General Government
City council
$850,228
$748,294
$942,381
$1,366,912
$1,102,159
$792,086
City manager
2,447,474
2,471,756
2,627,151
3,314,042
3,059,619
3,657,308
Management services
5,003,353
4,174,275
4,364,749
4,271,621
6,012,945
6,636,726
Public safety- police
15,903,077
16,508,781
17,319,612
18,080,456
18,682,407
20,601,680
Development services
6,220,369
6,375,474
6,660,916
6,507,481
8,080,695
9,658,900
Debt Service:

Interest
--
--
--
--
622
--
Principal
--
--
--
--
84,719
--
Capital outlay:

Buildings and improvements
108,323
76,
--
--
--
71,592
22,705
Equipment and vehicles
76,024
31,505
67,656
177,290
423,740
469,569
Leases
--
--
--
--
178,588
--
Total Expenditures
$30,608,848
$30,310,065
$31,982,465
$33,717,802
$37,697,086
$41,838,974
Revenues over expenditures
$2,391,438
$5,361,593
$5,415,805
$11,452,314
$9,546,481
$6,704,657
Other Financing Sources (Uses)
Transfers in
$240,000
$140,000
$644,400
$252,000
$200,000
$200,000
Transfers out
(2,585,893)
(2,220,068)
(3,372,385)(3)
(7,116,453)(4)
(2,592,224)
(2,572,890)
Sale of capital assets
--
7,988
124,100
--
--
--
Insurance proceeds
--
1,563,517
--
--
30,636
--
Proceeds from sale of land
210,707
--
--
--
--
--
Issuance of lease
--
--
--
--
178,588
--
Total other financing sources (uses)
(2,135,186)
(508,563)
(2,603,885)
(6,864,453)
(2,183,000)
(2,372,890)
Net change in fund balances
$256,252
$4,853,030
$2,811,920
$4,587,861
$7,363,481
$4,331,767
Fund balances, July 1(5)
$7,971,105
$8,227,357
$13,080,387
$15,892,307
$22,083,076
$29,446,557
Fund balances, June 30
$8,227,357
$13,080,387
$15,892,307
$20,480,168
$29,446,557
$33,778,324
Represent unaudited estimated results; subject to change.

Footnotes to Table 3 Continued:

The City leases certain water rights for their fair rental value to the Water District to serve its retail service territory (which coincides with the City’s boundaries). See “– Outstanding Debt of the General Fund – 2012 Lease Revenue Bonds.” Other revenue shown above consists predominantly of such lease payments, which in Fiscal Year 2021-22 totaled approximately $1.8 million.

In Fiscal Year 2019-20, the City began making contributions to CalPERS in connection with retirement liabilities associated with former employees of the Fire District, which liabilities were assumed by the City in connection with the annexation of the Fire District. The increase in transfers out in Fiscal Year 2019-20 is due to a transfer out of $1.1 million to make required contributions to CalPERS with respect to such liabilities. See “– Property Taxes – Pass-Through Revenue Sharing Agreement” and “– Employee Retirement System.” The increase in transfers out in Fiscal Year 2020-21 was due primarily to set asides totaling approximately $3.5 million for the payment of debt service on the 2012 Bonds and the 2013 Bonds (as defined herein) in future years. See “– Outstanding Debt of the General Fund.” In Fiscal Year 2021-22, the City restated the fund balance of the General Fund at July 1, 2021 to record the deposit of self-insurance in the fund financial statements instead of an adjustment for the government-wide financial statements.

Source: City of Hesperia audited financial statements for Fiscal Years ended June 30, 2018 through June 30, 2022; City of Hesperia.

Major General Fund Revenues By Source
The following table provides a summary of major sources of General Fund revenues of the City for Fiscal Years 2017-18 through 2021-22.

Table 4a

CITY OF HESPERIA
Major General Fund Revenues By Source
Fiscal Years 2017-18 through 2021-22
(Dollars in Thousands)
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Audited
2021-22
% of
Total(1)
Taxes
Sales and Use Taxes
$9,284
$10,305
$10,162
$12,837
$14,560

30.8%
Franchises
3,360
3,501
3,566
3,655
3,935

8.3 Transient Occupancy Tax
1,295
1,400
1,389
1,799
2,013

4.3 Property Taxes(2)
786
1,939
1,735
1,779
1,877

4.0 Special Assessments
278
288
297
306
315

0.7 Property Transfer Tax
302
281
284
387
568

1.2 Commercial Cannabis Tax
--
38 290
703
544

1.1 Total Taxes
$15,305
$17,751
$17,722
$21,465
$23,814

50.4 Intergovernmental
$11,271
$11,169
$11,884
12,589
$13,165

27.9 Charges for services
2,719
2,759
3,026
4,593
5,978

12.7 Total Major Revenues
$29,295
$31,679
$32,632
$38,647
$42,957

91.1%
Reflects percentage of total Fiscal Year 2021-22 General Fund revenues of $47.2 million.

In 2018, the boundaries of the Fire District were annexed into the San Bernardino County Fire Protection District. As a result of the annexation, commencing Fiscal Year 2018-19, the City receives approximately 1.5% of the property tax revenues that were previously allocated to the Fire District. A portion of such property tax revenues are remitted to the City pursuant to a revenue sharing agreement entered into by the City, the Fire District and the San Bernardino County Fire Protection District in connection with the annexation. See “– Property Taxes – Pass-Through Revenue Sharing Agreement.” Source: City of Hesperia.

The following table shows the City’s estimated revenues from the major sources of General Fund for Fiscal Years 2022-23 and 2022-23 and the Fiscal Year 2023-24 Proposed Budget (with a comparison against the Fiscal Year 2022-23 Budget (as originally adopted and not reflecting any mid-Fiscal Year budget adjustments) and the Fiscal Year 2023-23 Proposed Budget).

Table 4b

CITY OF HESPERIA
Major General Fund Revenues By Source
Budgeted Fiscal Year 2022-23 and 2023-24 and Estimated Fiscal Year 2022-23 (Dollars in Thousands)
Adopted Budget 2022-23
Estimated
Unaudited 2022-23(1)
Proposed
Budget
2023-24(2)
Taxes
Sales and Use Taxes
$13,900
$14,608
$14,440
Franchises
4,090
4,298
4,308
Transient Occupancy Tax
1,500
1,800
1,700
Property Taxes
1,946
2,063
2,103
Special Assessments
325
361
379
Property Transfer Tax
400
332
300
Commercial Cannabis Tax
481
358
350
Total Taxes
$22,642
$23,820
$23,580
Intergovernmental
13,832
$14,573
15,630
Charges for services
4,168
5,732
3,986
Total Major Revenues
$40,642
$44,125
$43,196
Represent unaudited estimated actuals; subject to change.

Represents Fiscal Year 2023-24 Proposed Budget as anticipated to be adopted by the City Council on June 20, 2023; subject to change.

Source: City of Hesperia.

Certain General Fund taxes currently imposed by the City are affected by Proposition 218. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Limitations on Revenues – Article XIIIC and Article XIIID of the California Constitution” in the forepart of this Official Statement.

Sales and Use Taxes
General. A sales and use tax is imposed on retail sales or consumption of personal property in the City. As shown in Table 4a, sales and use tax revenues represented the largest or the second largest source of revenues for the City’s General Fund in each of Fiscal Years 2017-18 through 2021-22, comprising approximately 31% of the City’s total General Fund revenues for Fiscal Year 2021-22. In Fiscal Year 2021-22, the City’s sales tax revenues totaled approximately $14.6 million, an increase of approximately 13% compared to sales tax revenues of approximately $12.8 million in Fiscal Year 2020-21. For Fiscal Year 2022-23, the City’s sales tax revenues are projected at approximately $14.6 million.

