Estimated Revenue - The amount of projected revenue to be collected during the fiscal year.
Expenditure - Actual spending of funds in accordance with budgeted appropriations.
Federal Emergency Management Agency (FEMA) - Agency for emergency preparedness training.
Fees - Charges for services levied by the government to recover costs associated with providing a service, or permitting an activity. Major types of fees include construction, recreation and planning fees.
Fiscal Year - A twelve-month period used for budgeting, accounting or tax collection purposes. The City of Lancaster operates on a twelve-month period beginning July 1 and ending June 30.
Fair Political Practices Commission (FPPC) - State appointed commission to establish and enforce election guidelines.
Franchise Tax - A tax charged for the privilege of using public rights-of-way and property within the City for public or private purposes. The City charges franchise taxes to natural gas, electricity, cable television and solid waste.
Full-Time Equivalent (FTE) - Full-time equivalent employee works 2,080 hours in a year.
Fund - An accounting concept used to separate or subdivide the financial activity of a city for legal and managerial purposes. All financial activity of a municipality must be classified in relation to a fund. The City's budget consists of a general fund, spe cial revenue funds, debt service funds, capital project funds and fiduciary funds.
General Plan - The comprehensive plan, required by Section 65300 of the Government Code of the State of California, that contains the goals, objectives, policies and specific actions that guide the long-term development and operation of the City of Lancaster.
Generally Accepted Accounting Principles (GAAP) - Principles are uniform, minimum standards used for accounting and reporting for both private industry and governments.
The Governmental Accounting Standards Board currently sets government GAAP.
Governmental Accounting Standards Board (GASB) - The current standards-setting board for governmental GAAP.
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 292 Government Finance Officers Association of the United States and Canada (GFOA) - A non-profit professional association serving government finance professionals throughout North America.
Grant - A contribution from one government unit to another or from a non -profit organization usually made for a specific purpose and time.
Intergovernmental Revenue - Revenue from other governments, primarily shared State revenue from gasoline taxes and vehicle-in-lieu taxes.
Internal Control - The system of controls established by the City to protect the assets from misappropriation and ensure accurate reporting of financial transactions.
Investment Policy - A written and Council adopted policy delineating permitted investments of the City's idle cash. The City of Lancaster's Investment Policy is typically updated and reaffirmed annually.
Joint Powers Authority (JPA) – Legally created entities that allow two or more public agencies to jointly exercise common powers. Forming such entities can provide a creative approach to the provision of public services; and permits public agencies with the means to provide services more efficiently and in a cost-effective manner. The Joint Exercise of Powers Act – as codified in California Government Code section 6500 – governs JPAs.
Licenses and Permits - Revenue category that includes building permits and any other miscellaneous license.
Local Agency Investment Fund (LAIF) - State Treasurer’s Investment Pool of funds from local jurisdictions to take advantage of the State Treasurer’s investment expertise.
Los Angeles County Sheriff’s Department (LASD) - Provides law enforcement services to the City of Lancaster under a general services agreement. The LASD provides enforcement of local, state and federal statutes.
Memorandum of Understanding (MOU) - A formalized agreement of processes, results or operating criteria between two or more entities.
Metropolitan Transportation Authority (MTA) - Administers transportation funds in Los Angeles County.
Municipal Code - A compilation of City Council approved ordinances (laws) presently in effect. The Code defines city policies in various categories.
Negative Declaration - A written statement briefly describing the reasons that an adopted project will not have a significant effect on the environment and therefore does not require the preparation of an Environmental Impact Report (EIR). The contents of a Negative Declaration are described in Section 15071 of the State CEQA Guidelines.
Nixle - Allows for nearly instant emergency communications to residents and businesses via phone, email and the web. It is also a mechanism to give instructions and information to targeted groups in the community.
Objectives - Identifies the desired results of the activities of a program.
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 293 Operating Budget - An operational plan, expressed in financial terms, by which a program is funded. It includes: (1) the departmental function; (2) the services provided; and (3) current year resources and funding allocation.
Ordinance - A formal legislative enactment by the City Council. It has the full force and effect of law within the City boundaries unless it is in conflict with any higher form of law, such as a State statute or constitutional provision. An ordinance has higher legal standing than a resolution. A law set forth by a government authority, specifically a municipal regulation. An ordinance takes longer to enact than a resolution.
Pass Through - The tax increment that is shared with other entities such as the county and school districts is called a Pass-Through.
Personnel Expenses - Salary and fringe benefits such as pensions and insurance for full time, part-time and limited contract employees of the City.
Program - A division of a department that specifies a group of activities.
Program & Financial Plan - The Council approved document stating goals and objectives for a fiscal year and the method of financing thereof.
Property-Based Improvement District (PBID) - The special assessment district managed by The BLVD Association for the benefit of the member businesses which also serve as the source of the fees. These funds help to promote the downtown area in a variety of ways – including joint marketing efforts, training opportunities for businesses and hosting BLVD Association special events.
Property Tax Rate - The amount of real property tax levied for each $1,000 assessed valuation. This rate is limited in California by Article XIII of the State Constitution to 1 percent of assessed valuation plus voter approved overrides for indebtedness.
Proposition A - A countywide sales tax of ½ percent approved by the voters in 1980 for use in transit projects.
Proposition C - A countywide sales tax of ½ percent approved by the voters in 1990 for use in transit projects.
Public, Educational and Governmental Access Programming (PEG) Public Employees Retirement System (PERS) - Provided for government employees within the State of California. Each government agency may contract with PERS if they wish; not all belong.
Recognized Obligation Payment Schedule (ROPS) - Per ABx1 26, the Successor Agency is required to prepare a Recognized Obligation Payment Schedule annually. The Recognized Obligation Payment Schedules are approved at public meetings of the Successor Agency and Oversight Board.
Redevelopment Agency - A government body dedicated to urban renewal. Typically, it is a municipal level city department focused on a particular district or corridor that has become neglected or blighted. Redevelopment existed in California for over 60 years and over 420 agencies were established by cities and counties. Redevelopment was eliminated in 2011 by ABx1 26 – a State budget trailer bill.
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 294 Request for Proposals (RFP) - Similar to a bid but used when the desired product or service is not fully quantifiable – such as ‘design a computer network.’ Request for Qualifications (RFQ) - A process whereby professional services are solicited where the product or service requires substantial assistance to define – an example would be when soliciting for architectural services for a baseball stadium.
Reserved Fund Balance - A portion of the fund balance that is not re-appropriated as a source of funds. In the General Fund, it is the City's formal policy to maintain a minimum of 10% of annual budgeted expenditures as a reserved fund balance.
Resolution - A City Council policy constituting a written action or decision.
Revenue - Funds received by the City as income, including tax payments, licenses and permits, fees for specific services, receipts/reimbursements from other governmental entities, fines and forfeitures, grants, and investment income.
Revenue Estimate - A formal estimate of how much revenue will be earned from a specific revenue source for some future time period.
Sales and Use Tax - A tax imposed on the sale or use of all tangible personal property. As of April 2021, the tax rate for purchases in Lancaster is 10.25% – 6.25% goes to the State,
1.0% to the County plus three county transportation levies for a total of 2.25%. The balance of 1.75% stays locally in the City of Lancaster.
SB 211 - When the life of a Redevelopment Project Area is extended, this triggers the provisions of SB 211; whereby, over time, additional increment is passed through to entities that would have received the property taxes based on the normal property tax allocation formulas. This only applies to entities that do not have a previously existing Pass Through Agreement with the Redevelopment Agency.
Single Audit - An audit performed in accordance with the Single Audit Act of 1984 and Office of Management and Budget (OMB) Circular A -128, Audits of State and local Governments. The Single Audit Act requires governments to have one audit performed to meet the needs of all Federal grantor agencies, thus reducing the overall costs of audits.
Southern California Association of Governments (SCAG) - An association of government leaders who endeavor to improve the local governing process.
Special Revenue Fund - A fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes.
Successor Agency - On February 1, 2012 the Lancaster Redevelopment Agency was dissolved per ABx1 26. The legislation requires a successor agency to wind down the activities of the dissolved redevelopment agency. On January 24, 2012, the Lancaster City Council assumed the responsibilities of the Successor Agency for the former Redevelopment Agency.
Target Oriented Policing (TOP) - Funds set aside for the specific directed law enforcement designed to immediately and administratively direct law enforcement efforts to specific needs.
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 295 Taxes - Compulsory charges levied by a government to finance services provided for the common benefit.
Tourism Business Improvement District (TBID) - In 2013, seven Lancaster hotels recently joined together to form the Lancaster Tourism Business Improvement District providing funding for Destination Lancaster via a small self-assessment on the hotels.
Transient Occupancy Tax (TOT) - The tax charged on all hotel and motel room rates in the City.
User Fees/Charges - A fee or charge for receipt of a service by the user who benefits from using the service.
Urban Structure Program (USP) - A computerized fiscal model that calculates the development fees for adopted projects based on the estimated costs and revenues the project will create to the City. The intent of the Urban Structure Program is to implement Objective 15.3 of the City of Lancaster General Plan by ensuring that new development pays for the costs of providing services and infrastructure needed to serve that development. This program has won the GFOA Award of Excellence in 1996 as well as the Helen Putnam Award.
Zoning Ordinance - The adopted ordinance of the City of Lancaster that establishes the allowed uses, development standards, and the procedural and administrative requirements related to them for all property within the City. The purpose of the Zoning Ordinance is to implement the City's adopted General Plan.
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 296 Acronyms
AB Assembly Bill
ADA American Disabilities Act
ACFR Annual Comprehensive Financial Report
ARC Annual Required Contribution
AVC Antelope Valley College
AVEDGE Antelope Valley Economic Development and Growth Enterprise (a merger of Antelope Valley Board of Trade (AVBOT) and Greater Antelope Valley Economic Alliance (GAVEA) in 2020
AVEK Antelope Valley Eastern Kern Water Agency
AVTA Antelope Valley Transit Authority
AVTTF Antelope Valley Traffic Task Force
AVUHSD Antelope Valley Union High School District
AWOH Aerospace Walk of Honor
BAIP Business Attraction Incentive Program
BYD Build Your Dreams
CAT Combat Auto Theft
CCEA California Choice Energy Authority
CCI Construction Cost Index
CDBG Community Development Block Grant
CDCR California Department of Corrections and Rehabilitation CEC California Energy Commission
CERT Community Emergency Response Team
CEQA California Environmental Quality Act
CFC California Film Commission
CHAG City Hall Art Gallery
CIC Career Information Center
CIP Capital Improvement Program
CMP Congestion Management Program
CNG Compressed Natural Gas
CORE Community Oriented Response and Enforcement
CPI Consumer Price Index
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 297 CPTED Crime Prevention through Environmental Design
CRA Community Redevelopment Agency
CRM Customer Relationship Management
CRPTF Community Redevelopment Property Trust Fund
CSI Crime Stopping Initiatives
CSMFO California Society of Municipal Finance Officers CSO Community Service Officer
CSTI California Specialized Training Institute
CSU Cal State University
DOF California Department of Finance
ED Economic Development
EDMS Electronic Document Management Systems
EIA Energy Information Administration
EIR Environmental Impact Report
ERAF Educational Revenue Augmentation Fund
FEMA Federal Emergency Management Agency
FY Fiscal Year
FLICS Film Liaisons in California, Statewide
FLSA Fair Labor Standards Act
FOMC Federal Open Market Committee
FPPC Fair Political Practices Commission
FTE Full time Equivalent
GAAP Generally Accepted Accounting Principles
GASB Governmental Accounting Standards Board
GPCAC General Plan Citizens Advisory
GFOA Government Finance Officers Association
GIS Graphical Imagery System
GDP Gross Domestic Product
HCD Housing and Community Development
HERO California Home Energy Renovation Opportunity
HRIS Human Resources Information System
IT Information Technology
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 298 ITSP Information Technology Strategic Plan
JLUS Joint Land Use Study
LAEDC Los Angeles County Economic Development Corporation LAHSA Los Angeles Homeless Services Authority
LAIF Local Agency Investment Fund
LASD Los Angeles County Sheriff's Department
LBP Lancaster Business Park
LCE Lancaster Choice Energy
LCP Lancaster City Park
LFA Lancaster Financing Authority
LHA Lancaster Housing Authority
LLEBG Local Law Enforcement Block Grant
LNSC Lancaster National Soccer Center
LPA Lancaster Power Authority
LPAC Lancaster Performing Arts Center
LRA Lancaster Redevelopment Agency
LSA Lancaster Successor Agency
LSD Lancaster School District
MCI Municipal Cost Index
MEA Master Environmental Assessment
MOAH The Lancaster Museum of Art and History
MOU Memorandum of Understanding
MTA Metropolitan Transportation Authority
O&M Operations and Maintenance
OMP Sgt. Steve Owen Memorial Park
OPA Owner Participation Agreement
OPEB Other Post Employment Benefits
OSHA Occupational Safety and Health Administration
OTS Office of Traffic Safety
PACE Property Assessed Clean Energy
PBID Property Based Improvement District
PERS Public Employees Retirement System
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 299 PPI Producer Price Index
PROP Proposition
PSAHC Public Safety Ad Hoc Committee
RFP Request for Proposals
RFQ Request for Qualifications
SB Senate Bill
SBAP Small Business Attraction Program
SCAG Southern California Association of Governments
SCE Southern California Edison
SRRE Source Reduction and Recycling Element
STPL Surface Transportation Program Local
TAC Technical Advisory Committee
TBID Tourism Business Improvement District
TDA Transportation Development Act
TOP Target Oriented Policing
USP Urban Structure Program
VOP Volunteers on Patrol
VLF Vehicle In Lieu Fee
WHM Western Hotel Museum
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 300
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 301
BUDGET RESOLUTIONS
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 302
ADDENDUM
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 303
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CITY OF LANCASTER PROPOSED FISCAL YEAR 2024-2025 BUDGET 304
APPROPRIATIONS AND BUDGET ADJUSTMENTS
Council approved appropriations and budget impact adjustments will be listed on this page throughout the fiscal year as they occur.
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STAFF REPORT
City of Lancaster
JPH 1
6/11/2024
JC
Date: June 11, 2024
To: Mayor Parris and City Council Members
From: Jason Caudle, City Manager
Trolis Niebla, Assistant City Manager
George Harris, Director of Finance
Subject: A Resolution of the City Council of the City of Lancaster, Authorizing the Issuance of Lancaster Financing Authority Lease Revenue Bonds, Authorizing the Execution and Delivery of a Ground Lease, Lease Agreement, Indenture, Continuing Disclosure Certificate, and Bond Purchase Agreement in Connection with the Issuance of such Bonds, Authorizing the Distribution of an Official Statement in Connection with the Offering and Sale of such Bonds and Authorizing the Execution of necessary Documents and Certificates and Related Actions.
A Resolution of the Lancaster Financing Authority Authorizing the Issuance of Lancaster Financing Authority Lease Revenue Bonds, Authorizing the Execution and Delivery of a Ground Lease, Lease Agreement, Indenture, Assignment Agreement and Bond Purchase Agreement in Connection with the Issuance of Such Bonds, Authorizing the Distribution of an Official Statement in Connection with the Offering and Sale of such Bonds and Authorizing the Execution of necessary Documents and Certificates and Related Actions.
Recommendation:
Take the following actions:
Acting as the City Council:
1. Adopt Resolution No. ____ entitled, “A Resolution of the City Council of the City of Lancaster, Authorizing the Issuance of Lancaster Financing Authority Lease Revenue Bonds, Authorizing the Execution and Delivery of A Ground Lease, Lease Agreement, Indenture, 1 6
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Continuing Disclosure Certificate, and Bond Purchase Agreement in Connection with the Issuance of such Bonds, Authorizing the Distribution of an Official Statement in Connection with the Offering and Sale of such Bonds and Authorizing the Execution of necessary Documents and Certificates and Related Actions.”
Acting as the Lancaster Financing Authority:
2. Adopt Resolution No. ____ entitled, “ A Resolution of the Lancaster Financing Authority Authorizing the Issuance of Lancaster Financing Authority Lease Revenue Bonds, Authorizing the Execution and Delivery of a Ground Lease, Lease Agreement, Indenture, Assignment Agreement and Bond Purchase Agreement in Connection with the Issuance of such Bonds, Authorizing the Distribution of an Official Statement in Connection with the Offering and Sale of such Bonds and Authorizing the Execution of necessary Documents and Certificates and Related Actions.
Fiscal Impact:
Based on conservative assumptions on current market rates, the proposed 2024 Lease Revenue Bonds, Series A and B (collectively, the “2024 Bonds”) debt service will level out at approximately $4.2 million annually in lease payments from fiscal year 2026-27 through 2053-54. In the next two fiscal years, the debt service will step up each year, with total debt service payments in fiscal year 2024-25 being approximately $2 million and total debt service payments in fiscal year 2025-26 being approximately $3 million. These estimated annual debt service payments are subject to change based on market interest rate movements up until the bond’s price and the interest rates are locked in. The costs of issuance for the 2024 Bonds will be paid out of the financing and so there will be no budgetary impact in FYE 2024-25 directly due to the issuance costs of the bonds.
Background:
The City has identified two significant projects that require funding: (1) the Multi-Agency Regional Resilience Center (the “MARRC Project”) and (2) the conversion of the City’s minor league baseball stadium into a soccer stadium for a new professional soccer team (the “Stadium Project”). In addition to these two projects, the City anticipates using the 2024 Bonds to raise approximately $9 million for PARCS projects, including the Avenue J Neighborhood Park, an Indoor Recreation Complex, and public art projects to be procured and installed throughout the City.