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 Law, set forth in California Revenue and Taxation Code Section 7200 et seq. The local sales tax rate in the City is 7.75%, of which the City’s General Fund is allocated 1.00%.

The State collects and administers the tax, and makes distributions on taxes collected within the City as follows:

Table 5

CITY OF HESPERIA
Sales Tax Rates
Rate
State - General Fund

3.9375%
State - Local Revenue Fund

1.5625
Public Safety Fund (Proposition 172)

0.5000
County

0.2500
City

1.0000
San Bernardino County Transportation Authority

0.5000
Total

7.7500%
Source: California Department of Tax and Fee Administration.

At the November 1993 election, Proposition 172 was approved by voters in the State, allowing for the permanent extension of the half-cent sales tax that was originally imposed on July 15, 1991, which was scheduled to sunset on June 30, 1993. (On July 1, 1993, a six-month extension of the tax was granted by the State in order to provide a source of one-time funding for cities and counties to partially offset 1993-1994 ongoing property tax reductions.) The passage of the Proposition 172 legislation, effective January 1, 1994, required that the proceeds from the half-cent tax be diverted from the State to counties and cities on an ongoing basis for funding public safety programs.

Sales and use taxes are complementary taxes; when one applies, the other does not. In general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible personal property in the State. The use tax is imposed on the purchase, for storage, use or other consumption in the State of tangible personal property from any retailer. The use tax generally applies to purchases of personal property from a retailer outside the State where the use will occur within the State. 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. Sales tax revenue collected by the State is directly deposited monthly to the City. For a summary of historical taxable transactions in the City, see “– Historical Taxable Transactions.” Certain transactions are exempt from the State sales and use tax. These include sales of the following products:
• food products for home consumption;
• prescription medicine;
• newspapers and periodicals;
• edible livestock and their feed;
• seed and fertilizer used in raising food for human consumption; and • gas, electricity and water when delivered to consumers through mains, lines and pipes.

This is not an exhaustive list of exempt transactions. A comprehensive list can be found in the March 2018 publication of the California Department of Tax and Fee Administration (the “CDTFA”) entitled “Sales and Use Taxes: Exemptions and Exclusions,” which can be found on the CDTFA’s website at http://www.cdtfa.ca.gov. The reference to this Internet website is shown for reference and convenience only; the information contained within the website may not be current and has not been reviewed by the City and is not incorporated in this Official Statement by reference.

In June 2018, the United States Supreme Court published its decision in South Dakota v. Wayfair (the “Wayfair Decision”), in which the Supreme Court held that sales to a customer in a particular state alone are sufficient to create a nexus for purposes of determining whether a seller is required to collect sales taxes of the applicable state. Prior to the Wayfair Decision, courts had interpreted the dormant Commerce Clause of the United States Constitution to require that a company have physical nexus in a state in order for the seller to be liable for the collection of that state’s sales tax. Physical nexus is defined as having either property or payroll in the state, including a resident employee working from home or inventory stored in that state. The State has issued guidance in response to the Wayfair Decision. Under such guidance, beginning April 1, 2019, retailers located outside of the State are required to register with the CDTFA, collect the California use tax, and pay the tax to the CDTFA based on the amount of their sales into California, even if they do not have a physical presence in the state. The new collection requirements apply to retailers if during the preceding or current calendar year certain sales thresholds are met. The new collection requirements apply to taxable sales of tangible personal property to California consumers on and after April 1, 2019, and are not retroactive. Additionally, the State’s passage of Assembly Bill 147, signed by the Governor on April 25, 2019, provides the implementation rules for the Wayfair Decision in California.

Sales Tax Collection Procedures. Collection of the sales and use tax is administered by the CDTFA. This process was formerly administered by the State Board of Equalization. The Taxpayer Transparency and Fairness Act of 2017, which took effect July 1, 2017, restructured the State Board of Equalization and separated its functions among three separate entities: the State Board of Equalization, the CDTFA, and the Office of Tax Appeals. The State Board of Equalization will continue to perform the duties assigned to it by the state Constitution, while all other duties will be transferred to the newly established CDTFA and the Office of Tax Appeals. CDTFA will handle most of the taxes and fees previously collected by the State Board of Equalization, including sales and use tax.

Under the Sales and Use Tax Law, all sales and use taxes collected by the CDTFA under a contract with any city, city and county, or county are required to be transmitted by the CDTFA to such city, city and county, or county periodically as promptly as feasible. These transmittals are required to be made at least twice in each calendar quarter. Under its procedures, the CDTFA projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon the CDTFA’s quarterly projection. During the last month of each quarter, the CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter.

According to the CDTFA, it distributes quarterly tax revenues to cities, counties, and special districts using the following method. Using the prior year’s quarterly tax allocation as a starting point, the CDTFA first eliminates nonrecurring transactions such as fund transfers, audit payments, and refunds, and then adjusts for growth, to establish the estimated base amount. The CDTFA disburses 90% to each local jurisdiction in three monthly installments (advances) prior to the final computation of the quarter’s actual receipts. Ten percent is withheld as a reserve against unexpected occurrences that can affect tax collections (such as earthquakes, fire, or other natural disaster) or distributions of revenue such as unusually large refunds or negative fund transfers. The first and second advances each represent 30% of the 90% distribution, while the third advance represents 40%. One advance payment is made each month, and the quarterly reconciliation payment (clean-up) is distributed in conjunction with the first advance for the subsequent quarter. Statements showing total collections, administrative costs, prior advances, and the current advance are provided with each quarterly clean-up payment.

History of Taxable Transactions. A summary of historic taxable sales within the City for calendar years 2017 through 2021 is shown in the following table.

Table 6

CITY OF HESPERIA

TAXABLE TRANSACTIONS
For Calendar Years 2017 Through 2021
(Dollars in thousands)
2017
2018
2019
2020
2021
Retail and Food Services:

Motor Vehicle and Parts Dealers
$61,427
$61,340
$64,316
$74,348
$95,997
Home Furnishing and Appliance Stores
16,631
18,246
18,545
19,903
23,032
Bldg. Mat’ls., Garden Equip., Supplies
37,754
39,389
32,878
33,284
33,568
Food and Beverage Stores
51,701
51,438
53,423
61,011
64,073
Gasoline Stations
205,577
248,914
235,044
201,082
310,467
Clothing and Accessories Stores
26,466
29,992
31,647
31,362
52,474
General Merchandise Stores
107,491
105,418
110,133
133,929
148,721
Food Services and Drinking Places
118,367
124,208
137,378
137,652
175,399
Other Retail Group
48,177
48,967
54,561
68,834
82,230
Total Retail and Food Services
673,591
727,971
737,925
761,407
985,962
All other outlets
126,090
137,368
152,262
148,870
174,374
Total all outlets
$799,681
$865,339
$890,186
$910,277
$1,160,336
Source: California Department of Tax and Fee Administration.

Total taxable sales reported during the first three quarters of calendar year 2022 in the City were reported to be $950.5 million, a 10.87% increase from the total taxable sales of $857.4 million reported during the first three quarters of calendar year 2021.

Intergovernmental Revenues
As shown in Table 4a, intergovernmental revenues represented the largest or second largest source of revenues for the City’s General Fund in each of Fiscal Years 2017-18 through 2021-22, comprising approximately 28% of the City’s total General Fund revenues for Fiscal Year 2021-22. In Fiscal Year 2021-22, the City’s intergovernmental revenues totaled approximately $13.2 million, an increase of approximately 5% compared to intergovernmental tax revenues of approximately $12.6 million in Fiscal Year 2020-21. For Fiscal Year 2022-23, the City’s intergovernmental revenues are projected at approximately $14.6 million.

Historically, the majority of the City’s intergovernmental revenues have consisted of the City’s share of the Vehicle License Fee (the “VLF”) that is imposed by the State. The VLF is the portion of the fees paid in lieu of personal property taxes on a vehicle. The VLF is based on vehicle value and declines as the vehicle ages. Prior to the adoption of the State Budget for Fiscal Year 2004-05, the VLF was 2% of the value of a vehicle. Through legislation in prior Fiscal Years, the State enacted VLF reductions under which the State was required to “backfill” local governments for their revenue losses resulting from the lowered fee with property taxes in-lieu of the VLF. The State Budget for Fiscal Year 2004-05 permanently reduced the VLF from 2% to 0.65% of the value of a vehicle and removed 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. 100% of the VLF revenues and property taxes in-lieu of the VLF the City receives from the State can be used for City general purposes.

In Fiscal Year 2022-23, the City’s VLF revenues and property taxes in-lieu of the VLF totaled approximately $10.2 million with the remaining $3 million of intergovernmental revenues consisting primarily of contributions from other City funds for general and administrative expenses. The following table shows the City’s total VLF revenues and property taxes in-lieu of the VLF for Fiscal Years 2017-18 through 2021-22, and projected total VLF revenues and property taxes in-lieu of the VLF for Fiscal Year 2022-23.

Table 7

CITY OF HESPERIA
VLF Revenues and In-Lieu Property Tax Revenues
Fiscal Years 2017-18 through 2021-22
Fiscal Year
Total
2017-18
$ 7,913,637
2018-19
8,360,412
2019-20
9,019,413
2020-21
9,594,289
2021-22
10,220,844
2022-23 (1)
11,279,915
Represent unaudited estimated actuals; subject to change.

Source: City of Hesperia.

Charges for Services
The City provides various services which generate revenue for the General Fund. Some services provided by the City include business licensing, building construction and planning reviews and inspections, recording of documents, health inspections, and engineering encroachment inspections.

As shown in Table 4a, charges for services were the third largest revenue source for the City’s General Fund in each of Fiscal Years 2017-18 through 2021-22, comprising approximately 13% of the City’s total General Fund revenues for Fiscal Year 2021-22. In Fiscal Year 2021-22, charges for services totaled approximately $6 million, an increase of approximately 30% compared to charges for services of approximately $4.6 million in Fiscal Year 2020-21. For Fiscal Year 2022-23, the City’s charges for services are projected at approximately $5.8 million.

Franchise Taxes
The City imposes fees on refuse hauling; gas and electric utilities; and cable television companies operating in the City for the use, and wear and tear of the City right-of-way. The fees range from 2% to 10% of their gross receipts.

As shown in Table 4a, franchise tax revenues represented the fourth largest source of revenues for the City’s General Fund in each of Fiscal Years 2017-18 through 2021-22, comprising approximately 8% of the City’s total General Fund revenues for Fiscal Year 2021-22. In Fiscal Year 2021-22, the City’s franchise tax revenues totaled approximately $3.9 million, an increase of approximately 8% compared to franchise tax revenues of approximately $3.7 million in Fiscal Year 2020-21. For Fiscal Year 2022-23, the City’s franchise tax revenues are projected at approximately $4.3 million, with approximately $4 million derived from franchise fees relating cable television (projected to total approximately $675,000), refuse hauling (projected to total $1.8 million) and utilities (projected to total approximately $1.5 million).

Transient Occupancy Taxes
The City’s municipal code authorizes the application of a 10% tax to the cost of hotel rooms within the City. This is intended to offset the cost of governmental services (streets and public safety) that the visitors use while temporarily staying in the City. Growth is driven by a combination of occupancy, rates, and lodging supply.

As shown in Table 4a, transient occupancy tax revenues represented the fifth largest source of revenues for the City’s General Fund in each of Fiscal Years 2017-18 through 2021-22, comprising approximately 4% of the City’s total General Fund revenues for Fiscal Year 2021-22. In Fiscal Year 2021-22, the City’s transient occupancy tax revenues totaled approximately $2 million, an increase of approximately 12% compared to transient occupancy tax revenues of approximately $1.8 million in Fiscal Year 2020-21. For Fiscal Year 2022-23, the City’s transient occupancy tax revenues are projected at approximately $1.8 million.

Property Taxes
General. Property taxes represent the City’s sixth largest source of General Fund revenues for Fiscal Year 2021-22. This section describes property tax levy and collection procedures in the County and provides certain information regarding the City’s historical assessed values and major property taxpayers. Property taxes have been the primary revenue source affected by voter initiatives and legislative actions. With approval of Proposition 13, property tax revenues were first curtailed over 35 years ago when they were reduced by two-thirds and thereafter limited to 2% annual increases or the consumer price index, whichever was less. In addition, if unemployment and reduced economic activity generally is a sustained consequence of the COVID-19 pandemic through multiple fiscal years, a combination of property tax payment delinquencies and property tax assessment appeals could depress property tax revenue growth over time.

Levy and Collection. Property taxes are levied for each fiscal year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed public utilities property and real property the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State and may be sold at public auction.

Property taxes on the unsecured roll are due as of the January 1 lien dates and become delinquent on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1% attaches to them on the first day of each month until paid.

The County has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Beginning in 1978-79, Proposition 13 and its implementing legislation shifted the function of property tax allocation to the counties, except for levies to support prior voted debt, and prescribed how levies on countywide property values are to be shared with local taxing entities within each county.

ERAF Shift Legislation. Certain property taxes have been shifted from local government agencies to schools by the State Legislature for deposit in the Education Revenue Augmentation Fund (“ERAF”), a shift that has resulted in diversion of City property taxes since Fiscal Year 1992-93. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Proposition 1A” and “– Proposition 22” in the forepart of this Official Statement. There can be no assurance that the State will not undertake future ERAF shifts.

Assessed Valuation. All property is assessed using its full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” in the forepart of this Official Statement. Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, and 2% inflation) will be allocated on the basis of situs among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year.

Assessed Valuation History. The following table shows the City’s assessed valuation for Fiscal Years 2013-14 through 2022-23.

Table 8

CITY OF HESPERIA
Assessed Valuations of All Taxable Property
Fiscal
Year
Secured
Unsecured
Less:

Exemptions
Total
2013-14
$4,323,310,389
$153,406,415
$80,382,872
$4,396,333,932
2014-15
4,568,876,732
153,173,691
78,496,915
4,643,553,508
2015-16
4,927,736,958
163,458,347
77,065,237
5,014,130,068
2016-17
5,180,716,557
149,700,012
81,294,703
5,249,121,866
2017-18
5,534,189,488
144,454,034
80,114,454
5,598,529,068
2018-19
5,868,554,993
141,232,000
78,228,784
5,931,558,209
2019-20
6,316,580,296
147,332,716
77,352,516
6,386,560,496
2020-21
6,687,029,419
195,487,371
76,124,850
6,806,391,940
2021-22
7,107,306,637
199,301,311
75,184,120
7,231,423,828
2022-23
7,898,838,177
178,265,562
71,025,529
8,006,821,210
Source: San Bernardino County Auditor-Controller; City of Hesperia.

Proposition 13 and Proposition 8 Property Value Adjustments. Proposition 13, passed in 1978, established the base year value concept for property tax assessments. Under Proposition 13, the 1975-76 fiscal year serves as the original base year used in determining the assessment for real property. Thereafter, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or 2%, whichever is less. A new base year value, however, is established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed.

Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a “decline-in-value.” As of the January 1st (lien date) each year, the Assessor must enroll either a property’s Proposition 13 value (adjusted annually for inflation by no more than 2%) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value, the lower value is commonly referred to as a “Proposition 8 Value.” “Proposition 8 values” are temporary and, once enrolled, must be reviewed annually by the assessor until the Proposition 13 adjusted base year value is enrolled.