At the May 7, 2024, meeting, the City Council authorized staff to engage the services of bond finance professionals NHA Advisors as municipal financial advisor, Piper Sandler as underwriter, and Stradling Yocca Carlson & Rauth as bond and disclosure counsel to assist the City with issuing the 2024 Bonds. Also, at the City Council meeting, City staff presented a detailed overview of the MARRC Project and Stadium Project and a finance plan for the 2024 Bonds.
At this evening’s meeting, City staff are requesting the City Council to approve the issuance of the 2024 Bonds and accompanying legal and disclosure documents.
Review and Analysis:
MARRC Project Overview:
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The MARRC will serve as a fully functioning, large-scale, off-the-grid, resilient and emergency evacuation center and event center. The proposed complex includes construction of an emergency operations center and a culinary community kitchen. The MARRC Project is estimated to cost $81.5 million, which will be shared among several public agencies. Matching sources of funding identified to date include a $20.5 million grant awarded to the Antelope Valley Fair Authority from the California Department of Food and Agriculture (“CDFA”) Fairs and Expositions Branch.
In addition, on November 2, 2023, the City of Palmdale and the Antelope Valley Fairgrounds Authority entered into an agreement whereby the City of Palmdale committed to contribute a total of $10 million to the project. In addition to these upfront contributions to the project, the Antelope Valley Union High School District (“AVUHSD”) has committed to annual contributions toward the debt service on the 2024 Bonds, totaling $10 million. Formal actions are pending regarding the County of Los Angeles and other agencies. It is expected that an additional $10-$30 Million will be contributed by other agencies. After factoring in these additional contributions from other agencies, the remaining contribution to the project from the City of Lancaster is set at a not-to- exceed amount of $50 Million, under the terms of the Joint Use and Irrevocable License Agreement with the Antelope Valley Fairgrounds Authority, approved by the City Council on March 26, 2024.
Construction on the MARRC Project is expected to begin in early August 2024, with potential completion in late 2025.
Stadium Project:
The City will convert its existing baseball stadium (previously used for the Lancaster JetHawks) into a 5,300-seat, soccer-specific stadium for professional and pre-professional soccer. The Stadium Project is estimated to cost $12.5 million. Construction on the Stadium Project is expected to begin in early August 2024, with potential completion at the end of February 2025, in time for the start of the spring soccer season in March.
PARCS Projects:
The City plans to construct a new Avenue J Neighborhood Park, consisting of a playground, pedestrian/bike lane with lighting and benches, shaded picnic area, fitness course with exercise stations, shaded open space areas, drought tolerant-demonstration garden, landscaping and perimeter fence. The City has been awarded $2.4M in funds from the California Department of Parks and Recreation Land and Water Conservation Fund Grant for the project. The grant requires $2.5M in matching funds to complete the project.
In addition, the city plans to design and build a new indoor recreation complex to host youth and adult indoor sports programming. The new facility will provide two (2) full size basketball courts, which can double as 4 volleyball courts, 8 pickleball courts, as well as host a multitude of indoor athletic programs. Allowing for a designated space for city leagues and programs to practice and play games. Furthermore, the facility will have the ability to host private rentals for practice and tournaments. Estimated cost of this project is $3.5M
Finally, the PARCS Department is currently in the process of developing and adopting a Public Art Master Plan. Through extensive internal and external community engagement the Master Plan will develop the vison, values and goals for public art; identify clear action strategies; as well as identify cultural opportunities and locations for future art installations. The adoption of the Master Plan will result in the identification of $3M in public art to be procured and installed throughout the City.
Combined total between these three PARCS projects is approximately $9 million. 1 6
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Bond Structure:
To finance these capital projects, the City will issue the 2024 Bonds as a lease revenue bond. The 2024 Bonds will be payable from lease payments made by the City to the Lancaster Financing Authority (the “Authority”) pursuant to a lease agreement involving various City assets. This structure is secured by a General Fund appropriations pledge and is similar to the structure used by the City’s 2018 Lease Revenue Bonds to finance improvements to City Hall and other facilities.
The assets proposed for the 2024 Bonds are listed in the table below (together the “Leased Assets”) and combined equal approximately $78 million in building insured value.
Asset* Description Constructed
Size
(Square
Ft.)
Building
Insured
Value
Lancaster
Municipal
Stadium
Stadium / Sporting
Venue
1996
(Remodel in
FY 2024-25)
29,230 $26,749,179
Performing Arts
Theater
Performing arts center
w/ two theaters 1991 41,950 $20,295,368
Museum of Art
and History Museum 2012 21,334 $9,284,676
Economic
Development
Office
Office / small
business incubator 1985 30,000 $7,353,910
Public Safety
Building
Office headquarters
for City’s police
department
1950
(Remodeled
in FY 2023-
24)
29,623 $7,250,091
Lancaster
Community
Center
Community Facility
(music, dance, arts,
crafts, STEM)
2008
(Remodeled
in FY 2021-
22)
16,056 $3,993,288
Corporation Yard Public Works
Modular Office 2006 10,080 $2,938,824
Total Insured Value $77,865,336
*Final list of assets subject to completing title review and seismic assessment The financing for the MARRC and the PARCS projects will be issued on a tax-exempt basis, but because of the nature of the agreement with Antelope Valley Soccer, Inc, the financing for the Stadium Improvements will need to be issued on a partially-taxable basis. Accordingly, the 2024 Bonds will have two series: Series A will be issued as tax-exempt bonds and Series B will be issued as taxable bonds and will fund approximately 60% of the anticipated $12.5M cost of the stadium project (or $7.5 million).
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Both series of the 2024 Bonds will be supported by a level annual lease payment structure and will have a 30-year final maturity on May 1, 2055. Additionally, both series will have a 10-year optional redemption at par. On a combined basis, debt service repayments will commence at approximately $2 million per year in fiscal year 2024-25, step up to $3 million per year in fiscal year 2025-26, and level out from fiscal year 2026-27 through final maturity at $4.2 million per year. The graph on the next page illustrates the combined structure between both series.
Because the 2024 Bonds use the Lancaster Municipal Stadium as the leased asset, the 2024 Bonds are required to capitalize a portion of the interest that would accrue on the debt through November 2025.
Financing Documents:
The following documents are being presented for approval:
•Authorizing Resolutions: The authorizing resolutions approve the form of the legal documents for the 2024 Bonds. The resolutions also authorize the execution of the legal documents for the 2024 Bonds, provided the final pricing of the 2024 Bonds is within not- to-exceed parameters identified therein. These not-to-exceed parameters authorize City staff to issue the bonds, provided the final par and interest rates are equal to or less than the following: (1) the par amount of the 2024 Bonds cannot exceed $73,000,000; (2) the underwriter’s discount cannot exceed 0.5% of the total par amount of the 2024 Bonds; (3) the maximum true interest cost cannot exceed 5.5%; and (4) the final maturity cannot exceed May 1, 2054.
•Ground Lease: This is an agreement between the City and the Authority in which the City leases the Leased Assets to the Authority, providing the mechanism from which the $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
2024-25
2025-26
2026-27
2027-28
2028-29
2029-30
2030-31
2031-32
2032-33
2033-34
2034-35
2035-36
2036-37
2037-38
2038-39
2039-40
2040-41
2041-42
2042-43
2043-44
2044-45
2045-46
2046-47
2047-48
2048-49
2049-50
2050-51
2051-52
2052-53
2053-54
2024A
(Tax Exempt)
2024B
(Taxable)
2024 LRBs
Estimated Net Debt Service
Millions
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Authority may sublease the Leased Assets back to the City pursuant to a Lease Agreement. •Lease Agreement: This agreement provides for the leasing of the Leased Assets back from the Authority to the City in exchange for semi-annual lease payments that equal the debt service on the 2024 Bonds. The City’s General Fund will make the lease payments over the term of the Lease Agreement.
•Assignment Agreement: This is an agreement between the Authority and the Trustee providing the mechanism by which the Authority assigns its rights, title, and interest in and to the Lease Agreement and Ground Lease to the Trustee. •Indenture: The Indenture formalizes the relationship between the Lancaster Financing Authority, City of Lancaster, and U.S. Bank Trust Company, National Association (“U.S.
Bank”) as Trustee for the 2024 Bonds. The Indenture describes the terms of the Bonds, including the payment terms and schedule, prepayment options, other covenants related to the 2024 Bonds, and other administrative items.
•Preliminary Official Statement: A preliminary official statement (“POS”) has been prepared to provide material information to investors regarding the terms and security of the 2024 Bonds. The POS contains all information a reasonable investor should know about the City’s General Fund, financials, budget, risks, operations, and policies before making the decision whether to purchase the 2024 Bonds. The POS also includes descriptions of the legal and financial aspects of the 2024 Bonds, as well as a summary of the various related legal documents. Certain information which will not be known until the pricing of the 2024 Bonds (such as the final principal amount, the interest rates and the redemption dates) and this information is either left blank or noted as “preliminary, subject to change” in the POS. The Underwriter will use the POS to market the 2024 Bonds to potential investors. Once the 2024 Bonds have been priced, the final pricing information will be inserted into the POS, thereby converting it to an Official Statement. The Underwriter will then distribute the Final Official Statement to the individuals and institutions that placed orders to buy the 2024 Bonds from the Underwriter.
•Continuing Disclosure Agreement: Under the Continuing Disclosure Agreement, the City will agree to provide an annual report containing certain information relevant to the security of the 2024 Bonds, to be filed on the EMMA system (the internet-based information repository maintained by the Municipal Securities Rule Making Board for municipal bonds issued in the United States) to make such information available to the investors. The City will also agree to disclose and make filings upon the occurrence of enumerated significant events (e.g., a change in trustee, a rating change, or a missed debt payment on the 2024 Bonds).
•Bond Purchase Agreement: Pursuant to the Bond Purchase Agreement (“BPA”), the Underwriter (Piper Sandler) will agree to buy the 2024 Bonds at specified prices and interest rates, subject to satisfaction of certain requirements, such as the City’s execution and delivery of the indentures and delivery of closing certificates and opinions. The BPA will be presented to the authorized officers of the City for approval and execution on the pricing date after the Underwriter has completed the offering to the investors and the pricing of the 2024 Bonds. The Resolution specifies the maximum underwriter’s discount and other financing parameters that must be met before moving forward on the transaction. 1 6
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Good Faith Estimates:
NHA Advisors, LLC (the City’s municipal advisor) and Piper Sandler (the City’s underwriter) have provided good faith estimates on the cost of the financing, as required by California Government Code Section 5852.1. These estimates are based on current market rates. •True Interest Cost of the 2024 Bonds. Assuming an aggregate principal amount of $66,965,000 of the 2024 Bonds are sold and based on market interest rates prevailing at the time of preparation of this information, a good faith estimates of the true interest cost of the 2024 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the 2024 Bonds, is 4.67%.
•Finance Charge of the 2024 Bonds. Assuming an aggregate principal amount of $66,965,000 of the 2024 Bonds are sold and based on market interest rates prevailing at the time of preparation of this information, a good faith estimates of the finance charge of the 2024 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2024 Bonds), is approximately $667,829. •Amount of Proceeds to be Received. Assuming an aggregate principal amount of $66,965,000 of the 2024 Bonds are sold and based on market interest rates prevailing at the time of preparation of this information, a good faith estimates of the amount of proceeds expected to be received by the Authority for sale of the 2024 Bonds less the finance charge of the 2024 Bonds described above and any reserves or capitalized interest paid or funded with proceeds of the 2024 Bonds, is $60,000,000.
•Total Payment Amount. Assuming an aggregate principal amount of $66,965,000 of the 2024 Bonds are sold and based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the total payment amount, which means the sum total of all payments the Authority will make to pay debt service on the 2024 Bonds plus the finance charge of the Bonds described above not paid with the proceeds of the 2024 Bonds, calculated to the final maturity of the 2024 Bonds, is $122,792,190.
The foregoing information constitutes good faith estimates only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary from the estimates above due to variations from these estimates in the timing of the sale of the 2024 Bonds, the amount of 2024 Bonds sold, the amortization of the 2024 Bonds sold and market interest rates at the time of each sale. The date of sale and the amount of 2024 Bonds sold will be determined based on the need for project funds and other factors. The actual interest rates at which the 2024 Bonds will be sold will depend on the bond market at the time of each sale. The actual amortization of the 2024 Bonds will also depend, in part, on market interest rates at the time of sale. Market interest rates are affected by economic and other factors beyond the City’s and the Authority’s control.
Next Steps:
City staff will work with the financing team to complete the issuance of the 2024 Bonds. The following are tentative dates for the remaining key events of the financing:
Schedule:
•June 11: City Council and Financing Authority Board Approve Financing 1 6
5 8
•Late June: Price 2024 Bonds (lock interest rates)
•Mid-July: Closing (funds delivered to City/Trustee)
Attachment:
1. City Council Resolution No. ____
2. Financing Authority Board Resolution No. ____
3. Ground Lease
4. Lease Agreement
5. Assignment Agreement
6. Indenture
7. Preliminary Official Statement (including Continuing Disclosure Agreement as Appendix E)
8. Appendix A to Official Statement
9. Bond Purchase Agreement
Stradling Yocca Carlson & Rauth
Draft of 6/4/24
4854-4046-9434v4/022283-0612
RESOLUTION NO. 24-__
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LANCASTER, AUTHORIZING THE ISSUANCE OF
LANCASTER FINANCING AUTHORITY LEASE REVENUE
BONDS, AUTHORIZING THE EXECUTION AND DELIVERY OF
A GROUND LEASE, LEASE AGREEMENT, INDENTURE,
CONTINUING DISCLOSURE AGREEMENT AND BOND
PURCHASE AGREEMENT IN CONNECTION WITH THE
ISSUANCE OF SUCH BONDS, AUTHORIZING THE
DISTRIBUTION OF AN OFFICIAL STATEMENT IN
CONNECTION WITH THE OFFERING AND SALE OF SUCH
BONDS AND AUTHORIZING THE EXECUTION OF
NECESSARY DOCUMENTS AND CERTIFICATES AND
RELATED ACTIONS
WHEREAS, the City of Lancaster (the “City”) is a municipal corporation and charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California (the “State”);
WHEREAS, the City and the Lancaster Financing Authority (the “Authority”) desire to finance the costs of the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”); WHEREAS, the Authority and the City have determined that it would be in the best interests of the City and residents of the City to authorize the preparation, sale and delivery by the Authority of the “Lancaster Financing Authority Lease Revenue Bonds Series 2024A (Tax-Exempt)” (the “Series 2024A Bonds”) and the “Lancaster Financing Authority Lease Revenue Bonds Series 2024B (Federally Taxable)” (the “Series 2024B Bonds” and together with the Series 2024A Bonds, the “Series 2024 Bonds”) to finance the Projects;
WHEREAS, in order to facilitate the issuance of the Series 2024 Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property (collectively, the “Leased Assets”) to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority, and pay certain Base Rental Payments (as defined in the Lease Agreement), which are pledged to the owners of the Series 2024 Bonds by the Authority pursuant to an Indenture by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority (the “Indenture”); WHEREAS, the Series 2024 Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”);
WHEREAS, the City and the Authority desire to provide for the negotiated sale of the Series 2024 Bonds;
2 4854-4046-9434v4/022283-0612
WHEREAS, the City and the Authority have selected Piper Sandler & Co., to act as underwriter (“Underwriter”) of the Series 2024 Bonds and, in connection therewith, to purchase the Series 2024 Bonds from the Authority pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”);
WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), requires that, in order to be able to purchase or sell the Series 2024 Bonds, the Underwriter thereof must have reasonably determined that the City has undertaken in a written agreement or contract for the benefit of the holders of the Bonds to provide disclosure of certain financial information and certain events on an ongoing basis; WHEREAS, in order to cause such requirement to be satisfied, the City desires to execute and deliver a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”); WHEREAS, a form of the Preliminary Official Statement with respect to the Series 2024 Bonds (the “Preliminary Official Statement”) has been prepared; WHEREAS, the City is a member of the Authority and the Projects are located within the boundaries of the City;
WHEREAS, the City has prior to the consideration of this resolution held a public hearing on the financing of the Projects with the proceeds of the issuance of the Series 2024 Bonds in accordance with Section 6586.5 of the Act;
WHEREAS, notice of such hearing was published once in the Antelope Valley Press, a newspaper of general circulation in the City, at least five days prior to the hearing (in accordance with Section 6586.5 of the Act);
WHEREAS, the City Council has been presented with the form of each document referred to herein relating to the financing contemplated hereby, and the City Council desires to authorize and direct the execution of such documents and the consummation of such financing; WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; and
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LANCASTER, AS FOLLOWS:
Section 1. Each of the above recitals is true and correct. Following a duly noticed and conducted public hearing, the City Council hereby finds and determines that there are significant public benefits to the citizens of the City through the use of the Act to assist the City with respect to the subject matter hereof through the approval of the issuance of the Series 2024 Bonds and otherwise hereunder within the meaning of Section 6586(a)-(d), inclusive, of the Act, in that the issuance of the Series 2024 Bonds and related transactions will result in more efficient delivery of local agency services to residential and commercial development.
Section 2. The forms of the Ground Lease and Lease Agreement, on file with the City Clerk, are hereby approved, and the Mayor, or such other member of the City Council as the Mayor 3 4854-4046-9434v4/022283-0612
may designate, the Vice Mayor, the City Manager, the Assistant City Manager, the Finance Director and the City Clerk, and any designee thereof (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Ground Lease and Lease Agreement in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the term of the Ground Lease and Lease Agreement shall terminate no later than May 1, 2055 (provided that such term may be extended as provided therein) and the true interest cost applicable to the interest components of the Base Rental Payments shall not exceed 5.5%.