Largest Taxpayers. The top twenty property taxpayers, based on secured assessed values of taxable property in the City, as shown on the 2022-23 tax roll, are set forth in the following table.

Table 9

CITY OF HESPERIA
Largest 2022-23 Secured Taxpayers
Property Owner
Primary
Land Use
Assessed Valuation
Total(1)

1. Exeter 8300 Caliente Land LLC
Industrial
$72,910,000

0.92%

2. West Main Villas LLC
Apartments
42,268,718

0.54 3.

Carl E. Ross Living Trust
Undeveloped
39,778,902

0.50 4.

Kaiser Foundation Health Plan Inc.

Medical Offices
38,862,997

0.49 5.

Exeter Hesperia Parcel 3 Land LLC
Undeveloped
33,500,570

0.42 6.

WLPX Hesperia LLC
Commercial
32,579,824

0.41 7.

Rim Properties
Apartments
32,236,615

0.41 8.

Amargosa LLC
Industrial
30,871,646

0.39 9.

Hesperia Apartments LLC
Apartments
30,562,272

0.39 10.

Best Way Disposal Co. Inc.

Industrial
28,897,736

0.37 11.

Olivetree Apartments LP
Apartments
28,056,411

0.36 12.

Wal-Mart Stores Inc.

Commercial
26,069,678

0.33 13.

Target Corporation
Commercial
25,044,718

0.32 14.

Randolph S. and Sandra P. Davis
Apartments
21,742,416

0.28 15.

Sparky’s Storage 18 CA LP
Industrial
16,336,757

0.21 16.

Hesperia Marketplace Cap Partners LP
Commercial
15,577,589

0.20 17.

Villas 154 LP
Apartments
14,652,177

0.19 18.

Associated Global Partners LLC
Undeveloped
14,212,139

0.18 19.

MPNR Properties LLC
Commercial
13,849,760

0.18 20.

Crossings at Hesperia LP
Apartments
13,634,316

0.17 $571,645,241

7.24%
2022-23 Local Secured Assessed Valuation: $7,898,838,177.

Source: California Municipal Statistics, Inc.

No Teeter Plan for the City. Section 4701 through Section 4717 of the California Revenue and Taxation Code permit counties to use a method of apportioning taxes (commonly referred to as the “Teeter Plan”) whereby local agencies receive from the County 100% of their respective shares of the amount of secured ad valorem taxes levied, without regard to actual collections of taxes. Due to this allocation method, the cities in the County receive no adjustments for redemption payments on delinquent collections. The unsecured taxes are allocated based on actual unsecured tax collections. The County adopted this method of distributing taxes; however, the City has elected not to participate in the Teeter Plan. Consequently, property tax collections allocated to the City, as set forth in this Official Statement, reflect actual collections.

Pass-Through Revenue Sharing Agreement. In 2018, the boundaries of the Fire District were annexed into the San Bernardino County Fire Protection District. As a result of the annexation, the Fire District’s functions were transferred to the San Bernardino County Fire Protection District, which assumed all of the rights duties, responsibilities, liabilities and other matters of the Fire District, except the retirement liabilities to CalPERS associated with the former employees of the Fire District which liabilities were assumed by the City. . The Fire District has no active employees. See “– Employee Retirement System” for a discussion regarding the City’s contributions to CalPERS, including contributions that are required to be made by the City to CalPERS with respect to former employees of the Fire District.

As a result of the annexation, commencing in Fiscal Year 2018-19, the City receives approximately 1.5% of the property tax revenues generated within the former boundaries of the Fire District. The portion of such property tax revenues that represent tax increment generated within the former boundaries of the Fire District are remitted to the City pursuant to a pass-through revenue sharing agreement (the “Pass-Through Revenue Sharing Agreement”) entered into by the City, the Fire District and the San Bernardino County Fire Protection District in connection with the annexation. Prior to the annexation, the Fire District and the former City of Hesperia Community Redevelopment Agency (the “Former Agency”) entered into two negotiated pass-through agreements (the “Negotiated Pass-Through Agreements”) pursuant to which property tax revenues representing tax increment were required to be remitted by the Former Agency to the Fire District. Because the Negotiated Pass-Through Agreements did not include language allowing for a transfer of tax increment revenues to the San Bernardino County Fire Protection District and the City, as required as part of the annexation, the City, the Fire District and the San Bernardino County Fire Protection District subsequently entered into the Pass-Through Revenue Sharing Agreement to provide for such transfer.

The Pass-Through Revenue Sharing Agreement terminates when the Negotiated Pass-Through Agreements expire. The City currently anticipates that the Negotiated Pass-Through Agreements will expire on or about 2037, the estimated year on which all enforceable obligations of the Former Agency and its successor agency are projected to be paid and retired. On and after the expiration of the Pass-Through Revenue Sharing Agreement, the City will receive the entire 1.5% of the property tax revenues generated within the former boundaries of the Fire District directly from the County. See “– Redevelopment Dissolution Act” below.

Property Tax Levies and Collections. The following table shows secured property tax levies and tax collections for Fiscal Years 2017-18 through 2021-22.

Table 10

CITY OF HESPERIA
Secured Property Tax Levies and Collections
Fiscal Years 2017-18 through 2021-22(1)
Fiscal
Taxes Levied
Collected within the Fiscal Year of Levy
Collections
in
Total Collections
as June 30, 2022
Year Ended
June 30
for the
Fiscal Year
Amount
Percent
of Levy
Subsequent Years
Amount
Percent
of Levy
2018(2)
$4,429,662
$4,183,822
94%
$18,121
$4,201,943
95%
2019
500,280
486,238
97 16,076
500,280
100
2020
919,877
896,493
--
15,763
912,256
99 2021
938,839
933,597
99 --
933,597
99 2022
961,018
956,899
100
--
956,899
100
The amounts presented include tax increment generated within former redevelopment project areas, including amounts deposited into the trust fund maintained by the County Auditor-Controller for the Successor Agency to the Hesperia Community Redevelopment Agency that were passed through to other agencies.

Beginning with Fiscal Year 2018-19, the taxes levied and collected shown exclude the Fire District.

Source: City of Hesperia, and the County of San Bernardino Auditor Controller’s Office.

Redevelopment Dissolution Act. 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 Part 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 have and may further be amended from time to time (as amended, the “Dissolution Act”). Pursuant to the Dissolution Act, the Former Agency was dissolved and succeeded by the Successor Agency to the Hesperia Community Redevelopment Agency.

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 enforceable obligations of the Former 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.

Outstanding Debt of the General Fund
Outstanding Debt. The City makes scheduled periodic payments pursuant to certain other outstanding long-term agreements. Below are descriptions of certain of the City’s outstanding long-term agreements in connection with which General Fund appropriations are made annually. This excludes information regarding certain equipment leases and obligations payable by the City or its related entities from special revenues. See “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022 – Note 6.” 2012 Lease Revenue Bonds. In 2012, the Authority issued its 2012 Lease Revenue Bonds (Water Rights Acquisition) (the “2012 Bonds”), in the original principal amount of $26,735,000. The net proceeds of the 2012 Bonds were used by the City to finance a portion of the purchase price of permanent rights to 5,971 acre-feet of water annually (the “Water Rights”) from a private landowner. The City leases the Water Rights for their fair rental value to the Water District to serve its retail service territory (which coincides with the City’s boundaries). The Water District’s rental payments to the City are intended to approximate the avoided cost of leasing the water from the current owner or acquiring replacement water on the open market. As of the date of this Official Statement, the 2012 Bonds are outstanding in the aggregate principal amount of $20,620,000. 2013 Lease Revenue Bonds. In 2013, the Authority issued its 2013 Refunding Lease Revenue Bonds (Refinancing of 2005 Civic Plaza Financing) (the “2013 Bonds”), in the original principal amount of $12,445,000. The net proceeds of the 2013 Bonds were used to prepay certain lease obligations of the City and related certificates of participation delivered in 2005. As of the date of this Official Statement, the 2013 Bonds are outstanding in the aggregate principal amount of $8,945,000, and are anticipated to be refunded in full with the net proceeds of the 2023 Bonds. See “REFUNDING PLAN” in the forepart of this Official Statement.