Section 3. The form of Indenture, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate principal amount of the Series 2024 Bonds shall not exceed $73,000,000, the final maturity date of the Series 2024 Bonds shall be no later than May 1, 2055, the true interest cost applicable to the Series 2024 Bonds shall not exceed 5.5% and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Series 2024 Bonds established at negotiated sale pursuant to the Bond Purchase Agreement.
Section 4. The Bond Purchase Agreement, on file with the City Clerk, is hereby approved and the Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the City, to execute and deliver the acceptance thereof set forth in the Bond Purchase Agreement, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate underwriter's discount (not including any original issue discount paid by the Underwriter) from the principal amount of the Series 2024 Bonds in excess of 0.5% of the aggregate principal amount of the Series 2024 Bonds.
Section 5. The issuance of not to exceed $73,000,000 aggregate principal amount of the Series 2024 Bonds in one or more series of taxable or tax-exempt bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby authorized and approved.
Section 6. The form of Preliminary Official Statement, on file with the City Clerk, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Series 2024 Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12).
Section 7. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Series 2024 Bonds, is hereby authorized and approved.
The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the City, to execute the 4 4854-4046-9434v4/022283-0612
final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the City.
Section 8. The form of Continuing Disclosure Agreement, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Continuing Disclosure Agreement, in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced to the execution and delivery thereof.
Section 9. The Authorized Officers are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including, but not limited to, adding property to, substituting property for or removing property from the Leased Assets identified in the Lease Agreement, and taking any and all actions, and executing and delivering any and all documents, in order to clear any title exceptions to the Leased Assets, including but not limited to entering into any subordination and non-disturbance agreement with any tenants of the Leased Assets. Additionally, any Authorized Officer is authorized and directed to solicit and accept bids for bond insurance and, if applicable, a reserve account insurance policy, for the Series 2024 Bonds, provided such officer determines acceptance of the best bid will result in debt service savings, and appropriate changes to each of the documents referenced herein to evidence such bond insurance and the terms thereof, are hereby authorized and approved. Anything to the contrary herein notwithstanding, in the event an Authorized Officer determines in consultation with NHA Advisors, LLC, the City’s municipal advisor, that the cost efficient marketing of the Series 2024 Bonds requires creation of a funded reserve under the Indenture, each of the Indenture, Lease Agreement and other documents approved herein may be revised to reflect the funding of such a reserve. All actions heretofore taken by the officers, employees and agents of the City with respect to the transactions set forth above are hereby approved, confirmed and ratified.
Section 10. In accordance with Government Code Section 5852.1, certain good faith estimates are set forth in the staff report presented to the City Council in connection with this Resolution. Such estimates have been provided to the City by its municipal advisor with respect to the Series 2024 Bonds and the City Council hereby finds that the requirements of Section 5852.1 have been satisfied.
Section 11. This Resolution shall take effect from and after its date of adoption. 5 4854-4046-9434v4/022283-0612
PASSED, APPROVED and ADOPTED this 11th day of June, 2024, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST: APPROVED:
____________________________ ______________________________ ANDREA ALEXANDER R. REX PARRIS
City Clerk Mayor
City of Lancaster City of Lancaster
STATE OF CALIFORNIA }
COUNTY OF LOS ANGELES }ss
CITY OF LANCASTER }
CERTIFICATION OF RESOLUTION
CITY OF LANCASTER
I, __________________________, ___________________________ City of Lancaster, CA, do hereby certify that this is a true and correct copy of the original Resolution No. 24-___, for which the original is on file in my office.
WITNESS MY HAND AND THE SEAL OF THE CITY OF LANCASTER, on this _________ day of ________________, ________.
(seal)
___________________________________
Stradling Yocca Carlson & Rauth
Draft of 6/4/24
4856-3288-3130v4/022283-0612
RESOLUTION NO. 24-__
A RESOLUTION OF THE LANCASTER FINANCING
AUTHORITY AUTHORIZING THE ISSUANCE OF LANCASTER
FINANCING AUTHORITY LEASE REVENUE BONDS,
AUTHORIZING THE EXECUTION AND DELIVERY OF A
GROUND LEASE, LEASE AGREEMENT, INDENTURE,
ASSIGNMENT AGREEMENT AND BOND PURCHASE
AGREEMENT IN CONNECTION WITH THE ISSUANCE OF
SUCH BONDS, AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION WITH THE
OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING
THE EXECUTION OF NECESSARY DOCUMENTS AND
CERTIFICATES AND RELATED ACTIONS
WHEREAS, the City of Lancaster (the “City”) and the Lancaster Financing Authority (the “Authority”) desire to finance the costs of the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”); WHEREAS, the Authority and the City have determined that it would be in the best interests of the Authority, the City and residents of the City to authorize the preparation, sale and delivery by the Authority of the “Lancaster Financing Authority Lease Revenue Bonds Series 2024A (Tax- Exempt)” (the “Series 2024A Bonds”) and the “Lancaster Financing Authority Lease Revenue Bonds Series 2024B (Federally Taxable)” (the “Series 2024B Bonds”; and, together with the Series 2024A Bonds, the “Series 2024 Bonds”) to finance the Project; WHEREAS, in order to facilitate the issuance of the Series 2024 Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property and improvements thereon (collectively, the “Leased Assets”) to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority and pay certain Base Rental Payments (as defined in the Lease Agreement), which are pledged to the owners of the Series 2024 Bonds by the Authority pursuant to an Indenture by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority (the “Indenture”);
WHEREAS, the Authority and the Trustee desire to enter into an Assignment Agreement (the “Assignment Agreement”) in order to provide, among other things, that all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee for the purpose of providing moneys to pay debt service on the Series 2024 Bonds; WHEREAS, the Series 2024 Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”);
WHEREAS, the City and the Authority desire to provide for the negotiated sale of the Series 2024 Bonds;
2 4856-3288-3130v4/022283-0612
WHEREAS, the City and the Authority have selected Piper Sandler & Co., to act as underwriter (the “Underwriter”) of the Series 2024 Bonds and, in connection therewith, to purchase the Series 2024 Bonds from the Authority pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”);
WHEREAS, a form of the Preliminary Official Statement with respect to the Series 2024 Bonds (the “Preliminary Official Statement”) has been prepared; WHEREAS, the City is a member of the Authority and the Projects are located within the boundaries of the City;
WHEREAS, the City has, prior to the consideration of this resolution, held a public hearing on the financing of the Projects with the proceeds of the issuance of the Series 2024 Bonds in accordance with Section 6586.5 of the Act;
WHEREAS, notice of such hearing was published once in the Antelope Valley Press, a newspaper of general circulation in the City, at least five days prior to the hearing (in accordance with Section 6586.5 of the Act);
WHEREAS, the Board of Directors of the Authority (the “Board of Directors”) has been presented with the form of each document referred to herein, and the Board of Directors desires to authorize and direct the execution of such documents and the consummation of such financing; WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such refinancing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; and
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE LANCASTER FINANCING AUTHORITY, AS FOLLOWS:
Section 1. All of the recitals herein contained are true and correct and the Board of Directors so finds. The Board of Directors has determined and hereby finds that the Authority’s assistance in financing the Projects by the execution and delivery of the Series 2024 Bonds will result in significant public benefits within the meaning of Section 6586(a)-(d), inclusive, of the Act.
Section 2. The forms of the Lease Agreement and the Ground Lease, on file with the Secretary of the Authority, are hereby approved, and the Chairman of the Authority, or such other member of the Board of Directors as the Chairman may designate, the Vice Chairman, the Executive Director, the Deputy Executive Director, the Treasurer, and the Secretary of the Authority, and any designee thereof (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Lease Agreement and the Ground Lease, respectively, in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the term of the Lease Agreement and the Ground Lease shall terminate no later than May 1, 2055 (provided that such term may be extended as provided therein) and the true interest cost applicable to the interest components of the Base Rental Payments shall not exceed 5.5%. 3 4856-3288-3130v4/022283-0612
Section 3. The form of Indenture, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate principal amount of the Series 2024 Bonds shall not exceed $73,000,000, the final maturity date of the Series 2024 Bonds shall be no later than May 1, 2055, the true interest cost applicable to the Series 2024 Bonds shall not exceed 5.5% and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Series 2024 Bonds established at negotiated sale pursuant to the Bond Purchase Agreement.
Section 4. The issuance of not to exceed $73,000,000 aggregate principal amount of the Series 2024 Bonds in one or more series of taxable or tax-exempt bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby authorized and approved.
Section 5. The form of Assignment Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment Agreement in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 6. The Bond Purchase Agreement on file with the Secretary of the Authority is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Authority to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate underwriter's discount (not including any original issue discount paid by the Underwriter) from the principal amount of the Series 2024 Bonds in excess of 0.5% of the aggregate principal amount of the Series 2024 Bonds.
Section 7. The form of Preliminary Official Statement, on file with the Secretary of the Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Series 2024 Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (except for the omission of certain final pricing, rating and related information as permitted by such Rule 15c2-12).
The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Series 2024 Bonds a reasonable number of copies of the Preliminary Official Statement.
Section 8. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Series 2024 Bonds, is hereby authorized and approved.
The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are 4 4856-3288-3130v4/022283-0612
each hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the Authority.
Section 9. The Authorized Officers are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including, but not limited to, adding property to, substituting property for or removing property from the Leased Assets identified in the Lease Agreement, and taking any and all actions, and executing and delivering any and all documents, in order to clear any title exceptions to the Leased Assets, including but not limited to entering into any subordination and non-disturbance agreement with any tenants of the Leased Assets. Additionally, any Authorized Officer is authorized and directed to solicit and accept bids for bond insurance and, if applicable, a reserve account insurance policy, for the Series 2024 Bonds, provided such officer determines acceptance of the best bid will result in debt service savings, and appropriate changes to each of the documents referenced herein to evidence such bond insurance and the terms thereof, are hereby authorized and approved. Anything to the contrary herein notwithstanding, in the event the Executive Director determines in consultation with NHA Advisors, LLC, the Authority’s municipal advisor, that the cost efficient marketing of the Series 2024 Bonds requires creation of a funded reserve under the Indenture, each of the Indenture, Lease Agreement and other documents approved herein may be revised to reflect the funding of such a reserve. All actions heretofore taken by the officers and agents of the Authority with respect to the transactions set forth above are hereby approved, confirmed and ratified.
Section 10. In accordance with Government Code Section 5852.1, certain good faith estimates are set forth in the staff report presented to the Board of Directors in connection with this Resolution. Such estimates have been provided to the Authority by its municipal advisor with respect to the Series 2024 Bonds and the Board of Directors hereby finds that the requirements of Section 5852.1 have been satisfied.
Section 11. This Resolution shall take effect from and after its date of adoption. 5 4856-3288-3130v4/022283-0612
PASSED, APPROVED and ADOPTED this 11th day of June, 2024, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST: APPROVED:
____________________________ ______________________________ ANDREA ALEXANDER R. REX PARRIS
Secretary Chairman
Lancaster Financing Authority Lancaster Financing Authority STATE OF CALIFORNIA }
COUNTY OF LOS ANGELES }ss
CITY OF LANCASTER }
CERTIFICATION OF RESOLUTION
LANCASTER FINANCING AUTHORITY
I, __________________________, ___________________________ City of Lancaster, CA, do hereby certify that this is a true and correct copy of the original Resolution No. 24-___, for which the original is on file in my office.
WITNESS MY HAND AND THE SEAL OF THE CITY OF LANCASTER, on this _________ day of ________________, ________.
(seal)
___________________________________
Stradling Yocca Carlson & Rauth
Draft dated May 31, 2024
4864-5739-2058v3/022283-0612
RECORDING REQUESTED BY:
Lancaster Financing Authority
AND WHEN RECORDED RETURN TO:
Stradling Yocca Carlson & Rauth LLP
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Brian P. Forbath, Esq.
[Space above for Recorder’s use.]
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. THE GRANTOR AND THE GRANTEE ARE GOVERNMENTAL AGENCIES.
GROUND LEASE
by and between
CITY OF LANCASTER
and
LANCASTER FINANCING AUTHORITY
Dated as of _____ 1, 2024
Relating to
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024A (TAX-EXEMPT)
and
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024B (FEDERALLY TAXABLE)
4864-5739-2058v3/022283-0612
GROUND LEASE
THIS GROUND LEASE (this “Ground Lease”), executed and entered into as of December 1, 2024, is by and between the CITY OF LANCASTER (the “City”), a municipal corporation and charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessor, and the LANCASTER FINANCING AUTHORITY (the “Authority”), a joint exercise of powers entity duly organized and existing under the laws of the State of California, as lessee.
WITNESSETH:
WHEREAS, the City of Lancaster (the “City”) and the Authority desire to finance the costs of the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”); WHEREAS, in order to finance the Projects, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to this Ground Lease, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated the date hereof;
WHEREAS, the Property is more particularly described in Exhibit A hereto; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Projects through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”); WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof (the “Assignment Agreement”);
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Ground Lease do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Ground Lease;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Except as otherwise defined herein, or unless the context clearly otherwise requires, words and phrases defined in Article I of the Lease Agreement shall have the same meaning in this Ground Lease.
ARTICLE II
LEASE OF THE PROPERTY; RENTAL
Section 2.01 Lease of Property. The City hereby leases to the Authority, and the Authority hereby leases from the City, for the benefit of the Owners of the Bonds, the Property, subject only to Permitted Encumbrances, to have and to hold for the term of this Ground Lease.
Section 2.02 Rental. The Authority shall pay to the City as and for rental of the Property hereunder, the sum of $1.00, the receipt of which is hereby acknowledged, and shall enter into the Lease Agreement.
ARTICLE III
QUIET ENJOYMENT
The parties intend that the Property will be leased back to the City pursuant to the Lease Agreement for the term thereof. It is further intended that, to the extent provided herein and in the Lease Agreement, if an event of default occurs under the Lease Agreement, the Authority, or its assignee, will have the right, for the then remaining term of this Ground Lease to (a) take possession of the Property, (b) if it deems it appropriate, cause an appraisal of the Property and a study of the then reasonable use thereof to be undertaken, and (c) relet the Property. Subject to any rights the City may have under the Lease Agreement (in the absence of an event of default) to possession and enjoyment of the Property, the City hereby covenants and agrees that it will not take any action to prevent the Authority from having quiet and peaceable possession and enjoyment of the Property during the term hereof and will, at the request of the Authority and at the City’s cost, to the extent that it may lawfully do so, join in any legal action in which the Authority asserts its right to such possession and enjoyment.
ARTICLE IV
SPECIAL COVENANTS AND PROVISIONS
Section 4.01 Waste. The Authority agrees that at all times that it is in possession of the Property, it will not commit, suffer or permit any waste on the Property, and that it will not willfully or knowingly use or permit the use of the Property for any illegal purpose or act.
Section 4.02 Further Assurances and Corrective Instruments. The City and the Authority agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably he required for correcting any inadequate or incorrect description of the Property hereby 3 4864-5739-2058v3/022283-0612
leased or intended so to be or for carrying out the expressed intention of this Ground Lease, the Indenture and the Lease Agreement.
Section 4.03 Waiver of Personal Liability. All liabilities under this Ground Lease on the part of the Authority shall be solely liabilities of the Authority as a joint exercise of powers entity, and the City hereby releases each and every director, officer and employee of the Authority of and from any personal or individual liability under this Ground Lease. No director, officer or employee of the Authority shall at any time or under any circumstances be individually or personally liable under this Ground Lease to the City or to any other party whomsoever for anything done or omitted to be done by the Authority hereunder.
All liabilities under this Ground Lease on the part of the City shall be solely liabilities of the City as a public corporation, and the Authority hereby releases each and every member, officer and employee of the City of and from any personal or individual liability under this Ground Lease. No member, officer or employee of the City shall at any time or under any circumstances be individually or personally liable under this Ground Lease to the Authority or to any other party whomsoever for anything done or omitted to be done by the City hereunder.
Section 4.04 Taxes. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Property.
Section 4.05 Right of Entry. The City reserves the right for any of its duly authorized representatives to enter upon the Property at any reasonable time to inspect the same.
Section 4.06 Representations of the City. The City represents and warrants to the Authority and the Trustee as follows:
(a) the City has the full power and authority to enter into, to execute and to deliver this Ground Lease, and to perform all of its duties and obligations hereunder, and has duly authorized the execution of this Ground Lease;
(b) except for Permitted Encumbrances, the Property is not subject to any dedication, easement, right of way, reservation in patent, covenant, condition, restriction, lien or encumbrance which would prohibit or materially interfere with the use of the Property for governmental purposes as contemplated by the City;
(c) all taxes, assessments or impositions of any kind with respect to the Property, except current taxes, have been paid in full; and
(d) the Property is necessary to the City in order for the City to perform its governmental functions.
Section 4.07 Representations of the Authority. The Authority represents and warrants to the City and the Trustee that the Authority has the full power and authority to enter into, to execute and to deliver this Ground Lease, and to perform all of its duties and obligations hereunder, and has duly authorized the execution and delivery of this Ground Lease. 4 4864-5739-2058v3/022283-0612
ARTICLE V
ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING
Section 5.01 Assignment and Subleasing. This Ground Lease may be sold or assigned and the Property subleased, as a whole or in part, by the Authority without the necessity of obtaining the consent of the City, if an event of default occurs under the Lease Agreement. The Authority shall, within 30 days after such an assignment, sale or sublease, furnish or cause to be furnished to the City a true and correct copy of such assignment, sale or sublease, as the case may be.
Section 5.02 Restrictions on City. The City agrees that, except with respect to Permitted Encumbrances, it will not mortgage, sell, encumber, assign, transfer or convey the Property or any portion thereof during the term of this Ground Lease.
ARTICLE VI
TERM; TERMINATION
Section 6.01 Term. The term of this Ground Lease shall commence as of the date of commencement of the term of the Lease Agreement and shall remain in full force and effect from such date to and including May 1, 20__, unless such term is extended or sooner terminated as hereinafter provided.
Section 6.02 Extension; Early Termination. If, on May 1, 20__, the Bonds shall not be fully paid, or provision therefor made in accordance with Article X of the Indenture, or the Indenture shall not be discharged by its terms, or if the Rental Payments payable under the Lease Agreement shall have been abated at any time, then the term of this Ground Lease shall be automatically extended until the date upon which all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the Indenture, and the Indenture shall be discharged by its terms, except that the term of this Ground Lease shall in no event be extended more than ten years. If, prior to May 1, 20__, all Bonds shall be fully paid, or provisions therefor made in accordance with Article X of the Indenture, and the Indenture shall be discharged by its terms, the term of this Ground Lease shall end simultaneously therewith.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Binding Effect. This Ground Lease shall inure to the benefit of and shall be binding upon the City, the Authority and their respective successors and assigns.
Section 7.02 Severability. In the event any provision of this Ground Lease shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.
Section 7.03 Amendments, Changes and Modifications. This Ground Lease may be amended, changed, modified, altered or terminated only in accordance with the provisions of the Lease Agreement.
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Section 7.04 Assignment to Trustee. The Authority and City acknowledge that the Authority has assigned its right, title and interest in and to this Ground Lease (but none of its obligations and none of its rights to provide consents or approvals hereunder) to the Trustee pursuant to certain provisions of the Assignment Agreement. The City consents to such assignment.
Section 7.05 Execution In Counterparts. This Ground Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
Section 7.06 Applicable Law. This Ground Lease shall be governed by and construed in accordance with the laws of the State of California.
Section 7.07 Captions. The captions or headings in this Ground Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Ground Lease.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Authority and the City have caused this Ground Lease to be executed by their respective officers hereunto duly authorized, all as of the day and year first above written.
CITY OF LANCASTER
By:
Jason Caudle
City Manager
ATTEST:
Andrea Alexander
City Clerk
LANCASTER FINANCING AUTHORITY
By:
Jason Caudle
Executive Director
ATTEST:
Andrea Alexander
Secretary
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CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in the Property conveyed under the foregoing to the Lancaster Financing Authority, a joint exercise of powers entity duly organized and existing under the laws of the State of California, is hereby accepted by the undersigned officer or agent on behalf of the Board of Directors of the Lancaster Financing Authority, pursuant to authority conferred by resolution of the said Board of Directors adopted on _________, 2024, and the grantee consents to recordation thereof by its duly authorized officer.
Dated: ________, 2024 LANCASTER FINANCING AUTHORITY
By:
Jason Caudle
Executive Director
4864-5739-2058v3/022283-0612
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
4864-5739-2058v3/022283-0612
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A-1
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EXHIBIT A
DESCRIPTION OF THE PROPERTY
Lancaster Municipal Stadium
Lancaster Performing Arts Center
Economic Development Office
Public Safety Building
Lancaster Museum of Art and History
Lancaster Community Center
Corporation Yard
Stradling Yocca Carlson & Rauth
Draft dated May 31, 2024
4855-3582-4826v3/022283-0612
LEASE AGREEMENT
by and between
CITY OF LANCASTER
and
LANCASTER FINANCING AUTHORITY
Dated as of _____ 1, 2024
Relating to
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024A (TAX-EXEMPT)
and
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024B (FEDERALLY TAXABLE)
TABLE OF CONTENTS
Page
i
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions .................................................................................................................. 2
ARTICLE II
LEASE OF PROPERTY; TERM
Section 2.01 Lease of Property........................................................................................................ 4 Section 2.02 Term; Occupancy ....................................................................................................... 5
ARTICLE III
RENTAL PAYMENTS
Section 3.01 Base Rental Payments ................................................................................................ 5 Section 3.02 Additional Rental Payments ....................................................................................... 6 Section 3.03 Fair Rental Value........................................................................................................ 6 Section 3.04 Payment Provisions .................................................................................................... 6 Section 3.05 Appropriations Covenant............................................................................................ 7 Section 3.06 Rental Abatement ....................................................................................................... 7
ARTICLE IV
ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE STADIUM PROJECT Section 4.01 Deposit of Bond Proceeds; City Deposit.................................................................... 8 Section 4.02 Acquisition, Construction and Improvement of the Stadium Project......................... 8 Section 4.03 Compliance with Law................................................................................................. 8 Section 4.04 Payment of Costs........................................................................................................ 8 Section 4.05 Time of Completion and Liquidated Damages .......................................................... 8 Section 4.06 Construction and Acquisition of the Stadium Project ................................................ 9 Section 4.07 Completion Date; Certification .................................................................................. 9
ARTICLE V
MAINTENANCE, ALTERATIONS AND ADDITIONS
Section 5.01 Maintenance and Utilities......................................................................................... 10 Section 5.02 Additions to Property ............................................................................................... 10 Section 5.03 Installation of City’s Equipment .............................................................................. 10
ARTICLE VI
INSURANCE
Section 6.01 Commercial General Liability and Property Damage Insurance; Workers’ Compensation Insurance ..........................................................................................10 Section 6.02 Title Insurance .......................................................................................................... 11 Section 6.03 Additional Insurance Provision; Form of Policies ................................................... 12 Section 6.04 Self-Insurance........................................................................................................... 12
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01 Defaults and Remedies ............................................................................................. 13
TABLE OF CONTENTS
(continued)
Page
ii
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Section 7.02 Waiver ...................................................................................................................... 15
ARTICLE VIII
EMINENT DOMAIN; PREPAYMENT
Section 8.01 Eminent Domain....................................................................................................... 16 Section 8.02 Prepayment ............................................................................................................... 16
ARTICLE IX
COVENANTS
Section 9.01 Right of Entry ........................................................................................................... 17 Section 9.02 Liens ......................................................................................................................... 17 Section 9.03 Quiet Enjoyment....................................................................................................... 17 Section 9.04 Authority Not Liable ................................................................................................ 18 Section 9.05 Assignment and Subleasing...................................................................................... 18 Section 9.06 Title to Property........................................................................................................ 19 Section 9.07 Authority’s Purpose.................................................................................................. 19 Section 9.08 Representations of the City ...................................................................................... 19 Section 9.09 Representation of the Authority ............................................................................... 19
ARTICLE X
NO CONSEQUENTIAL DAMAGES; USE OF THE PROPERTY; SUBSTITUTION OR
RELEASE
Section 10.01 No Consequential Damages ..................................................................................... 19 Section 10.02 Use of the Property................................................................................................... 19 Section 10.03 Substitution or Release of, or Addition to, the Property .......................................... 19
ARTICLE XI
MISCELLANEOUS
Section 11.01 Law Governing......................................................................................................... 20 Section 11.02 Notices...................................................................................................................... 20 Section 11.03 Validity and Severability.......................................................................................... 21 Section 11.04 Net-Net-Net Lease.................................................................................................... 21 Section 11.05 Taxes......................................................................................................................... 21 Section 11.06 Section Headings ...................................................................................................... 21 Section 11.07 Amendments............................................................................................................. 22 Section 11.08 Assignment ............................................................................................................... 22 Section 11.09 Execution.................................................................................................................. 23 Signatures .................................................................................................................................S-1 EXHIBIT A DESCRIPTION OF THE PROPERTY.....................................................................A-1
EXHIBIT B CAPITALIZED INTEREST AND BASE RENTAL PAYMENT
SCHEDULE ..............................................................................................................B-1 1 4855-3582-4826v3/022283-0612
LEASE AGREEMENT
THIS LEASE AGREEMENT (this “Lease Agreement”) executed and entered into as of December 1, 2024, is by and between the CITY OF LANCASTER (the “City”), a municipal corporation and charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee, and the LANCASTER FINANCING AUTHORITY (the “Authority”), a joint exercise of powers entity duly organized and existing under and by virtue of the laws of the State of California, as lessor.
RECITALS
WHEREAS, the City and the Authority desire to finance the costs of the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi- Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”);
WHEREAS, in order to finance the Projects, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to this Lease Agreement;
WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Projects through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under this Lease Agreement; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”); WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Lease Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Lease Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease Agreement, have the meanings herein specified, which meanings shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.
“Additional Bonds” means bonds other than the Series 2024 Bonds issued under the Indenture in accordance with the provisions thereof.
“Additional Rental Payments” means all amounts payable by the City as Additional Rental Payments pursuant to Section 3.02 hereof.
“Authority” means the Lancaster Financing Authority, a joint exercise of powers authority organized and existing under the laws of the State of California. “Base Rental Deposit Date” means the second Business Day preceding each Interest Payment Date.
“Base Rental Payments” means any of the Series 2024A Base Rental Payments or the Series 2024B Base Rental Payments payable to the Authority from the City as Base Rental Payments pursuant to Section 3.01 hereof.
“Base Rental Payment Schedule” means the schedule of Base Rental Payments payable to the Authority from the City pursuant to Section 3.01 hereof and attached hereto as Exhibit B. “Bonds” means the Series 2024 Bonds issued under the Indenture, and any Additional Bonds.
“City” means the City of Lancaster, a municipal corporation and charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California. “Costs” means, with respect to the Stadium Project, together with any other proper item of cost not specifically mentioned herein, (a) costs of payment of, or reimbursement for, acquisition, design, construction, rehabilitation, installation, delivery and financing of the Stadium Project, including, but not limited to, the payment of real property rental, administrative costs and capital expenditures relating to acquisition, construction, installation, and demolition, inspection costs, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee pursuant to the Indenture and other financing documents, legal fees and charges, financial, accounting and other professional consultant fees, costs of rating agencies or credit ratings, fees for the printing, execution, transportation and safekeeping of the Series 2024 Bonds; (b) all other costs which the City shall be required to pay under the terms of any contract or contracts for the acquisition, construction, delivery and installation of the Stadium Project, and demolition work required for the Stadium Project, including, but not limited to, the cost of insurance; (c) any sums required to reimburse the City for advances made for any of the above items, or for any other costs incurred and for work done, which is properly chargeable to the Stadium Project; (d) any costs paid 3 4855-3582-4826v3/022283-0612
from the Net Insurance Proceeds to repair, restore or replace the Stadium Project; and (e) such other expenses not specified herein as may be necessary or incidental to the acquisition, construction, delivery and installation of the Stadium Project, the financing thereof and the placing of the same in use and operation. Costs, as defined herein, shall be deemed to include the cost and expenses incurred by any agent of the City for any of the above mentioned items. “Delivery Date” means _____, 2024.
“Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may from time to time be amended in accordance with to the provisions thereof and hereof.
“Indenture” means the Indenture, dated as of the date hereof, by and among the Authority, the City and the Trustee, as originally executed and as it may from time to time be amended or supplemented in accordance with the provisions thereof. “Joint Powers Agreement” means the Joint Exercise of Powers Agreement, dated September 1, 1989, by and between the City and the Lancaster Redevelopment Agency, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. “Lease Agreement” means this Lease Agreement, as originally executed and as it may from time to time be amended in accordance with the provisions hereof. “Net Insurance Proceeds” means any insurance proceeds or condemnation award in excess of $50,000, paid with respect to any of the Property, remaining after payment therefrom of all reasonable expenses incurred in the collection thereof. “Permitted Encumbrances” means, with respect to the Property, as of any particular time, (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions of Article V hereof, permit to remain unpaid, (b) the Assignment Agreement, (c) this Lease Agreement, (d) the Ground Lease, (e) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law as normally exist with respect to properties similar to the Property for the purposes for which it was acquired or is held by the City, (f) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date which the City certifies in writing will not affect the intended use of the Property or impair the security granted to the Trustee for the benefit of the Owners of the Bonds by the Indenture and the Assignment Agreement and to which the Authority and the City consent in writing, (g) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Delivery Date which the City certifies in writing do not affect the intended use of the Property or impair the security granted to the Trustee for the benefit of the Owners of the Bonds by the Indenture and the Assignment Agreement and to which the Authority and the City consent in writing, and (h) all of the exceptions to title listed in the title insurance policy relating to the Series 2024 Bonds and dated the Delivery Date. “Projects” is defined in the Recitals.
“Property” means the real property described in Exhibit A hereto and the improvements located thereon or, from and after each substitution of any alternate property for all or any portion of 4 4855-3582-4826v3/022283-0612
the Property pursuant to Section 10.03 hereof, such alternate property together with any portion of the Property that is not released from the provisions of this Lease Agreement in connection therewith.
“Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental Payments.
“Rental Period” means the period from the Delivery Date through April 30, 2025, and, thereafter, the twelve-month period commencing on May 1 of each year during the term of the Lease Agreement.
“Series 2024 Bonds” means collectively, the Series 2024A Bonds and the Series 2024B Bonds.
“Series 2024A Bonds” means the Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) issued under the Indenture.
“Series 2024B Bonds” means the Lancaster Financing Authority Lease Revenue Bonds, Series 2024B (Federally Taxable) issued under the Indenture. “Stadium Project” means the conversion of the existing City-owned minor league baseball stadium for use as a minor league soccer stadium.
“Stadium Property” means the portion of the Property on which the Stadium Project is located.
“Termination Date” means May 1, 20__ unless extended or sooner terminated as provided in Section 2.02 hereof.
“Trustee” means the trustee appointed under the Indenture and referred to therein as the Trustee.
ARTICLE II
LEASE OF PROPERTY; TERM
Section 2.01 Lease of Property.
(a) The Authority hereby leases to the City and the City hereby leases from the Authority the Property, on the terms and conditions hereinafter set forth, subject to all Permitted Encumbrances.
(b) The leasing of the Property by the City to the Authority pursuant to the Ground Lease shall not effect or result in a merger of the City’s leasehold estate pursuant to this Lease Agreement and its fee estate as lessor under the Ground Lease, and the Authority shall continue to have a leasehold estate in the Property pursuant to the Ground Lease throughout the term thereof and hereof. The leasehold interest granted by the City to the Authority pursuant to the Ground Lease is and shall be independent of this Lease Agreement; this Lease Agreement shall not be an assignment or surrender of the leasehold interest granted to the Authority under the Ground Lease.
5 4855-3582-4826v3/022283-0612
Section 2.02 Term; Occupancy. The term of this Lease Agreement shall commence on the Delivery Date and shall end on the Termination Date, unless such term is extended or sooner terminated as hereinafter provided. If on the Termination Date the Bonds shall not be fully paid, or provision therefor made in accordance with Article X of the Indenture, or the Indenture shall not be discharged by its terms, or if the Rental Payments shall remain due and payable or shall have been abated at any time and for any reason, then the term of this Lease Agreement shall be extended until the date upon which (i) all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the Indenture, or (ii) the Indenture shall be discharged by its terms and all Rental Payments shall have been paid in full. Notwithstanding the foregoing, the term of this Lease Agreement shall in no event be extended more than ten years beyond such Termination Date, such extended date being the “Maximum Lease Term.” If prior to the Termination Date, all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the Indenture, the Indenture shall be discharged by its terms and all Rental Payments shall have been paid in full, the term of this Lease Agreement shall end simultaneously therewith.
ARTICLE III
RENTAL PAYMENTS
Section 3.01 Base Rental Payments.
(a) Subject to the provisions hereof relating to a revision of the Base Rental Payment Schedule pursuant to subsection (b) of this Section, the City shall pay to the Authority, as Base Rental Payments (subject to the provisions of Section 3.06 and Article VII hereof) the Series 2024A Base Rental Payments and the Series 2024B Base Rental Payments, at the times specified in the Base Rental Payment Schedule, a portion of which Base Rental Payments shall constitute principal, and a portion of which shall constitute interest. Rental Payments, including Base Rental Payments, shall be paid by the City to the Authority for and in consideration of the right to use and occupy the Property and in consideration of the continued right to the quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or of the State of California, or of any political subdivision thereof, within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any form of taxation. (b) If the term of this Lease Agreement shall have been extended pursuant to Section 2.02 hereof, the obligation of the City to pay Rental Payments shall continue to and including the Base Rental Deposit Date preceding the date of termination of this Lease Agreement (as so extended pursuant to Section 2.02 hereof). Upon such extension, the Base Rental Payments shall be established so that they will be sufficient to pay all extended and unpaid Base Rental Payments; provided, however, that the Rental Payments payable in any Rental Period subsequent to such extension shall not exceed the annual fair rental value of the Property. 6 4855-3582-4826v3/022283-0612
Section 3.02 Additional Rental Payments. The City shall also pay, as Additional Rental Payments, such amounts as shall be required for the payment of the following:
(a) all taxes and assessments of any type or nature charged to the Authority or the City or affecting the Property or the respective interests or estates of the Authority or the City therein;
(b) all reasonable administrative costs of the Authority relating to the Property including, but without limiting the generality of the foregoing, salaries, wages, fees and 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 Indenture or the Lease Agreement or to defend the Authority and its members, officers, agents and employees;
(c) insurance premiums for all insurance required pursuant to Article V hereof; (d) any amounts with respect to the Lease Agreement or the Bonds required to be rebated to the federal government in accordance with Section 148(f) of the Code; and (e) all other payments required to be paid by the City under the provisions of this Lease Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable hereunder shall be paid by the City directly to the person or persons to whom such amounts shall be payable. The City shall pay all such amounts when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days after notice in writing from the Trustee to the City stating the amount of Additional Rental Payments then due and payable and the purpose thereof.
Section 3.03 Fair Rental Value. The parties hereto have agreed and determined that the annual fair rental value of the Property is not less than the maximum annual Rental Payments due in any year. In making such determination of fair rental value, consideration has been given to the uses and purposes that may be served by the Property and the benefits therefrom which will accrue to the City and the general public. Payments of the Rental Payments for the Property during each Rental Period shall constitute the total rental for said Rental Period.