No Anticipated Future Debt. Other than the 2023 Bonds, the City does not currently anticipate incurring any long-term obligations payable from its General Fund in the next five years.

Direct and Overlapping Bonded Debt
The ability of land owners within the City to pay property tax installments as they come due could be affected by the existence of other taxes and assessments imposed upon the land. The statement of direct and overlapping debt (the “Debt Report”) set forth on the following page was prepared by California Municipal Statistics, Inc. as of April 1, 2023. The Debt Report includes only such information as has been reported to California Municipal Statistics, Inc. by the issuers of the debt described therein and by others. The Debt Report is included for general information purposes only. The City takes no responsibility for its completeness or accuracy.

Table 11
Direct and Overlapping Bonded Debt
2022-23 Assessed Valuation: $8,075,905,550
OVERLAPPING TAX AND ASSESSMENT DEBT:
% Applicable
Debt 4/1/23
Victor Valley Joint Community College District

20.23%
$30,477,348
California Statewide Community Development Authority Assessment Districts 100.00
9,373,000
City of Hesperia Community Facilities District No. 2005-1 100.00
14,245,000

TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
$54,095,348
DIRECT AND OVERLAPPING GENERAL FUND DEBT:

San Bernardino County General Fund Obligations

2.78%
$4,471,908
San Bernardino County Pension Obligation Bonds

2.78 1,750,288
San Bernardino County Flood Control District General Fund Obligations

2.78 1,141,607
Hesperia Unified School District General Fund Obligations

84.607
99,083,258
Snowline Joint Unified School District General Fund Obligations

4.278
2,547,763
City of Hesperia Lease Revenue Bonds
100.00
30,230,000(1)

TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT
$139,224,824
OVERLAPPING TAX INCREMENT DEBT (Successor Agencies):

3.340 - 100.%
$99,183,454

COMBINED TOTAL DEBT
$292,503,626(2)
Ratios to 2022-23 Assessed Valuation:

Total Overlapping Tax and Assessment Debt

0.67%
Total Direct Debt ($30,230,000)

0.37%
Combined Total Debt

3.62%
Ratios to Redevelopment Successor Agencies Incremental Valuation ($5,160,692,028):

Total Overlapping Tax Increment Debt

1.92%
Excludes 2023 Bonds to be sold, and refunding of 2013 Bonds.

Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Source: California Municipal Statistics, Inc.

Employee Retirement System
This section contains certain information relating to CalPERS.  The information is primarily 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 and expresses no opinion as to the accuracy of the information provided by CalPERS.

The financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov.  The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters.  Such information is not incorporated by reference in this Official Statement.  Neither the City nor the Underwriter can guarantee the accuracy of such information.  Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future.  Actuarial assessments will change with the future experience of the pension plans.

Description of Plans. The City participates in CalPERS, a defined benefit public employee retirement system, under which CalPERS acts as a common investment and administrative agent for local and state governmental agencies within the State. All qualified permanent and probationary employees of the City are eligible to participate in the City’s Miscellaneous Employee Pension Plan (the “City Miscellaneous Plan”), cost-sharing multiple employer defined benefit pension plans administered by the CalPERS. The City Miscellaneous Plan consists of two-tiers: (1) a tier for employees hired before January 1, 2013 (the “Classic Tier”); and (2) a tier for employees hired on or after January 1, 2013 (the “PEPRA Tier”). The benefits for the public agencies are established by contract with CalPERS in accordance with the provisions of the California Public Employees Retirement Law (the “Retirement Law”).

The Fire District maintains a miscellaneous plan (the “Fire District Miscellaneous Plan”) and a safety plan (the “Fire District Safety Plan”). As previously described, in connection with the annexation of the boundaries of the Fire District into the San Bernardino County Fire Protection District, the Fire District’s functions were transferred the San Bernardino County Fire Protection District. As part of the annexation, the San Bernardino County Fire Protection District assumed all of the rights duties, responsibilities, liabilities and other matters of the Fire District, except the retirement liabilities to CalPERS associated with the former employees of the Fire District. Such retirement liabilities were assumed by the City in consideration of the property revenues generated within the former boundaries of the Fire District to be remitted to the City. See “– Property Taxes – Pass-Through Revenue Sharing Agreement.” Accordingly, this section also includes certain information regarding the Fire District Miscellaneous Plan and the Fire District Safety Plan. The Fire District has no active employees.

The City Miscellaneous Plan, the Fire District Miscellaneous Plan and the Fire District Safety Plan are hereinafter referred to collectively as the “Plans.” The Water District maintains retirement plans for its employees and retirees. Certain information regarding such plans and associated liabilities are included in the financial statements of the City because the Water District is a component district of the City. see “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022 – Note 8” for additional information regarding such plans.

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 to 62 with statutorily reduced benefits. For employees hired into a plan with the 2.7% at 55 formula, eligibility for service retirement is age 55 with at least five years of services. California Public Employees’ Pension Reform Act (“PEPRA”) miscellaneous members become eligible for service retirement upon attainment of age 52 with at least five years of service.

All members are eligible for nonduty disability benefits after five 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. Safety members can receive a special death benefit if the member dies while actively employed and the death is job-related. Fire District members may receive the alternate death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. The cost of living adjustments are applied as specified by the Retirement Law.

The benefits provided under the Plans are summarized in the following tables.

Miscellaneous Plans
Hire Date
City
Miscellaneous Plan
Prior to January 1, 2013
Fire District
Miscellaneous Plan
Prior to January 1, 2013
City and Fire District Miscellaneous Plans
On or after
Jan. 1 , 2013
Benefit formula

2.7% @ 55

2.0% @ 55

2.0% @ 62
Benefit vesting schedule
5 years’ service
5 years’ service
5 years’ service
Benefit payments
Monthly for life
Monthly for life
Monthly for life
Retirement age
50 – 55+
52 – 63+
52 - 67+
Monthly benefits, as a % of eligible

2.0% to 2.7%

1.4% to 2.4%

1.0% to 2.5%
Required Employer Contribution Rates:

Normal Cost Rate(1)

14.020%

0.000%

7.590%
Employees hired prior to January 1, 2013 are required by contract to contribute 1% of the City’s employer normal cost contributions.

Source: City of Hesperia Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022.

Fire District Safety Plan
Benefit formula

2.0% @ 50
Benefit vesting schedule
5 years’ service
Benefit payments
Monthly for life
Retirement age
50-55+
Monthly benefits, as a % of eligible

2.0% to 2.7%
Required Employer Contribution Rates:

Normal Cost Rate
--
Payment of Unfunded Liability
$983,846
Source: City of Hesperia Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022.

California Public Employees’ Pension Reform Act of 2013. Employees hired prior to January 1, 2013 and have remained under continuous employment with a CalPERS agency are considered “Classic” employees. California Public Employees’ Pension Reform Act of 2013 (“PEPRA”), which was signed by the State Governor on September 12, 2012, established a new pension benefit tier for employees who were hired on and after January 1, 2013, who were not previously CalPERS members or have left employment with a CalPERS agency for more than 6 months.

PEPRA adjusted the benefit formulas, required employee contribution, calculation of benefits and maximum pay, as well as other benefits. PEPRA miscellaneous employees receive benefits based on a 2.0% at age 62 formula. Employees are required to pay at least 50% of the total (annual) normal cost rate, and are required to make the full amount of required employee contributions themselves under PEPRA. Retirement benefits for such employees are calculated on the highest average annual compensation over a consecutive 36-month period. Accordingly, retirement benefits for PEPRA miscellaneous employees are calculated as 2% of the average final 36 months compensation. Retirement benefits for Classic miscellaneous employees are calculated as 2% of the average final 12 months of compensation. Retroactive benefits increases are also prohibited, as are contribution holidays, and purchases of additional non-qualified service credit, as are contribution holidays, and purchases of additional non-qualified service credit.

PEPRA also capped pensionable income as noted below. Maximum amounts are set annually, subject to adjustment in accord with the Consumer Price Index. Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of PEPRA are expected to reduce the City’s unfunded pension lability and potentially reduce City contribution levels in the long term.

CalPERS Pension Compensation Limits for
Calendar Year 2023 (Classic and PEPRA members)
Classic
PEPRA
Maximum Pensionable Income
$330,000
$175,250 (1)
(1) The Maximum Pensionable income for PEPRA members employed at agencies that participate in Social Security is $146,042.

Source: CalPERS Payroll Circular Letter dated January 3, 2023.

Contributions. Section 20814(c) of the Retirement Law requires that the employer contribution rates for all public employers are 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’s 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 UAL.

The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. City 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 contributions requirements are classified as plan member contributions. During the fiscal year, the City contributed a total of $3,222,939 to the City Miscellaneous Plan and Fire District Miscellaneous Plan and $983,846 to the Fire District Safety Plan.

Beginning in Fiscal Year 2017-18, CalPERS collects employer contributions for the Plans as a percentage of payroll for the normal cost portion and as a dollar amount for contributions toward the UAL. The dollar amounts are billed on an annual basis.

The actuarially determined normal cost rates and UAL contribution amounts for the Plans for the Fiscal Years ended June 30, 2022, through June 30, 2024, are as shown in the following table.

Fiscal Year 2021-22
Fiscal Year 2022-23
Fiscal Year 2023-24
Employer Normal
Cost Rate(1)
Employer Amortization of UAL
Employer Normal
Cost Rate(1)
Employer Amortization of UAL
Employer Normal
Cost Rate(1)
Employer Amortization of UAL
City Miscellaneous Plan
Classic Tier

14.02%
$1,516,908

14.03%
$1,710,427

15.95%
$1,657,465
PEPRA Tier

7.59 20,989

7.47 25,258

7.68 0
Fire District Miscellaneous Plan

0.00 24,722

0.00 26,505

0.00 20,479
Fire District Safety Plan

0.00 1,017,698

0.00 1,104,310

0.00 917,179
Employees hired prior to January 1, 2013 are required by contract to contribute 1% of the City’s employer normal cost contributions. Percentages shown are inclusive of employee contributions.

Source: CalPERS Actuarial Reports dated July 2020, July 2021, and July 2022.

The City’s estimated total contribution amounts (including the required normal cost (if any) and UAL contributions) for the Plans in Fiscal Years 2021-22, 2022-23 and 2023-24 are shown in the following table.

Fiscal Year 2021-22
Fiscal Year 2022-23
Fiscal Year 2023-24
Total Employer Contribution(1)
Total Employer Contribution(1)
Total Employer Contribution(1)
City Miscellaneous Plan
Classic Tier
$2,258,347
$2,401,733
$2,288,589
PEPRA Tier
246,102
289,828
290,422
Fire District Miscellaneous Plan
24,722
26,505
20,479
Fire District Safety Plan
1,017,698
1,104,310
917,179
Employees hired prior to January 1, 2013 are required by contract to contribute 1% of the City’s employer normal cost contributions. Contributions shown are inclusive of employee contributions.

Source: CalPERS Actuarial Reports dated July, 2020, July 2021, and July 2022.

Pension Section 115 Trust. As previously described, the City anticipates establishing the City Miscellaneous Plan 115 Trust, a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code, with Alta Trust Company, as trustee, to fund the City’s retirement obligations to the CalPERS with respect to the City Miscellaneous Plan, and the Fire District Safety Plan 115 Trust, a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code, with Alta Trust Company, as trustee, to fund the City’s retirement obligations to the CalPERS with respect to the Fire District Safety Plan. When established, the City anticipates making initial deposits of $3.6 million and $1.2 million into the City Miscellaneous Plan 115 Trust and the Fire District Safety Plan 115 Trust, respectively.

Projected Employer Contributions. The following table shows the City’s actuarially-determined required employer contribution for Fiscal Year 2023-24 and projected employer contributions (before cost sharing) for Fiscal Years 2024-25 through 2028-29 for the Plans by normal cost (expressed as a percentage of total active payroll) and amortization of the unfunded accrued liability (expressed as a dollar amount).

The projections assume a 6.80% annual rate of return for Fiscal Year 2021-22 but do not include any reductions in the normal cost that will occur over time as new employees are hired into PEPRA or other lower cost benefit tiers.

Required Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond) City Miscellaneous Plan (Classic Tier)
Fiscal Year
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
Normal Cost %

15.95%

16.0%

16.0%

16.0%

16.0%

16.0%
UAL Payment
$1,657,465
$1,642,000
$1,181,000
$1,109,000
$1,011,000
$1,053,000
City Miscellaneous Plan (PEPRA Tier)
Fiscal Year
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
Normal Cost %

7.68%

7.7%

7.7%

7.7%

7.7%

7.7%
UAL Payment
$0
$0
$0
$0
$0
$0
Fire District Miscellaneous Plan
Fiscal Year
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
Normal Cost %

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%
UAL Payment
$20,479
$20,000
$20,000
$20,000
$20,000
$20,000
Fire District Safety Plan
Fiscal Year
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
Normal Cost %

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%
UAL Payment
$917,000
$917,000
$917,000
$917,000
$917,000
$917,000
Source: CalPERS Actuarial Reports dated July 2022.

Funded Status. The following table sets forth the schedule of funding for the Plans for the valuation dates of June 30, 2019, 2020, and 2021.

Valuation Date
Ended June 30
Accrued Liability
Market Value of Assets
UAL
Funded
Ratio
Annual Covered Payroll
City Miscellaneous Plan (Classic Tier)
2019
$62,367,208
$45,424,992
$16,942,216

72.8%
$4,875,081
2020
65,091,834
46,842,306
18,249,528

72.0 4,542,208
2021
69,308,361
56,963,556
12,344,805

82.2 3,642,289
City Miscellaneous Plan (PEPRA Tier)
2019
$1,624,956
$1,484,483
$140,473

91.4%
$2,734,090
2020
2,204,787
1,995,200
209,587

90.5 3,264,935
2021
2,921,457
3,401,713
(120,256)
104.1
3,480,878
Fire District Miscellaneous Plan
2019
$31,661,390
$22,231,763
$9,429,627

70.2%
$0
2020
32,052,705
22,255,783
9,796,922

69.4 0
2021
32,681,193
25,695,089
6,986,104

78.6 0
Fire District Safety Plan
2019
$596,113
$396,468
$199,645

66.5%
$0
2020
570,006
368,396
201,610

64.6 0
2021
573,270
424,638
148,632

74.1 0
Source: CalPERS Actuarial Reports dated July 2022.

There is a two-year lag between the valuation date and the start of the contribution Fiscal Year. The UAL was determined in the June 30, 2021 actuarial valuation, but the corresponding UAL payments commence two years after the valuation date in Fiscal Year 2023-24. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their required employer contribution well in advance of the start of the Fiscal Year.

Net Pension Liability. As of June 30, 2022, the City reported a net pension liability of $9.7 million for the City Miscellaneous Plan, $136,931 for the Fire District Miscellaneous Plan and $5.8 million for the Fire District Safety Plan. Net pension liability is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021.