Section 3.04 Payment Provisions. Each installment of Base Rental Payments payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at the principal office of the Trustee in Los Angeles, California, or such other place or entity as the Trustee shall designate. Each Base Rental Payment shall be deposited with the Trustee no later than the Base Rental Deposit Date preceding the Interest Payment Date on which such Base Rental Payment is due. Any Base Rental Payment which shall not be paid by the City when due and payable under the terms of this Lease Agreement shall bear interest from the date when the same is due hereunder until the same shall be paid at the rate equal to the highest rate of interest on any of the Outstanding Bonds. 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 hereunder 7 4855-3582-4826v3/022283-0612
or refunded at the time of such determination. Amounts required to be deposited by the City with the Trustee pursuant to this Section on any date shall be reduced to the extent of available amounts on deposit in the Base Rental Payment Fund, the Interest Fund or the Principal Fund.
Section 3.05 Appropriations Covenant. The City covenants to take such action as may be necessary to include all Rental Payments due hereunder as a separate line item in its annual budgets and to make necessary annual appropriations for all such Rental Payments. The City will deliver to the Authority and the Trustee a Certificate of the City stating that its final annual budget includes all Base Rental Payments due in such fiscal year within ten days after the filing or adoption thereof. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by the City.
Section 3.06 Rental Abatement.
(a) In the Event of Non-Delivery of the Stadium Project. To the extent described below, the amount of Rental Payments due hereunder shall be partially abated during any period in which by reason of delay in the completion of the Stadium Project there is substantial interference with the City’s use and occupancy of the Stadium Property; provided, however, that the Rental Payments due for any Rental Period shall not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. The City and the Authority shall calculate such abatement and shall provide the Trustee with a certificate setting forth such calculation and the basis therefor. Such abatement shall continue until the substantial completion of the Stadium Project, and the term of this Lease Agreement shall be extended as provided in Section 2.02 hereof, except that the term shall in no event be extended beyond May 1, 20__. Notwithstanding the foregoing, the City shall remain obligated to make Rental Payments hereunder, as an obligation of the City payable from a special fund, (i) to the extent there are proceeds of any completion or performance bonds or moneys paid to the City by the contractors or any other person as liquidated damages as a result of any defect or delay in completion of the Stadium Project, or (ii) to the extent that amounts in the Series 2024 Account of the Reserve Fund or the Capitalized Interest Fund are available to pay Lease Payments which would otherwise be abated under this Section 3.06(a). Any amounts received by the City as liquidated damages shall be deposited by the City immediately upon receipt in the Base Rental Payment Fund. (b) In the Event of Damage, Destruction, Condemnation or Title Defect. Except as otherwise specifically provided in this Section, during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property, Rental Payments shall be abated proportionately, and the City waives the benefits of California Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other rights to terminate the Lease Agreement by virtue of any such interference, and the Lease Agreement shall continue in full force and effect. The amount of such abatement shall be agreed upon by the City and the Authority; provided, however, that the Rental Payments due for any Rental Period shall not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. The City and the Authority shall calculate such abatement and shall provide the Trustee with a certificate setting forth such calculation and the basis therefor. Such abatement shall continue for the period commencing with the date of interference resulting from such damage, 8 4855-3582-4826v3/022283-0612
destruction, condemnation or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed; and the term of this Lease Agreement shall be extended as provided in Section 2.02 hereof, except that the term shall in no event be extended beyond the Maximum Lease Term.
Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental Payments in any of the funds and accounts established under the Indenture, Rental Payments shall not be abated as provided above but, rather, shall be payable by the City as a special obligation payable solely from said funds and accounts.
ARTICLE IV
ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE STADIUM PROJECT Section 4.01 Deposit of Bond Proceeds; City Deposit. Upon the issuance of the Series 2024 Bonds, the Authority agrees that all proceeds of the Series 2024 Bonds shall be paid to the Trustee and that such moneys shall be deposited with the Trustee and be applied as provided in Section 3.02 of the Indenture.
Section 4.02 Acquisition, Construction and Improvement of the Stadium Project. The City agrees to acquire, construct, deliver and install any portion of the Stadium Project to be financed with the proceeds of the Series 2024 Bonds, or to cause such portion to be acquired, constructed, delivered and installed, with the proceeds of Series 2024 Bonds paid to the City by the Authority pursuant to Section 4.01 above and the Authority shall have no responsibility with respect thereto.
Section 4.03 Compliance with Law. The City shall comply with all applicable provisions for bids and contracts prescribed by law with respect to the Stadium Project, including, without limitation, any applicable environmental review and approvals, Sections 20110 et seq. of the Public Contracts Code and Article 42 (commencing with Section 20670) of Part 3 of Division 2 of the Public Contracts Code. The City acknowledges and agrees that specific expenditures for all or any portion of the Stadium Project, as now or hereafter designated, are expressly subject to compliance with such requirements..
Section 4.04 Payment of Costs. Payment of Costs of the Stadium Project shall be made from the moneys deposited with the Trustee in the Stadium Project Subaccounts of the Project Fund as provided in Section 4.01 hereof and Section 3.05 of the Indenture, which shall be disbursed from the Stadium Project Subaccounts of the Project Fund in accordance and upon compliance with Section 3.05 of the Indenture.
Section 4.05 Time of Completion and Liquidated Damages. The construction and equipping of the Stadium Project shall be completed on or prior to [_____ 1, 20__], subject to excused delays pursuant to standard City procedures. It is agreed that, if the City does not cause the completion of the acquisition, construction, equipping and installation of the Stadium Project by its completion date specified above by construction contractors or a construction manager, whichever the City deems appropriate, [liquidated damages will be assessed against the construction contractor for each day of unexcused delay in completion (in accordance with standard City procedure).] The City shall cause to be paid to the Trustee all amounts received as liquidated damages for application toward the Base Rental Payments. [CONFIRM RE LIQUIDATED DAMAGES] 9 4855-3582-4826v3/022283-0612
Each construction contractor hired by the City shall be required to provide payment and performance bonds in amounts equal to the maximum price under its contract.
Section 4.06 Construction and Acquisition of the Stadium Project. The City agrees to oversee the construction, acquisition, delivery and installation of the Stadium Project in accordance with the following terms:
(a) Construction and Completion. The City agrees to proceed with all due diligence to complete the construction, acquisition, delivery and installation of the Stadium Project, all in accordance with the plans and specifications for the Stadium Project (the “Plans and Specifications”) approved by the City Engineer. The City shall comply with all statutes and laws applicable to the performance of its obligations hereunder, including all public laws applicable thereto and all laws regarding the approval, acquisition and construction of public projects by cities in the State of California. The City shall make certain that each contract relating to the Stadium Project is awarded in accordance with applicable law and contains a scheduled completion date which requires completion on or before the scheduled Completion Date referred to in Section 4.05 above;
(b) Change Orders. Subject to any other restrictions imposed upon the City, the City may approve any changes to the Plans and Specifications so long as any change does not, and all such changes as a whole do not, (i) substantially alter the nature of the Project, (ii) delay the completion of the Stadium Project beyond [_____ 1, 20__], (iii) reduce the fair rental value of the Stadium Property, or (iv) increase the total Costs of the Stadium Project to an amount in excess of the amount in the Stadium Project Subaccounts of the Project Fund unless there has been deposited with the City an amount equal to such excess or unless there has been deposited with the City a certificate of an Authorized Representative of the City, together with a revised construction budget demonstrating that the total amount on deposit to pay for the Stadium Project is adequate to allow the completion of the Stadium Project as planned;
(c) Payment of Costs of the Stadium Project. Payment of the portion of the Costs of the Stadium Project being financed by the City shall be made from moneys deposited in the Stadium Project Subaccounts of the Project Fund, and shall be disbursed for such purpose in accordance and upon compliance with the Indenture. Neither the Authority nor the City shall be liable for the payment of Costs of the Stadium Project other than from amounts on deposit in the Stadium Project Subaccounts of the Project Fund; and
(d) Unexpended Monies. The City agrees that unexpended moneys remaining in the Stadium Project Subaccounts of the Project Fund shall, upon payment in full of all Costs of the Stadium Project, be applied solely in accordance with the provisions of the Indenture.
Section 4.07 Completion Date; Certification. Upon the completion of acquisition, construction, delivery and installation of the portion of the Stadium Project to be financed with each issue of Bonds, the City shall deliver to the Trustee a Completion Certificate with respect thereto.
On the date of filing a Completion Certificate concerning that portion of the Stadium Project financed with proceeds of Series 2024 Bonds, all excess moneys remaining in the Stadium Project Subaccounts of the Project Fund for the Series 2024 Bonds for which such Completion Certificate is delivered shall be applied in accordance with the provisions of Section 3.05 of the Indenture. 10 4855-3582-4826v3/022283-0612
ARTICLE V
MAINTENANCE, ALTERATIONS AND ADDITIONS
Section 5.01 Maintenance and Utilities. Throughout the term of this Lease Agreement, as part of the consideration for rental of the Property, all improvement, repair and maintenance of the Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Property, which may include, without limitation, janitor service, security, power gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Rental Payments, the Authority agrees to provide only the Property.
Section 5.02 Additions to Property. Subject to Section 9.02 hereof, the City and any sublessee shall, at its own expense, have the right to make additions, modifications and improvements to the Property. To the extent that the removal of such additions, modifications or improvements would not cause material damage to the Property, such additions, modifications and improvements shall remain the sole property of the City or such sublessee, and neither the Authority nor the Trustee shall have any interest therein. Such additions, modifications and improvements shall not in any way cause permanent and material damage to the Property or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Property, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is at least equal to the value of the Property immediately prior to the making of such additions, modifications and improvements.
Section 5.03 Installation of City’s Equipment. The City and any sublessee may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon the Property. All such items shall remain the sole property of the City or such sublessee, and neither the Authority nor the Trustee shall have any interest therein. The City or such sublessee may remove or modify such equipment or other personal property at any time, provided that such party shall repair and restore any and all damage to the Property resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City or any sublessee from purchasing items to be installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Property.
ARTICLE VI
INSURANCE
Section 6.01 Commercial General Liability and Property Damage Insurance; Workers’ Compensation Insurance.
(a) The City shall maintain or cause to be maintained, throughout the term of this Lease Agreement, a standard commercial general liability insurance policy or policies in protection of the City, the Authority and their respective members, officers, agents and employees. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or 11 4855-3582-4826v3/022283-0612
liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or ownership of the Property. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in a single accident or event, and in a minimum amount of $500,000 for damage to property (subject to a deductible clause of not to exceed $100,000) resulting from a single accident or event. Such commercial general liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried or required to be carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City provided such self-insurance complies with the provisions of Section 6.04 hereof. The Net Insurance Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the Net Insurance Proceeds of such insurance shall have been paid. (b) The City shall maintain or cause to be maintained, throughout the term of this Lease Agreement, workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the California Labor Code, or any act enacted as an amendment or supplement thereto or in lieu thereof, such workers’ compensation insurance to cover all persons employed by the City in connection with the Property and to cover full liability for compensation under any such act; provided, however, that the City’s obligations under this subsection may be satisfied by self-insurance, provided such self- insurance complies with the provisions of Section 6.04 hereof. (c) The City shall maintain or cause to be maintained, fire, lightning and special extended coverage insurance (which shall include coverage for vandalism and malicious mischief, but need not include coverage for earthquake damage) on all improvements constituting any part of the Property in an amount equal to the greater of 100% of the replacement cost of such improvements or 100% of the outstanding principal amount of the Bonds. All insurance required to be maintained pursuant to this subsection may be subject to a deductible in an amount not to exceed $500,000. The City’s obligations under this subsection may be satisfied by self-insurance, provided such self- insurance complies with the provisions of Section 6.04 hereof. (d) The City shall maintain rental interruption insurance to cover the Authority’s loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the hazards required to be covered pursuant to subsection (c) of this Section in an amount sufficient at all times to pay an amount not less than the product of two times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period. The City’s obligations under this subsection may be satisfied by self-insurance, provided such self-insurance complies with the provisions of Section 6.04 hereof. (e) The insurance required by this Section shall be provided by reputable insurance companies with claims paying abilities determined, in the reasonable opinion of a professionally certified risk manager or an independent insurance consultant, to be adequate for the purposes hereof.
Section 6.02 Title Insurance. The City shall provide, at its own expense, one or more CLTA or ALTA title insurance policies for the Property, in the aggregate amount of not less than the initial aggregate principal amount of the Bonds. Said policy or policies shall insure (a) the fee interest of the City in the Property, (b) the Authority’s ground leasehold estate in the Property under 12 4855-3582-4826v3/022283-0612
the Ground Lease, and (c) the City’s leasehold estate hereunder in the Property, subject only to Permitted Encumbrances. All Net Insurance Proceeds received under said policy or policies shall be deposited with the Trustee and applied as provided in Section 5.04 of the Indenture. So long as any of the Bonds remain Outstanding, each policy of title insurance obtained pursuant to the Indenture or this Lease Agreement or required thereby or hereby shall provide that all proceeds thereunder shall be payable to the Trustee for the benefit of the Bond Owners.
Section 6.03 Additional Insurance Provision; Form of Policies. The City shall pay or cause to be paid when due the premiums for all insurance policies required by Section 6.01 hereof, and shall promptly furnish or cause to be furnished evidence of such payments to the Trustee. All such policies shall provide that the Trustee shall be given 30 days’ notice of the expiration thereof or any intended cancellation thereof. The Trustee shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee.
The City shall cause to be delivered to the Trustee on or before August 15 each year, commencing August 15, 2025, a schedule of the insurance policies being maintained in accordance herewith and a Certificate of the City stating that such policies are in full force and effect and that the City is in full compliance with the requirements of this Article. The Trustee shall be entitled to rely upon said Certificate of the City as to the City’s compliance with this Article. The Trustee shall not be responsible for the sufficiency of coverage or amounts of such policies.
Section 6.04 Self-Insurance. Insurance provided through a California joint powers authority of which the City is a member or with which the City contracts for insurance shall be deemed to be self-insurance for purposes hereof. Any self-insurance maintained by the City pursuant to this Article shall comply with the following terms:
(a) the self-insurance program shall be approved in writing by the City’s Risk Manager, a professionally certified risk manager, or an independent insurance consultant; (b) the self-insurance program shall include an actuarially sound claims reserve fund out of which each self-insured claim shall be paid, the adequacy of each such fund shall be evaluated on an annual basis by the City’s Risk Management Department, a professionally certified risk manager or an independent insurance consultant and any deficiencies in any self-insured claims reserve fund shall be remedied in accordance with the recommendation of the City’s Risk Management Department, a professionally certified risk manager or an independent insurance consultant, as applicable; and
(c) in the event that the self-insurance program shall be discontinued, the actuarial soundness of its claims reserve fund, as determined by a professionally certified risk manager or by an independent insurance consultant, shall be maintained. 13 4855-3582-4826v3/022283-0612
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01 Defaults and Remedies.
(a) (i) If the City shall fail (A) to pay any Base Rental Payment payable hereunder when the same becomes due and payable, time being expressly declared to be of the essence in this Lease Agreement, or (B) to keep, observe or perform any other term, covenant or condition contained herein or in the Indenture to be kept or performed by the City, or (ii) upon the happening of any of the events specified in this subsection or in subsection (b) of this Section, the City shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement. The City shall in no event be in default in the observance or performance of any covenant, condition or agreement in this Lease Agreement on its part to be observed or performed, other than as referred to in clause (i)(A) or (ii) of the preceding sentence, 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. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following:
(1) To terminate this Lease Agreement in the manner hereinafter provided on account of default by the City, notwithstanding any re-entry or re-letting of the Property as hereinafter provided for in subparagraph (2) hereof, and to re-enter the Property and remove all persons in possession thereof and all personal property whatsoever situated upon the Property and place such personal property in storage in any warehouse or other suitable place, for the account of and at the expense of the City. In the event of such termination, the City agrees to surrender immediately possession of the Property, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. Neither notice to pay Rental Payments or to deliver up possession of the Property given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property nor the appointment of a receiver upon initiative of the Authority to protect the Authority’s interest under this Lease Agreement shall of itself operate to terminate this Lease Agreement, and no termination of this Lease Agreement on account of default by the City shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the City of the election on the part of the Authority to terminate this Lease Agreement. The City covenants and agrees that no surrender of the Property or of the remainder of the term hereof or any termination of this Lease Agreement shall be valid in any manner or for any purpose whatsoever unless stated by the Authority by such written notice. (2) Without terminating this Lease Agreement, (x) to collect each installment of Rental Payments as the same become due and enforce any other terms or provisions hereof to be kept or performed by the City, regardless of whether or not the City has abandoned the Property, or (y) to exercise any and all rights of entry and re-entry upon the Property. In the event the Authority does not elect to terminate this Lease Agreement in the manner provided for in 14 4855-3582-4826v3/022283-0612
subparagraph (1) hereof, the City shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the City and, if the Property is not re-let, to pay the full amount of the Rental Payments to the end of the term of this Lease Agreement or, in the event that the Property is re-let, to pay any deficiency in Rental Payments that results therefrom; and further agrees to pay said Rental Payments and/or Rental Payment deficiency punctually at the same time and in the same manner as hereinabove provided for the payment of Rental Payments hereunder, notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years Rental Payments in excess of the Rental Payments herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property. Should the Authority elect to re-enter as herein provided, the City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to re-let the Property, or any part thereof, from time to time, either in the Authority’s name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable and to remove all persons in possession thereof and all personal property whatsoever situated upon the Property and to place such personal property in storage in any warehouse or other suitable place, for the account of and at the expense of the City, and the City hereby indemnifies and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re-letting of the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re-let the Property in the event of such re-entry without effecting a surrender of this Lease Agreement, and further agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination of this Lease Agreement irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the City the right to terminate this Lease Agreement shall vest in the Authority to be effected in the sole and exclusive manner provided for in subparagraph (1) hereof. The City further agrees to pay the Authority the cost of any alterations or additions to the Property necessary to place the Property in condition for re-letting immediately upon notice to the City of the completion and installation of such additions or alterations.