Potential Impacts on Future Required Contributions. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City’s required contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions.

Change in Assumptions/Discount Rate. On December 21, 2016, the CalPERS Board of Administration voted to lower its discount rate from the rate of 7.50% to 7.00% over a three-year period. The change was reflected in the June 30, 2016 actuarial report, which lowered the discount rate from 7.50% to 7.375%; in the June 30, 2017 actuarial report, which lowered the discount rate from 7.375% to 7.25%; and in the June 30, 2018 actuarial report, which lowered the discount rate from 7.25% to 7.00. On November 15, 2021, the CalPERS Board of Administration voted to lower its discount rate from 7.00% to 6.80% for the June 30, 2021 actuarial report.

Investment Performance. CalPERS earnings reports for Fiscal Years 2011-12 through 2021-22 report investment gains (and losses) of approximately 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7%, 21.3% and (6.1%), respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City.

Other Post-Employment Retirement Benefits
The City provides OPEB through the OPEB Plan, a single-employer defined benefit health-care plan. The OPEB Plan, which is administered by the City, provides certain health-care benefits. Specifically, the City provides health insurance for its retired employees according to the personnel rules and regulations. The authority to do so is included annually in the Memorandum of Understanding between the City and each of its employee groups and ultimately passed by Council action. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. The OPEB Plan does not issue a separate report.

As of the June 30, 2021, measurement date, the following current and former employees of the City were covered by the benefit terms of the OPEB Plan:

Inactive employees or beneficiaries currently receiving benefits 49 Inactive employees entitled to but not yet receiving benefits 65 Active employees
154
Total
267
Source: City of Hesperia Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022.

As previously described, the City anticipates establishing the OPEB 115 Trust, a tax qualified irrevocable trust organized under Section 115 of the Internal Revenue Code with Alta Trust Company, as trustee, to prefund OPEB by June 30, 2023, with an initial deposit of approximately $600,000.

Benefit Payments. Benefit payment requirements are established by City policy and may be amended by the City Council. For the year ended June 30, 2022, the City made $79,891 in contributions in the form of premium payments, $86,091 in implicit subsidy benefit payments and administrative expense of $821 for a total benefits paid of $166,803.

Total OPEB Liability. The City’s OPEB liability of $6,982,356 was measured as of June 30, 2021, and was determined by an actuarial valuation as of June 30, 2020, rolled forward to June 30, 2021, using standard update procedures.

See “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022 – Note 9” for additional information regarding the OPEB Plan, including a description of the actuarial methods and assumptions used to measure the City’s OPEB liability as of the June 30, 2021 measurement date.

Employee Relations and Collective Bargaining
The City had approximately 166 full-time and part-time equivalent employees at the beginning of Fiscal Year 2021-22. The City has no fire or police personnel. The City contracts with the San Bernardino County Sheriff’s Department for its police services. Fire protection for the City is provided by the San Bernardino County Fire Department.

City employees are represented by one labor union association, the San Bernardino Public Employees Association. Currently approximately 51% all City employees, including part-time employees, are covered by the union’s collective bargaining agreement A table summarizing certain information about the bargaining unit is provided below. In the previous five years, there have not been any work stoppages by City employees.

Table 12

CITY OF HESPERIA
City Employee Bargaining Units
Bargaining Unit
Contract
Expiration Date
Number of Budgeted
Employees
Teamsters Local 1942 – City of Hesperia
January 31, 2024
84 Source: City of Hesperia.

Risk Management
General. The City is a member of the Public Entity Risk Management Authority (“PERMA”), a joint powers authority of 32 California cities and districts, for the purpose of pooling the City’s risk for workers’ compensation insurance with those of other member cities and districts. The Governing Board of PERMA is comprised of directors nominated and selected by each member city and district. Each governing board member has one vote regarding all financial and management issues coming before the board.

Each member is billed annually, and Workers’ Compensation premiums are paid quarterly. Estimated premiums for claims to be paid and a reserve are advanced upon joining PERMA. Each year PERMA adjusts its premiums based on City payroll figures, claims paid, and claims incurred but not reported. PERMA is allowed to make additional assessments to its members based on a retrospective premium adjustment process. The City receives audited financial statements of PERMA each year that have been audited by other auditors.

There have been no significant reductions in insurance coverage from the prior year. Settlements have not exceeded insurance coverage for each of the past three fiscal years.

Workers’ Compensation and Employers’ Liability. The City is self-insured for the first $250,000 of each workers’ compensation and employers liability claim, and PERMA will assume each claim’s liability between $250,000 and $500,000. Excess liability insurance coverage is obtained from the Local Agency Workers’ Compensation Excess Joint Powers Authority (“LAWCX”) by PERMA on behalf of the City. LAWCX will assume each claims liability between $500,000 and $5,000,000 for employer’s liability and Statutory for each workers’ compensation claim.

General Liability. The City is self-insured for general liability including errors and omissions and auto liability up to the first $50,000 for each occurrence, and the difference between the City’s $50,000 self-insurance retention and $1,000,000 is covered by PERMA. Excess liability insurance coverage is obtained from CSAC Excess Insurance Authority (“CSAC-EIA”) by PERMA on behalf of the City. CSAC-EIA will assume each claim liability between $1,000,000 and $50,000,000.

Employment Practices. The City is self-insured for employment practices up to the first $50,000 for each occurrence, and the difference between the City’s $50,000 self-insurance retention and $1,000,000 is covered by Employment Risk Management Authority. Excess insurance coverage is obtained from CSAC Excess Insurance Authority (“CSAC-EIA”) by PERMA on behalf of the City.

Property. The City is self-insured for the first $5,000 for each occurrence (with the exception of $100,000 flood), and the difference between the City’s self-insurance retention and the lesser of $100,000,000 ($2,500,000 Flood) or the insurable value is covered by Alliant Property Insurance Programs.

Auto Physical Damage. The City is self-insured for the first $2,500 for each occurrence for all vehicles and the difference between the City’s $2,500 self-insurance retention and the lesser of $100,000 or the insurable value is covered by Hanover Insurance Co.

Special Events. The City is insured up to $500,000 for each occurrence covered by Alliant Insurance Services.

Other. The City is self-insured for employee dishonesty, forgery and alteration, theft, disappearance, destruction, robbery & safe burglary, money orders and counterfeit paper currency up to the first $2,500 for each occurrence, and the difference between the City’s self-insurance retention and $1,000,000 is covered by Alliant Insurance Services, Inc..

See “APPENDIX C – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2022 – Note 11” for additional information regarding the City’s insurance, including self-insurance limits and changes in the balances of claims liabilities for the years ended June 30, 2022 and June 30, 2021.

City Investment Policy and Portfolio
The City administers a pooled investment program, except for those funds that are managed separately by trustees appointed under bond indentures. This program enables the City to combine available cash from all funds and to invest cash that exceeds current needs. The most recently revised Investment Policy for the City was adopted on November 15, 2022 by the City Council.

In accordance with the Government Code, the City requires certain collateralization for public deposits in banks and savings and loans, and has long-established safekeeping and custody procedures. The City Treasurer submits a monthly report to the City Council that contains a statement that the City’s portfolio is invested in conformance with state law and the Investment Policy, and that there is sufficient liquidity to meet estimated expenditures.

The City’s pooled investment portfolio as of March 31, 2023, had a market value of approximately $136 million, and is described in the following table. As of March 31, 2023, the average life of the City’s investment portfolio was 0.75 years.

Table 13

CITY OF HESPERIA
Investment Portfolio as of March 31, 2023
Type
Market
Value
Cost
Basis
% of
Portfolio(1)
$136,402,740
100%
Local Agency Investment Fund
$136,402,740
$138,267,929
100%
(1) Calculated using cost basis.

Source: City of Hesperia.