The City hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Property as herein provided and all claims for damages that may result from the destruction of or injury to the Property and all claims for damages to or loss of any property belonging to the City, or any other person, that may be in or upon the Property.
(b) If (i) the City’s interest in this Lease Agreement or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority and, as hereinafter provided for, or (ii) 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 act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the City’s debts or obligations, or offers to the City’s creditors to elect 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 15 4855-3582-4826v3/022283-0612
appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the City shall make a general assignment for the benefit of the City’s creditors, or (iii) the City shall abandon or vacate the Property, then the City shall be deemed to be in default hereunder. (c) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default, the Authority and its assignee shall be entitled to proceed to protect and enforce the rights vested in the Authority and its assignee by the Lease Agreement or by law. The provisions of the Lease Agreement and the duties of the City and of its city council, officers or employees shall be enforceable by the Authority or its assignee by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority and its assignee shall have the right to bring the following actions:
(i) Accounting. By action or suit in equity to require the City and its city council, officers and employees and its assigns to account as the trustee of an express trust. (ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority or its assignee. (iii) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority’s or its assignee’s rights against the City (and its city council, officers and employees) and to compel the City to perform and carry out its duties and obligations under the law and its covenants and agreements with the City as provided herein.
Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to the further exercise thereof or the exercise of any or all other rights, powers or privileges. The term “re-let” or “re-letting” as used in this Section shall include, but not be limited to, re-letting by means of the operation by the Authority of the Property. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law.
In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Lease Agreement, the City agrees to pay a reasonable amount as and for attorney’s fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder.
Notwithstanding anything to the contrary contained in this Lease Agreement, the Authority shall have no right upon a default hereunder by the City to accelerate Rental Payments. (d) Notwithstanding anything to the contrary contained in this Lease Agreement, the termination of this Lease Agreement by the Authority and its assignees on account of a default by the City under this Section shall not effect or result in a termination of the Ground Lease.
Section 7.02 Waiver. Failure of the Authority to take advantage of any default on the part of the City shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver 16 4855-3582-4826v3/022283-0612
of a particular default shall not be deemed to be a waiver of any other default or of the same default subsequently occurring. The acceptance of Rental Payments hereunder shall not be, or be construed to be, a waiver of any term, covenant or condition of this Lease Agreement.
ARTICLE VIII
EMINENT DOMAIN; PREPAYMENT
Section 8.01 Eminent Domain. If all of the Property (or portions thereof such that the remainder is not usable for public purposes by the City) shall be taken under the power of eminent domain, the term hereof shall cease as of the day that possession shall be so taken. If less than all of the Property shall be taken under the power of eminent domain and the remainder is usable for public purposes by the City at the time of such taking, then the Lease Agreement shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of the Rental Payments in accordance with the provisions of Section 3.06 hereof. So long as any Bonds shall be Outstanding, any award made in eminent domain proceedings for the taking of the Property, or any portion thereof, shall be paid to the Trustee and applied to the redemption of Bonds as provided in subsection (a) of Section 4.01 of the Indenture, in the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued and in Section 5.03 of the Indenture. Any such award made after all of the Bonds, and all other amounts due under the Indenture and hereunder, have been fully paid, shall be paid to the Authority and to the City as their respective interests may appear.
Section 8.02 Prepayment.
(a) The City may prepay all or a portion of the Base Rental Payments attributable to the Series 2024A Bonds which are payable on or after May 1, 20__, from any source of available funds, on any date on or after May 1, 20__, by paying (i) all or a portion, as selected by the City, of the principal components of such Base Rental Payments, and (ii) the accrued but unpaid interest component of such Base Rental Payments to be prepaid to the date of such prepayment. (b) The City may prepay all or a portion of the Base Rental Payments attributable to the Series 2024B Bonds which are payable on or after May 1, 20__, from any source of available funds, on any date on or after May 1, 20__, by paying (i) all or a portion, as selected by the City, of the principal components of such Base Rental Payments, and (ii) the accrued but unpaid interest component of such Base Rental Payments to be prepaid to the date of such prepayment. (c) The City may prepay, from any source of available funds, all or any portion of the Base Rental Payments attributable to the Series 2024 Bonds by depositing with the Trustee moneys or securities as provided, and subject to the terms and conditions set forth, in Article X of the Indenture sufficient to make such Base Rental Payments when due or to make such Base Rental Payments through a specified date on which the City has a right to prepay such Base Rental Payments pursuant to subsection (a) of this Section, and to prepay such Base Rental Payments on such prepayment date, at a prepayment price determined in accordance with subsection (a) of this Section.
(d) If less than all of the Base Rental Payments attributable to the Series 2024 Bonds are prepaid pursuant to this Section then, as of the date of such prepayment pursuant to subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this Section, the 17 4855-3582-4826v3/022283-0612
principal and interest components of such Base Rental Payments shall be recalculated in order to take such prepayment into account. The City agrees that if, following a partial prepayment of such Base Rental Payments, the Property is damaged or destroyed or taken by eminent domain, or a defect in title to the Property is discovered, the City shall not be entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and the City shall not be entitled to any reimbursement of such Base Rental Payments.
(e) If all of the Base Rental Payments are prepaid in accordance with the provisions of this Lease Agreement then, as of the date of such prepayment pursuant to subsection (a) of this Section and, if applicable, the corresponding provisions hereof relating to the prepayment of Base Rental Payments attributable to Additional Bonds, or deposit pursuant to subsection (b) of this Section and, if applicable, such corresponding provisions, and payment of all other amounts owed under this Lease Agreement have been made, the term of this Lease Agreement shall be terminated. (f) Prepayments of Base Rental Payments attributable to the Series 2024 Bonds made pursuant to this Section shall be applied to the redemption of Series 2024 Bonds as directed by the City and as provided in Section 4.01 of the Indenture. (g) Before making any prepayment pursuant to this Article, the City shall give written notice to the Authority and the Trustee specifying the date on which the prepayment will be made, which date shall be not less than 45 nor more than 60 days from the date such notice is given to the Authority.
ARTICLE IX
COVENANTS
Section 9.01 Right of Entry. The Authority and its assignees shall have the right to enter upon and to examine and inspect the Property during reasonable business hours (and in emergencies at all times) for any purpose connected with the Authority’s rights or obligations under this Lease Agreement, and for all other lawful purposes.
Section 9.02 Liens. In the event the City shall at any time during the term of this Lease Agreement cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the 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 Property and which may be secured by a mechanics’, materialmen’s or other lien against the 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 as long as such contestment is in good faith. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall forthwith pay and discharge said judgment.
Section 9.03 Quiet Enjoyment. The parties hereto mutually covenant that the City, by keeping and performing the covenants and agreements herein contained, shall at all times during the term of this Lease Agreement peaceably and quietly have, hold and enjoy the Property without suit, trouble or hindrance from the Authority.
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Section 9.04 Authority Not Liable. The Authority and its directors, officers, agents and employees, shall not be liable to the City or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Property. To the extent permitted by law, the City shall, at its expense, indemnify and hold the Authority and the Trustee and all directors, members, officers and employees thereof harmless against and from any and all claims by or on behalf of any person, firm, corporation or governmental authority arising from the acquisition, construction, occupation, use, operation, maintenance, possession, conduct or management of or from any work done in or about the Property or from the subletting of any part thereof, including any liability for violation of conditions, agreements, restrictions, laws, ordinances, or regulations affecting the Property or the occupancy or use thereof, but excepting the negligence or willful misconduct of the persons or entity seeking indemnity. The City also covenants and agrees, at its expense, to pay and indemnify and save the Authority and the Trustee and all directors, officers and employees thereof harmless - against and from any and -all claims arising from (a) any condition of the Property and the adjoining sidewalks and passageways, (b) any breach or default on the part of the City in the performance of any covenant or agreement to be performed by the City pursuant to this Lease Agreement, (c) any act or negligence of licensees in connection with their use, occupancy or Operation of the Property, or (d) any accident, injury or damage whatsoever caused to any person, firm or corporation in or about the Property or upon or under the sidewalks and from and against all costs, reasonable counsel fees, expenses and liabilities incurred in any action or proceeding brought by reason of any claim referred to in this Section, but excepting the negligence or willful misconduct of the person or entity seeking indemnity. In the event that any action or proceeding is brought against the Authority or the Trustee or any director, member, officer or employee thereof, by reason of any such claim, the City, upon notice from the Authority or the Trustee or such director, member, officer employee thereof, covenants to resist or defend such action or proceeding by counsel reasonably satisfactory to the Authority or the Trustee or such director, member, officer or employee thereof.
To the extent this Lease Agreement confers upon or gives or grants the Trustee any right, remedy or claim under or by reason of this Lease Agreement, the Trustee is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder.
Section 9.05 Assignment and Subleasing. Neither this Lease Agreement nor any interest of the City hereunder shall be sold, mortgaged, pledged, assigned, or transferred by the City by voluntary act or by operation by law or otherwise. The Property may not be subleased in whole or in part by the City without the prior written consent of the Authority. Any such sublease shall be subject to all of the following conditions:
(a) this Lease Agreement and the obligation of the City to make all Rental Payments hereunder shall remain the primary obligation of the City; (b) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) any sublease of the Property by the City shall explicitly provide that such sublease is subject to all rights of the Authority under the Lease Agreement, including, the right to re-enter and re-let the Property or terminate the Lease Agreement upon a default by the City; and 19 4855-3582-4826v3/022283-0612
(d) the City shall furnish the Authority and the Trustee with an Opinion of Counsel to the effect that such sublease will not, in and of itself, cause the interest on the Bonds to be included in gross income for federal income tax purposes.
Section 9.06 Title to Property. Upon the termination or expiration of this Lease Agreement (other than as provided in Section 7.01 and Section 8.01 hereof), and the first date upon which the Bonds are no longer Outstanding, all right, title and interest in and to the Property shall vest in the City. Upon any such termination or expiration, the Authority shall execute such conveyances, deeds and other documents as may be necessary to effect such vesting of record.
Section 9.07 Authority’s Purpose. The Authority covenants that, prior to the discharge of this Lease Agreement and the Bonds, it will not engage in any activities inconsistent with the purposes for which the Authority is organized, as set forth in the Joint Powers Agreement.
Section 9.08 Representations of the City. The City represents and warrants to the Authority that (a) the City has the full power and authority to enter into, to execute and to deliver this Lease Agreement and the Indenture, and to perform all of its duties and obligations hereunder and thereunder, and has duly authorized the execution and delivery of this Lease Agreement and the Indenture, and (b) the Property will be used in the performance of essential governmental functions.
Section 9.09 Representation of the Authority. The Authority represents and warrants to the City that the Authority has the full power and authority to enter into, to execute and to deliver this Lease Agreement, the Assignment Agreement and the Indenture, and to perform all of its duties and obligations hereunder and thereunder, and has duly authorized the execution and delivery of this Lease Agreement, the Assignment Agreement and the Indenture.
ARTICLE X
NO CONSEQUENTIAL DAMAGES;
USE OF THE PROPERTY; SUBSTITUTION OR RELEASE
Section 10.01 No Consequential Damages. In no event shall the Authority or the Trustee be liable for any incidental, indirect, special or consequential damage in connection with or arising out of this Lease Agreement or the City’s use of the Property.
Section 10.02 Use of the Property. The City will not use, operate or maintain the Property improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Lease Agreement. In addition, the City agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Property) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Property; provided, however, that the City may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to any of the Property or its interest or rights under this Lease Agreement.
Section 10.03 Substitution or Release of, or Addition to, the Property. The City shall have the right to substitute alternate real property for any portion of the Property or to release a portion of the Property from this Lease Agreement or to add additional property to the encumbrance of this Lease Agreement. All costs and expenses incurred in connection with such substitution, 20 4855-3582-4826v3/022283-0612
release or addition shall be borne by the City. Notwithstanding any substitution or release of, or addition to, Property pursuant to this subsection, there shall be no reduction in or abatement of the Base Rental Payments due from the City hereunder as a result of such substitution, release or addition. Any such substitution or release of any portion of the Property, or addition to the Property, shall be subject to the following specific conditions, which are hereby made conditions precedent to such substitution, release or addition:
(a) a Written Certificate of the City to the effect that the Property, as constituted after such substitution, release or addition, (i) has an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a useful life in excess of the final maturity of any Outstanding Bonds; (b) with respect to any substituted or added property, the City shall have obtained or caused to be obtained a CLTA or ALTA title insurance policy or policies with respect to the Property (as such term will be defined after such substitution or addition) in the amount at least equal to the aggregate principal amount of any Outstanding Bonds of the type and with the endorsements described in Section 6.02 hereof;
(c) the City, the Authority and the Trustee shall have executed, and the City shall have caused to be recorded with the Los Angeles County Recorder, any document necessary to reconvey to the City the portion of the Property being released and to include any substituted or added real property in the description of the Property contained herein and in the Ground Lease; and (d) the City shall have provided notice of such release, substitution or addition to each rating agency then rating the Bonds.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Law Governing. THIS LEASE AGREEMENT SHALL BE GOVERNED
EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE STATE OF CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST.
Section 11.02 Notices. All written notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely:
If to the City: City of Lancaster
44933 Fern Avenue
Lancaster, California 93534
Attention: City Manager
If to the Authority: Lancaster Financing Authority
c/o City of Lancaster
44933 Fern Avenue
Lancaster, California 93534
Attention: Executive Director
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Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram Or telecopier, upon the sender’s receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section.
Section 11.03 Validity and Severability. If for any reason this Lease Agreement shall be held by a court of competent jurisdiction to be void, voidable or unenforceable by the Authority or by the City, or if for any reason it is held by such a court that any of the covenants and conditions of the City hereunder, including the covenant to pay Rental Payments, is unenforceable for the full term hereof; then and in such event this Lease Agreement is and shall be deemed to be a Lease Agreement under which the Rental Payments are to be paid by the City annually in consideration of the right of the City to possess, occupy and use the Property, and all of the terms, provisions and conditions of this Lease Agreement, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect.
Section 11.04 Net-Net-Net Lease. This Lease Agreement shall be deemed and construed to be a “net-net-net lease” and the City hereby agrees that the Rental Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever and notwithstanding any dispute between the City and the Authority.
Section 11.05 Taxes. The City shall pay or cause to be paid all taxes and assessments of any type or nature charged to the Authority or affecting the Property or the respective interests or estates therein; provided, however, that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the term of this Lease Agreement as and when the same become due.
The City or any sublessee may, at the City’s or such sublessee’s expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority or the Trustee shall notify the City or such sublessee that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Property will be materially endangered or the Property, or any part thereof, will be subject to loss or forfeiture, in which event the City or such sublessee shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee.
Section 11.06 Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Lease Agreement.
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Section 11.07 Amendments.
(a) This Lease Agreement and the Ground Lease may be amended and the rights and obligations of the Authority and the City hereunder and thereunder may be amended at any time by an amendment hereto or thereto which shall become binding upon execution and delivery by the Authority and the City, but only with the prior written consent of the Owners of a majority of the principal amount of the Bonds then Outstanding pursuant to the Indenture, provided that no such amendment shall (i) extend the payment date of any Base Rental Payments, reduce the interest component or principal component of any Base Rental Payments or change the prepayment terms and provisions, without the prior written consent of the Owner of each Bond so affected, or (ii) reduce the percentage of the principal amount of the Bonds the consent of the Owners of which is required-for the execution of any amendment of this Lease Agreement or the Ground Lease. (b) This Lease Agreement and the Ground Lease and the rights and obligations of the Authority and the City hereunder and thereunder may also be amended at any time by an amendment hereto or thereto which shall become binding upon execution by the Authority and the City, without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes:
(i) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed herein or therein other agreements, conditions, covenants and temps thereafter to be observed or performed by the Authority or the City, or to surrender any right or power reserved herein or therein to or conferred herein or therein on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners;
(ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or therein or in regard to questions arising hereunder or thereunder which the Authority or the City may deem desirable or necessary and not inconsistent herewith or therewith, and which shall not materially adversely affect the interests of the Owners;
(iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of the interest on the Bonds;
(iv) to provide for the substitution or release of a portion of the Property in accordance with the provisions of Section 10.03 hereof; (v) to provide for the issuance of Additional Bonds in accordance with Article III of the Indenture; or
(vi) to make such other changes herein or therein or modifications hereto or thereto as the Authority or the City may deem desirable or necessary, and which shall not materially adversely affect the interests of the Owners, as evidenced by an Opinion of Bond Counsel.
Section 11.08 Assignment. The City and the Authority hereby acknowledge the assignment of this Lease Agreement (except for the Authority’s obligations and its rights to give consents or 23 4855-3582-4826v3/022283-0612
approvals hereunder), and the Base Rental Payments payable hereunder, to the Trustee pursuant to the Assignment Agreement.
Section 11.09 Execution. This Lease Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Lease Agreement.