APPENDIX B

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

APPENDIX C

ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE
$[PAR]
Hesperia Joint Public Finance Authority
2023 Refunding Lease Revenue Bonds
This CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”) is executed and delivered by the City of Hesperia (the “City”), for and on behalf of itself and the Hesperia Joint Public Finance Authority (the “Authority”), in connection with the issuance by the Authority of the bonds captioned above (the “2023 Bonds”). The 2023 Bonds are being issued pursuant to an Indenture, dated as of July 1, 2023 (the “Indenture”), between U.S. Bank Trust Company, National Association, as trustee, and the Authority.

The City covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2023 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:
“Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means the date that is nine months after the end of the City’s fiscal year (currently March 31 based on the City’s fiscal year end of June 30). “Dissemination Agent” means Urban Futures, Inc., or any successor Dissemination Agent, designated in writing by the City and which has filed with the City a written acceptance of such designation. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement dated __________, 2023, executed by the City and the Authority in connection with the issuance of the 2023 Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original purchaser of the 2023 Bonds required to comply with the Rule in connection with offering of the 2023 Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.

Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2024, with the report for fiscal year 2022-23, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder. (b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall provide (or cause the Dissemination Agent to provide) a notice to the MSRB in a timely manner, in an electronic format as prescribed by the MSRB. (c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:
(a) The City’s audited financial statements for the preceding fiscal year prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, financial information and operating data with respect to the City for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement, as follows:
(i) Principal amount of Bonds outstanding.
(ii) General fund budget summaries for the then-current fiscal year and the preceding fiscal year in substantially the form of Table 1 in Appendix A of the Official Statement. (iii) General fund balance sheet in substantially the form of Table 2 in Appendix A of the Official Statement. (iv) Statement of General fund revenues, expenditures and changes in fund balance in substantially the form of Table 3 in Appendix A of the Official Statement. (v) Major general fund revenues by source in substantially the form of Table 4a in Appendix A of the Official Statement. (vi) Assessed valuation of property in the City in substantially the form of Table 8 in Appendix A of the Official Statement, and the current property tax levy and collections in substantially the form of Table 10 in Appendix A of the Official Statement. (vii) Updated descriptions of outstanding general fund debt and lease obligations. (c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public through the MSRB. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from the MSRB.

Section 5. Reporting of Listed Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2023 Bonds:
(1) Principal and interest payment delinquencies.
(2) Nonpayment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2023 Bonds, or other material events affecting the tax status of the 2023 Bonds. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person. (13) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (15) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material. (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties. (b) Upon the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected 2023 Bonds under the Indenture. (c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the 2023 Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law.  If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (16), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2023 Bonds. If such termination occurs prior to the final maturity of the 2023 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Urban Futures, Inc. Any Dissemination Agent may resign by providing 30 days’ written notice to the City.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2023 Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the 2023 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the 2023 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the 2023 Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to this Disclosure Certificate modifying the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.

A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(b).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. If the City fails to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the 2023 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder, and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2023 Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the 2023 Bonds, and shall create no rights in any other person or entity.

Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Section 15. Governing Law. This Disclosure Certificate shall be governed by and construed in accordance with the laws of the State of California.

Date: _________, 2023

CITY OF HESPERIA
By:

Name:

Title:

AGREED AND ACCEPTED:

Urban Futures, Inc.,
as Dissemination Agent
By:

Name:

Title:

APPENDIX E

FORM OF OPINION OF BOND COUNSEL
[Closing Date]
Hesperia Joint Public Finance Authority
9700 Seventh Avenue
Hesperia, CA 92345
OPINION: $_______ Hesperia Joint Public Finance Authority 2023 Refunding Lease Revenue Bonds Members of the Board of Directors of the Authority:

We have acted as bond counsel to the Hesperia Joint Public Finance Authority (the “Authority”) in connection with the issuance by the Authority of the captioned bonds dated the date hereof (the “Bonds”). In such capacity, we have examined such law and such certified proceedings, certifications, opinions and other documents as we have deemed necessary to render this opinion.

The Bonds are issued pursuant to Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Bond Law”), the Indenture, dated as of ________ 1, 2023 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), and a resolution (the ”Resolution”) of the Board of Directors of the Authority adopted ______, 2023. Under the Indenture, the Authority has pledged certain revenues (the “Revenues”) for the payment of principal, premium (if any), and interest on the Bonds when due, including rental payments made by the City of Hesperia (the “City”) under a Property Lease dated as of ________ 1, 2023 (the “Lease Agreement”) between the Authority and the City.

Regarding questions of fact material to our opinion, we have relied on representations of the Authority contained in the Indenture and the City contained in the Lease Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Regarding certain questions of law material to our opinion, we have assumed the correctness of certain legal conclusions contained in the written opinions of the City Attorney, and others, without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The Authority is a duly created and validly existing joint exercise of powers authority with the power to adopt the Resolution, enter into the Indenture and the Lease Agreement and perform the agreements on its part contained therein, and issue the Bonds.

2. The City is a duly created and validly existing municipal corporation and general law city with the power to enter into the Lease Agreement and perform the agreements on its part contained therein.

3. The Indenture has been duly authorized, executed and delivered by the Authority, and constitutes a valid and binding obligation of the Authority, enforceable against the Authority.

4. The Lease Agreement has been duly authorized, executed and delivered by the Authority and the City, and constitutes a valid and binding obligation of the Authority and the City, enforceable against the Authority and the City.

5. The Indenture creates a valid lien on the Revenues and other funds pledged by the Indenture for the security of the Bonds, on a parity with other bonds (if any) issued or to be issued under the Indenture.

6. The Bonds have been duly authorized and executed by the Authority, and are valid and binding limited obligations of the Authority, payable solely from the Revenues and other funds provided therefor in the Indenture.

7. The 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. For tax years beginning after December 31, 2022, interest on the Bonds may be subject to the corporate alternative minimum tax. The opinions set forth in the preceding sentences are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Authority and the City have made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds.

8. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or any court; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations, opinions, and covenants referenced above. Our engagement with respect to this matter has terminated as of the date hereof.

Respectfully submitted,
A Professional Law Corporation

APPENDIX F

DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the 2023 Bonds, payment of principal, interest and other payments on the 2023 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2023 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the issuer of the 2023 Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the 2023 Bonds (the “Agent”) take any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2023 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2023 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2023 Bonds, or that they will so do on a timely basis, 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.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2023 Bonds (the “Securities”). The Securities 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 Security certificate will be issued for each maturity of the Securities in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. 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 an S&P Global Ratings rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities 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.

5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities 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.

6. Redemption notices shall be sent to DTC. If less than all of the Securities 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.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Principal, redemption price and interest payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. If applicable, a Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to tender/remarketing agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to tender/remarketing agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to tender/remarketing agent’s DTC account.

10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

11. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

APPENDIX G

SPECIMEN MUNICIPAL BOND INSURANCE POLICY
1 A-30
A-1
A-39
B-1
C-1
D-7
E-1
F-1
G-1
ii
33 * Preliminary; subject to change.
(1) Mr. Nils Bentsen has announced that he will retire as City Manager effective June 18, 2023. The City Council of the City has appointed Ms. Rachel Molina as City Manager effective June 19, 2023. * Preliminary; subject to change.
* Preliminary; subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. 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 prior to registration or qualification under the securities laws of such jurisdiction.This Preliminary Official Statement and the information contained herein are subject to completion or amendment. 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 prior to registration or qualification under the securities laws of such jurisdiction.Agenda Draft This Preliminary Official Statement and the information contained herein are subject to completion or amendment. 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 prior to registration or qualification under the securities laws of such jurisdiction.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. 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 prior to registration or qualification under the securities laws of such jurisdiction.

PRELIMINARY OFFICIAL STATEMENT DATED __________, 2023