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IN WITNESS WHEREOF, the Authority and the City have caused this Lease Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
CITY OF LANCASTER
By:
Jason Caudle
City Manager
ATTEST:
Andrea Alexander
City Clerk
LANCASTER FINANCING AUTHORITY
By:
Jason Caudle
Executive Director
ATTEST:
Andrea Alexander
Secretary
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EXHIBIT A
DESCRIPTION OF THE PROPERTY
Lancaster Municipal Stadium
Lancaster Performing Arts Center
Economic Development Office
Public Safety Building
Lancaster Museum of Art and History
Lancaster Community Center
Corporation Yard
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EXHIBIT B
CAPITALIZED INTEREST AND BASE RENTAL PAYMENT SCHEDULE
I. CAPITALIZED INTEREST PAYMENTS
A portion of the interest on the portion of the Series 2024 Bonds issued to finance the Stadium Project shall be paid from the Capitalized Interest Fund established under the Indenture on the following dates and in the following amounts:
Date 2024A Account 2024B Account
II. TOTAL BASE RENTAL PAYMENTS
Series 2024A Base Rental Series 2024B Base Rental
Interest
Payment
Date*
Principal
Component
Interest
Component
Series
2024A
Base Rental
Principal
Component
Interest
Component
Series 2024B
Base Rental
Annual
Combined
Base Rental
Payments
* Base Rental Payment Date is two Business Days prior to Interest Payment Date B-2
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Stradling Yocca Carlson & Rauth
Draft dated May 31, 2024
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RECORDING REQUESTED BY:
Lancaster Financing Authority
AND WHEN RECORDED RETURN TO:
Stradling Yocca Carlson & Rauth LLP
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Brian P. Forbath, Esq.
[Space above for Recorder’s use.]
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE BECAUSE THE ASSIGNOR IS A GOVERNMENTAL AGENCY. LEASE TERM IS LESS THAN 35 YEARS.
ASSIGNMENT AGREEMENT
by and between
LANCASTER FINANCING AUTHORITY
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated as of _____ 1, 2024
Relating to
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024A (TAX-EXEMPT)
and
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS ,
SERIES 2024B (FEDERALLY TAXABLE)
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ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this “Assignment Agreement”), executed and entered into as of _____ 1, 2024, is by and between the LANCASTER FINANCING AUTHORITY, a joint exercise of powers entity organized and existing under and by virtue of the laws of the State of California (the “Authority”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, as Trustee (the “Trustee”).
WITNESSETH:
WHEREAS, the City of Lancaster (the “City”) and the Authority desire to finance the costs of the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”); WHEREAS, in order to finance the Projects, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof (the “Ground Lease”), and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated as of the date hereof (the “Lease Agreement”); WHEREAS, the Property is more particularly described in Exhibit A hereto; WHEREAS, under the Lease Agreement, the City is obligated to make Base Rental Payments (as defined in the Lease Agreement) to the Authority; WHEREAS, the Authority desires to assign without recourse certain of its rights in the Ground Lease and the Lease Agreement, including its right to receive the Base Rental Payments, to the Trustee for the benefit of the owners of bonds (the “Bonds”) to be issued pursuant to the Indenture, dated as of the date hereof (as supplemented from time to time in accordance with the terms thereof, the “Indenture”), by and among the Authority, the City and the Trustee; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Assignment Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Assignment Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties hereto do hereby agree as follows:
Section 1. Assignment. The Authority, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby sell, assign and transfer to the Trustee, irrevocably and absolutely, without recourse, for the benefit of the owners of the Bonds, all of its right, title and interest in and to the Ground Lease and the Lease Agreement including, without limitation, its right to receive the Base Rental Payments to be paid by the City under and pursuant to the Lease 2 4867-6167-5706v3/022283-0612
Agreement; provided, however, that the Authority shall retain its obligations under the Lease Agreement and Ground Lease, the rights to indemnification, to give approvals and consents under the Lease Agreement and the Ground Lease and to payment or reimbursement of its reasonable costs and expenses under the Lease Agreement.
Section 2. Acceptance. The Trustee hereby accepts the foregoing assignment, subject to the terms and provisions of the Indenture, and all such Base Rental Payments shall be applied and the rights so assigned shall be exercised by the Trustee as provided in the Lease Agreement and the Indenture.
Section 3. Conditions. This Assignment Agreement shall impose no obligations upon the Trustee beyond those expressly provided in the Indenture.
Section 4. Further Assurances. The Authority shall make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Assignment Agreement, and for the better assuring and confirming to the Trustee, for the benefit of the owners of the Bonds, the rights intended to be conveyed pursuant hereto.
Section 5. Governing Law. THIS ASSIGNMENT AGREEMENT SHALL BE
GOVERNED EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE STATE OF CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST.
Section 6. Execution. This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Assignment Agreement.
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IN WITNESS WHEREOF, the Authority and the Trustee have caused this Assignment Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first above-written.
LANCASTER FINANCING AUTHORITY
By:
Jason Caudle
Executive Director
ATTEST:
Andrea Alexander
Secretary
[SIGNATURES CONTINUED ON NEXT PAGE.]
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[SIGNATURE PAGE CONTINUED.]
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By:
___________
Authorized Officer
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A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________ before me, __________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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EXHIBIT A
DESCRIPTION OF THE PROPERTY
Lancaster Municipal Stadium
Lancaster Performing Arts Center
Economic Development Office
Public Safety Building
Lancaster Museum of Art and History
Lancaster Community Center
Corporation Yard
Stradling Yocca Carlson & Rauth
Draft dated May 31, 2024
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INDENTURE
by and among
LANCASTER FINANCING AUTHORITY
and
CITY OF LANCASTER
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated as of _____ 1, 2024
Relating to
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS,
SERIES 2024A (TAX-EXEMPT)
and
$________
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS
SERIES 2024B (FEDERALLY TAXABLE)
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ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions .................................................................................................................. 2 Section 1.02 Equal Security .......................................................................................................... 13
ARTICLE II
THE BONDS
Section 2.01 Authorization of Bonds ............................................................................................ 13 Section 2.02 Terms of Series 2024 Bonds..................................................................................... 13 Section 2.03 Form of Series 2024 Bonds ...................................................................................... 15 Section 2.04 Transfer and Exchange of Bonds ............................................................................. 15 Section 2.05 Registration Books ................................................................................................... 15 Section 2.06 Execution of Bonds .................................................................................................. 15 Section 2.07 Authentication of Bonds........................................................................................... 16 Section 2.08 Temporary Bonds ..................................................................................................... 16 Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen ............................................................ 16 Section 2.10 Book-Entry Bonds .................................................................................................... 17
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2024 Bonds ................................................................................. 18 Section 3.02 Application of Proceeds of the Series 2024 Bonds .................................................. 18 Section 3.03 Costs of Issuance Fund............................................................................................. 19 Section 3.04 Project Fund.............................................................................................................. 19 Section 3.05 Conditions for the Issuance of Additional Bonds..................................................... 20 Section 3.06 Procedure for the Issuance of Additional Bonds...................................................... 21 Section 3.07 Additional Bonds...................................................................................................... 22
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2024 Bonds ........................................................................... 22 Section 4.02 Notice of Redemption............................................................................................... 24 Section 4.03 Selection of Bonds for Redemption ......................................................................... 25 Section 4.04 Partial Redemption of Bonds.................................................................................... 25 Section 4.05 Effect of Notice of Redemption ............................................................................... 25
ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations...................................................................................... 26 Section 5.02 Flow of Funds........................................................................................................... 26 Section 5.03 Application of Net Insurance Proceeds .................................................................... 27 Section 5.04 Title Insurance .......................................................................................................... 28 Section 5.05 Reserve Fund ............................................................................................................ 29 Section 5.06 Rebate Fund.............................................................................................................. 29 Section 5.07 Investment of Moneys .............................................................................................. 31
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ARTICLE VI
COVENANTS
Section 6.01 Compliance with Agreements .................................................................................. 32 Section 6.02 Compliance with Ground Lease and Lease Agreement ........................................... 32 Section 6.03 Observance of Laws and Regulations ...................................................................... 32 Section 6.04 Other Liens ............................................................................................................... 32 Section 6.05 Prosecution and Defense of Suits ............................................................................. 32 Section 6.06 Accounting Records and Statements ........................................................................ 33 Section 6.07 Recordation and Filing ............................................................................................. 33 Section 6.08 Tax Covenants .......................................................................................................... 33 Section 6.09 Continuing Disclosure .............................................................................................. 34 Section 6.10 Further Assurances ................................................................................................... 34
ARTICLE VII
DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default ..................................................................................................... 34 Section 7.02 Other Remedies of the Trustee ................................................................................. 35 Section 7.03 Non-Waiver .............................................................................................................. 35 Section 7.04 Remedies Not Exclusive........................................................................................... 35 Section 7.05 No Liability by the Authority to the Owners............................................................ 35 Section 7.06 No Liability by the City to the Owners .................................................................... 36 Section 7.07 No Liability of the Trustee to the Owners................................................................ 36 Section 7.08 Application of Amounts After Default..................................................................... 36 Section 7.09 Trustee May Enforce Claims Without Possession of Bonds.................................... 36 Section 7.10 Limitation on Suits ................................................................................................... 36
ARTICLE VIII
THE TRUSTEE
Section 8.01 Employment of the Trustee ...................................................................................... 37 Section 8.02 Duties, Removal and Resignation of the Trustee ..................................................... 37 Section 8.03 Compensation of the Trustee.................................................................................... 38 Section 8.04 Protection of the Trustee .......................................................................................... 39
ARTICLE IX
MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted .............................................................. 41 Section 9.02 Effect of Supplemental Indenture............................................................................. 42 Section 9.03 Endorsement of Bonds; Preparation of New Bonds................................................. 42 Section 9.04 Amendment of Particular Bonds .............................................................................. 43 Section 9.05 Execution of Supplemental Indentures..................................................................... 43
ARTICLE X
DEFEASANCE
Section 10.01 Discharge of Indenture ............................................................................................. 43 Section 10.02 Bonds Deemed To Have Been Paid ......................................................................... 44
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Section 10.03 Payment of Bonds After Discharge of Indenture ..................................................... 44
ARTICLE XI
MISCELLANEOUS
Section 11.01 Benefits of Indenture Limited to Parties .................................................................. 45 Section 11.02 Successor Deemed Included in all References to Predecessor................................. 45 Section 11.03 Execution of Documents by Owners........................................................................ 45 Section 11.04 Waiver of Personal Liability .................................................................................... 45 Section 11.05 Destruction of Bonds................................................................................................ 45 Section 11.06 Funds and Accounts ................................................................................................. 45 Section 11.07 Article and Section Headings Gender and References............................................. 46 Section 11.08 Partial Invalidity ....................................................................................................... 46 Section 11.09 Disqualified Bonds ................................................................................................... 46 Section 11.10 Money Held for Particular Bonds............................................................................. 47 Section 11.11 Payment on Non-Business Days .............................................................................. 47 Section 11.12 California Law.......................................................................................................... 47 Section 11.13 Notices...................................................................................................................... 47 Section 11.14 Notice to Rating Agencies........................................................................................ 48 Section 11.15 Execution in Counterparts ........................................................................................ 48 Signatures .................................................................................................................................S-1 EXHIBIT A FORM OF SERIES 2024 BOND...........................................................................A-1 EXHIBIT B PROJECT FUND REQUISITION .........................................................................B-1 4855-6708-5498v3/022283-0612
INDENTURE
THIS INDENTURE (this “Indenture”), executed and entered into as of December 1, 2024, is by and among the LANCASTER FINANCING AUTHORITY, a joint exercise of powers entity duly organized and existing under the laws of the State of California (the “Authority”), the CITY OF LANCASTER, a municipal corporation and charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the “City”) and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States, as Trustee (the “Trustee”); WITNESSETH:
WHEREAS, the City and the Authority desire to finance the costs of the acquisition of certain real property and the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”); WHEREAS, in order to finance the Projects, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated as of the date hereof (the “Lease Agreement”); WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Projects through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement; WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof;
WHEREAS, the Authority and the City desire to provide for the issuance by the Authority of Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) (the “Series 2024A Bonds”) and Series 2024B Bonds (Federally Taxable) (the “Series 2024B Bonds” and together with the Series 2024A Bonds, the “Series 2024 Bonds”), in the aggregate principal amount of $_________, in order to finance the Projects;
WHEREAS, the Series 2024 Bonds will be payable equally and ratably from the Base Rental Payments;
WHEREAS, the Authority and the City desire to provide for the issuance of additional bonds (the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2024 Bonds (the Series 2024 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”);
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to 2 4855-6708-5498v3/022283-0612
secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority and the City have authorized the execution and delivery of this Indenture; and WHEREAS, the Authority and the City have determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture has been in all respects duly authorized; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Bonds and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Lease Agreement. “Act” means the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code.
“Additional Bonds” means Bonds other than the Series 2024 Bonds issued hereunder in accordance with the provisions of Sections 3.05 and 3.06 hereof. “Additional Rental Payments” means all amounts payable by the City as Additional Rental Payments pursuant to Section 3.02 of the Lease Agreement. “Annual Debt Service” means, with respect to a Series of Bonds, for each Bond Year, the sum of (a) the interest payable on the Outstanding Bonds of such Series in such Bond Year, and (b) the principal amount of the Outstanding Bonds of such Series scheduled to be paid in such Bond Year.
“Assignment Agreement” means the Assignment Agreement, by and between the Authority and the Trustee, dated as of December 1, 2024, as the same may be amended or supplement pursuant to the provisions thereof.
“Authority” means the Lancaster Financing Authority, a joint exercise of powers entity organized and existing under and by virtue of the laws of the State of California. “Authorized Authority Representative” means the Chair, the Vice Chair, the Executive Director, the Treasurer and the Secretary of the Authority, or any other person authorized by the Board of Directors of the Authority to act on behalf of the Authority under or with respect to this Indenture.
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“Authorized City Representative” means the Mayor of the City, the Mayor Pro Tem of the City, the City Manager of the City, the Director of Administrative Services of the City, or the City Clerk, or any other person authorized by the City Council of the City to act on behalf of the City under or with respect to this Indenture.
“Authorized Denominations” means $5,000 or any integral multiple thereof. “Base Rental Payment Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Base Rental Payments” means any of the Series 2024A Base Rental Payments or the Series 2024B Base Rental Payments payable to the Authority by the City as Base Rental Payments pursuant to Section 3.01 of the Lease Agreement.
“Bonds” means the Series 2024 Bonds and any Additional Bonds issued hereunder. “Book-Entry Bonds” means the Bonds of a Series registered in the name of the nominee of DTC, or any successor securities depository for such Series of Bonds, as the registered owner thereof pursuant to the terms and provisions of Section 2.10 hereof. “Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday, (b) a day on which banking institutions in the State of California, or in any state in which the Office of the Trustee is located, are required or authorized by law (including executive order) to close, or (c) a day on which the New York Stock Exchange is closed.
“Capitalized Interest Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds.
“City” means the City of Lancaster, a municipal corporation and charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California. “Closing Date” means ______, 2024.
“Code” means the Internal Revenue Code of 1986, as amended. “Continuing Disclosure Agreement” means the Continuing Disclosure Agreement executed by the City in connection with the issuance of the Bonds, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. “Costs of Issuance” means all the costs of issuing and delivering the Bonds, including, but not limited to, all printing and document preparation expenses in connection with this Indenture, the Lease Agreement, the Ground Lease, the Assignment Agreement, the Bonds and any preliminary official statement and final official statement pertaining to the Bonds, rating agency fees, CUSIP Service Bureau charges, market study fees, legal fees and expenses of counsel with the issuance and delivery of the Bonds, the initial fees and expenses of the Trustee and its counsel and other fees and expenses incurred in connection with the issuance and delivery of the Bonds, to the extent such fees and expenses are approved by the City.
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“Costs of Issuance Fund” means the fund by that name established in accordance with Section 3.03 hereof.
“DTC” means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to Section 2.10 hereof. “Federal Securities” means (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), and (b) obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. “Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may from time to time be amended in accordance with the provisions thereof and of the Lease Agreement. “Indenture” means this Indenture, as originally executed and as it may be amended or supplemented from time to time by any Supplemental Indenture. “Information Services” means Municipal Securities Rulemaking Board through the Electronic Municipal Marketplace Access (EMMA) website; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee.
“Interest Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Interest Payment Date” means May 1 and November 1 of each year, commencing on November 1, 2024.
“Lease Agreement” means the Lease Agreement, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may be from time to time amended in accordance with the provisions thereof.
“Maximum Annual Debt Service” means, with respect to a Series of Bonds, as of the date of calculation, the largest amount of principal and interest payments due with respect to the current or any future Bond Year payable in such Bond Year. For purposes of such calculation, there shall be excluded payments with respect to each Series of Bonds to the extent that amounts due with respect to such Series of Bonds are prepaid or otherwise discharged in accordance with this Indenture. “Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Office of the Trustee” means the principal corporate trust office of the Trustee in Los Angeles, California, or such other office as may be specified to the Authority and the City by the Trustee in writing, except that with respect to presentation of Bonds for payment or for registration of 5 4855-6708-5498v3/022283-0612
transfer and exchange such term shall mean the office or the agency of the Trustee at which, at any particular time, its corporate trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing.
“Opinion of Counsel” means a written opinion of Stradling Yocca Carlson & Rauth LLP, or other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the Authority or the City and which written opinion is satisfactory to the Trustee.
“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09 hereof) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;
(b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.01 hereof; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture. “Owner” means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books.
“Participant” means any entity which is recognized as a participant by DTC in DTC’s book- entry system of maintaining records with respect to Book-Entry Bonds. “Participating Underwriter” has the meaning ascribed thereto in the Continuing Disclosure Agreement.
“Permitted Investments” means any of the following to the extent then permitted by the general laws of the State of California:
(1) (a) Direct obligations (other than an obligation subject to—variation in principal repayment) of the United States of America (“United States Treasury Obligations”), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated (collectively “United States Obligations”). These include, but are not necessarily limited to:
-U.S. Treasury obligations
All direct or fully guaranteed obligations
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-Farmers Home Administration
Certificates of beneficial ownership
-General Services Administration
Participation certificates
-U.S. Maritime Administration
Guaranteed Title XI financing
-Small Business Administration
Guaranteed participation certificates
Guaranteed pool certificates
-Government National Mortgage Association (GNMA)
GNMA-guaranteed mortgage-backed securities
GNMA-guaranteed participation certificates
-U.S. Department of Housing & Urban Development
Local authority bonds
-Washington Metropolitan Area Transit Authority
Guaranteed transit bonds
(2) Federal Housing Administration debentures.
(3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America:
-Federal Home Loan Mortgage Corporation (FHLMC)
Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) Senior debt obligations
-Farm Credit Banks (formerly: Federal Land Banks, Federal intermediate Credit Banks and Banks for Cooperatives)
Consolidated systemwide bonds and notes
-Federal Home Loan Banks (FHL Banks)
Consolidated debt obligations
-Federal National Mortgage Association (FNMA)
Senior debt obligations
Mortgage-backed securities (excluded are stripped mortgages securities which are purchased at prices exceeding their principal amounts) -Financing Corporation (FICO)
Debt obligations
-Resolution Funding Corporation (REFCORP)
Debt obligations
(4) Bank deposit products, unsecured certificates of deposit (including those placed by a third party pursuant to an agreement between the City and the Trustee), trust funds, trust accounts, overnight banking deposits, interest bearing deposits, interest bearing money market accounts, time deposits, demand deposits, and bankers’ acceptances (having maturities of not more than 30 days) of any bank (including the Trustee and any affiliate) the short-term obligations of which are rated “A-1” or “A-2” without regard to qualifier by a nationally recognized rating agency service.
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(5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks, including the Trustee and its affiliates, which have capital and surplus of at least $5 million.
(6) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, “A-1” or better by S&P and “Prime-1” by Moody’s. (7) Money market mutual funds rated “AAm” or “AAm-G” by a nationally recognized rating agency service, or better (including those for which the Trustee or its affiliates receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise) but excluding such funds with a floating net asset value. (8) Repurchase agreements:
With (1) any domestic bank, or domestic branch of a foreign bank or any non-bank financial institution or primary dealer as designated by the Federal Reserve the long term debt of which is rated at least “BBB+” by Standard & Poor’s or Moody’s (including the Trustee or any of its affiliates); or (2) any broker-dealer with “retail customers” or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least “BBB+” by Standard & Poor’s or Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated “BBB+” or better by Standard & Poor’s or Moody’s, provided that:
(a) The collateral shall be securities described in clause 1(a), (b) or (c) of this subsection, and the market value of the collateral is maintained at levels equal to 104% of the amount of cash transferred by the Trustee or the City to the provider of the repurchase agreement plus accrued interest with the collateral being valued weekly and marked-to-market at current market price plus accrued interest; (b) The Trustee or a third party acting solely as agent therefor or for the City (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books); (c) The repurchase or reverse repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession);
(d) The repurchase or reverse repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or Standard & Poor’s is withdrawn or suspended or falls below “BBB” by Standard & Poor’s or “Baa2” by Moody’s, as appropriate, the provider must, at the direction of Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the Trustee or the City. 8 4855-6708-5498v3/022283-0612
Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral levels are 103% or better and the provider is rated at least “A” by Standard & Poor’s or Moody’s, respectively.
(9) State Obligations
(a) Direct general obligations of any state of the United States or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A2” by Moody’s and “A” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct, general short-term obligations of any state agency or subdivision described in (a) above and rated “A-1+” by S&P and “Prime-1” by Moody’s.
(c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (a) above and rated “AA” or better by S&P and “Aa” or better by Moody’s.
(10) Local Agency Investment Fund of the State of California. (11) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt of the guarantor, or in the case of a monoline financial guaranty insurance company the claims paying ability of the guarantor, is rated at least “A+” by S&P and “A1” by Moody’s; provided, that prior written notice of an investment in the investment agreement is provided to S&P and, provided, further, by the terms of the investment agreement:
(a) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service on the Bonds;
(b) the invested funds are available for withdrawal without penalty or premium, at any time for purposes identified in this Indenture other than acquisition of alternative investment property upon not more than seven days prior notice (which notice may be amended or withdrawn at any time prior to the specified withdrawal date); provided that the Indenture specifically requires the Trustee or the City to give notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid;
(c) the investment agreement shall state that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof;
(d) a guaranteed rate of interest is to be paid on invested funds and all future deposits, if any, required to be made to restore the amount of such funds to the level specified under the Indenture;
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(e) the Trustee and the City receive the opinion of domestic counsel (which opinion shall be addressed to the City) that such investment agreement is legal, valid and binding and enforceable against the provider in accordance with its terms and of foreign counsel (if applicable);
(f) the investment agreement shall provide that if during its term (A) the provider’s or the guarantor’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A+” or “A1”, respectively, or, with respect to a foreign bank, below the ratings of such provider at the delivery date of the investment agreement, the provider must, at the direction of the City or the Trustee (acting at the direction of the City) within 10 days of receipt of such direction, either (1) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the Trustee, the City or a Holder of the Collateral, United States Treasury Obligations which are free and clear of any third-party liens or claims at the Collateral Levels set forth below; or (2) repay the principal of and accrued but unpaid interest on the investment (the choice of (1) or (2) above shall be that of the City or Trustee (acting at the direction of the City), as appropriate), and (B) the provider’s or the guarantor’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “BBB” or “Baa2,” or, with respect to a foreign bank, below “A+” or “A1” by S&P or Moody’s, as appropriate, the provider must, at the direction of the City or the Trustee (acting at the direction of the City), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the City or Trustee; (g) the investment agreement shall state, and an opinion of counsel shall be rendered to the effect, that the Trustee has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Trustee is in possession); and (h) the investment agreement must provide that if during its term (A) the provider shall default in its payment obligations, the provider’s obligation under the investment agreement shall, at the direction of the City or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Trustee, as appropriate, and (B) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Trustee, as appropriate.
(12) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements:
(a) the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions;
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(b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations;
(c) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification”);
(d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations;
(e) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and
(f) the cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent.
The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after the initial purchase of such Permitted Investments.
“Person” means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Principal Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Project” means the acquisition of certain real property and the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center and the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, and other related improvements, facilities and equipment. “Project Fund” means the fund of that name established pursuant to Section 3.04 hereof. “Property” means the real property described in the Lease Agreement and the improvements located thereon or, from and after each substitution of any alternate property for all or any portion of the Property pursuant to the Lease Agreement, such alternate property together with any portion of the Property that is not released from the provisions of the Lease Agreement in connection therewith. “Rebate Fund” means the fund by that name established in accordance with Section 5.05 hereof.
“Rebate Requirement” has the meaning ascribed thereto in the Tax Certificate. “Record Date” means the fifteenth day of the month next preceding an Interest Payment Date, whether or not such day is a Business Day.
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“Redemption Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Redemption Price” means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant hereto.
“Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05 hereof. “Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental Payments.
“Rental Period” means the period from the Closing Date through April 30, 2025 and, thereafter, the twelve-month period commencing on May 1 of each year during the term of the Lease Agreement.
“Representation Letter” means the Letter of Representations from the Authority to DTC, or any successor securities depository for any Series of Book-Entry Bonds, in which the Authority makes certain representations with respect to issues of its securities for deposit by DTC or such successor depository.
“Reserve Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.05.
“Reserve Fund Requirement” means (a) with respect to the Series 2024 Bonds, the lesser of (i)125% of the average Annual Debt Service with respect to the Series 2024 Bonds, (ii) Maximum Annual Debt Service with respect to the Series 2024 Bonds, or (iii) with respect to the Series 2024 Bonds, 10% of the original principal amount of the Series 2024 Bonds (or, if the Series 2024 Bonds has more than a de minimis amount of original issue discount or premium, 10% of the issue price of the Series 2024 Bonds); and (b) with respect to any Additional Bonds, such amounts as shall be determined in accordance with the Supplemental Indenture. “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Securities Depositories” means The Depository Trust Company, New York, New York 10041-0099, Fax-(212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. “Series” means the Series 2024A Bonds and the Series 2024B Bonds executed, authenticated and delivered on the Closing Date and identified pursuant to this Indenture and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds. “Series 2024 Bonds” means collectively, the Series 2024A Bonds and the Series 2024B Bonds.
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“Series 2024A Bonds” means the Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) issued under the Indenture.
“Series 2024B Bonds” means the Lancaster Financing Authority Lease Revenue Bonds, Series 2024B (Federally Taxable) issued under the Indenture. “Series 2024A Base Rental Payments” means any of the Series 2024A Base Rental Payments payable to the Authority by the City as Base Rental Payments pursuant to Section 3.01 of the Lease Agreement.
“Series 2024B Base Rental Payments” means any of the Series 2024B Base Rental Payments payable to the Authority by the City as Base Rental Payments pursuant to Section 3.01 of the Lease Agreement.
“Series 2024A Prepayment” means any payment made by the City pursuant to Section 7.02 of the Lease as a prepayment of the 2024A Base Rental Payments. “Series 2024B Prepayment” means any payment made by the City pursuant to Section 7.02 of the Lease as a prepayment of the 2024B Base Rental Payments. “Stadium Project Subaccounts” means, collectively, the Stadium Project Subaccount of the Series 2024A Account of the Project Fund created pursuant to Section 3.04 hereof and the Stadium Project Subaccount of the Series 2024B Account of the Project Fund created pursuant to Section 3.04 hereof.
“Supplemental Indenture” means any supplemental indenture amendatory of or supplemental to this Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
“Tax Certificate” means the Tax Certificate executed by the Authority and the City at the time of issuance of the Series 2024A Bonds relating to the requirements of Section 148 of the Code, as originally executed and as it may from time to time be amended in accordance with the provisions thereof.
“Term Bonds” means the Series 2024A Bonds maturing on May 1, 20__ and May 1, 20__ and the Series 2024B Bonds maturing on May 1, 20__, and any term maturities of an issue of Additional Bonds as specified in a Supplemental Indenture. “Trustee” means U.S. Bank Trust Company, National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States, or any successor thereto as Trustee hereunder, appointed as provided herein. “Written Certificate of the Authority” and “Written Request of the Authority” mean, respectively, a written certificate or written request signed in the name of the Authority by an Authorized Authority Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument “Written Certificate of the City” and “Written Request of the City” mean, respectively, a written certificate or written request signed in the name of the City by an Authorized City 13 4855-6708-5498v3/022283-0612
Representative. Any such certificate or request may, but need, not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.
Section 1.02 Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the Authority, the City, the Trustee and the Owners from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the principal of, premium, if any, and interest on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority or the City shall be for the equal and proportionate benefit, protection and security of all Owners of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein.
ARTICLE II
THE BONDS
Section 2.01 Authorization of Bonds. The Authority hereby authorizes the issuance of the Bonds under and subject to the terms of this Indenture and applicable laws of the State of California for the purpose of financing the Projects. The Bonds may consist of one or more Series of Bonds of varying denominations, dates, maturities, interest rates and other provisions, subject to the provisions and conditions contained herein.
Section 2.02 Terms of Series 2024 Bonds.
(a) The Series 2024A Bonds shall be designated the “Lancaster Financing Authority Lease Revenue Bonds, Series 2024A Bonds (Tax-Exempt).” Each Series of Additional Bonds shall bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series, of Bonds.
(b) The Series 2024B Bonds shall be designated the “Lancaster Financing Authority Lease Revenue Bonds, Series 2024B Bonds (Federally Taxable).” Each Series of Additional Bonds shall bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series, of Bonds. (c) The Series 2024A Bonds shall be issued in fully registered form without coupons in Authorized Denominations, so long as no Series 2024 Bond shall have more than one maturity date. The Series 2024A Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal amount of $________, shall mature on May 1 of each year and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates per annum as follows:
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Maturity Date
(May 1)
Principal
Amount
Interest
Rate
$ %
(d) The Series 2024B Bonds shall be issued in fully registered form without coupons in Authorized Denominations, so long as no Series 2024 Bond shall have more than one maturity date. The Series 2024B Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal amount of $________, shall mature on May 1 of each year and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates per annum as follows:
Maturity Date
(May 1)
Principal
Amount
Interest
Rate
$ %
(e) Interest on the Series 2024 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2024 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii) a Series 2024 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the dated date thereof, or (iii) interest on any Series 2024 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid in lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership of the Series 2024 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Except as otherwise provided in Section 2.10(a), interest shall be paid by check of the Trustee mailed by first class mail, postage 15 4855-6708-5498v3/022283-0612
prepaid, on each Interest Payment Date to the Series 2024 Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. (f) The principal and premium, if any, of the Series 2024 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. (g) The Series 2024 Bonds shall be subject to redemption as provided in Article IV.
Section 2.03 Form of Series 2024 Bonds. The Series 2024 Bonds shall be in substantially the form set forth in Exhibit A hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby.
Section 2.04 Transfer and Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred upon the Registration Books by the Person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.
The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series of other authorized denominations. The Trustee shall require the payment by the Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series pursuant to this Section during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption.
Section 2.05 Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall be open to inspection during regular business hours and upon reasonable notice by the City; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided.
Section 2.06 Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Authority with the facsimile signature of an Authorized Officer of the Authority attested by the manual or facsimile signature of the Secretary of the Authority. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of such officers of the Authority who shall have signed or attested any of the Bonds shall cease to be such officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and also any Bonds may be 16 4855-6708-5498v3/022283-0612
signed and attested on behalf of the Authority by such Persons as at the actual date of execution of such Bonds shall be the proper officers of the Authority although at the nominal date of such Bonds any such Person shall not have been such officer of the Authority.
Section 2.07 Authentication of Bonds. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form as that set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.08 Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Authority and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds of a Series it will execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series, may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of such Series in Authorized Denominations. Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under this Indenture as definitive Bonds of such Series authenticated and delivered hereunder.
Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or in accordance with the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence and indemnity satisfactory to the Trustee shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in lieu of and in replacement for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued under this Section and of the expenses which may be incurred by the Authority and the Trustee. Any Bond of a Series issued under the provisions of this Section in lieu of any Bond of such Series alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this Indenture with all other Bonds of such Series secured by this Indenture.
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Section 2.10 Book-Entry Bonds.
(a) Prior to the issuance of a Series of Bonds, the Authority may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds and, in such event, the Bonds of such Series for each maturity shall be in the form of a separate single fully registered Bond (which may be typewritten). The Series 2024 Bonds shall initially be issued as Book-Entry Bonds.
Except as provided in subsection (c) of this Section, the registered Owner of all of the Book-Entry Bonds shall be Cede & Co., as nominee of DTC. Notwithstanding anything to the contrary contained in this Indenture, payment of interest with respect to any Book-Entry Bond registered as of each Record Date in the name of Cede & Co. shall be made by wire transfer of same- day funds to the account of Cede & Co. on the Interest Payment Date at the address indicated on the Record Date for Cede & Co. in the Registration Books or as otherwise provided in the Representation Letter.
(b) The Trustee and the Authority may treat DTC (or its nominee) as the sole and exclusive Owner of Book-Entry Bonds registered in its name for the purposes of payment of the principal, premium, if any, or interest with respect to Book-Entry Bonds, selecting Book-Entry Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, registering the transfer of Book-Entry Bonds, obtaining any consent or other action to be taken by Owners of Book-Entry Bonds and for all other purposes whatsoever, and neither the Trustee nor the Authority shall be affected by any notice to the contrary. Neither the Trustee nor the Authority shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in Book-Entry Bonds under or through DTC or any Participant, or any other person which is not shown on the Registration Books as being an Owner, with respect to the accuracy of any records maintained by DTC or any Participant, the payment by DTC or any Participant of any amount in respect of the principal, premium, if any, or interest with respect to Book-Entry Bonds, any notice which is permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of Book-Entry Bonds, or any consent given or-other action taken by DTC as Owner of Book-Entry Bonds. The Trustee shall pay all principal., premium, if any and interest with respect to Book-Entry Bonds, only to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the Authority’s obligations with respect to the principal, premium, if any, and interest with respect to the Book-Entry Bonds to the extent of the sum or sums so paid. Except under the conditions of subsection (c) of this Section, no person other than DTC shall receive an executed Book-Entry Bond for each separate stated maturity. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to record dates, the term “Cede & Co.” in this Indenture shall refer to such new nominee of DTC.
(c) In the event (i) DTC, including any successor as securities depository for a Series of Bonds, determines not to continue to act as securities depository for such Series of Bonds, or (ii) the Authority determines that the incumbent securities depository shall no longer so act, and delivers a written certificate to the Trustee to that effect, then the Authority will discontinue the book-entry system with the incumbent securities depository for such Series of Bonds. If the Authority determines to replace the incumbent securities depository for such Series of Bonds with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate fully registered Bond of such Series for the aggregate outstanding principal amount 18 4855-6708-5498v3/022283-0612
of Bonds of such Series of each maturity, registered in the name of such successor or substitute qualified securities depository, or its nominee, or make such other arrangement acceptable to the Authority, the Trustee and the successor securities depository for the Bonds of such Series as are not inconsistent with the terms of this Indenture. If the Authority fails to identify another qualified successor securities depository for such Series of Bonds to replace the incumbent securities depository, then the Bonds of such Series shall no longer be restricted to being registered in the Registration Books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository for such Series of Bonds, or its nominee, shall designate. In such event the Authority shall execute, and deliver to the Trustee, a sufficient quantity of Bonds of such Series to carry out the transfers and exchanges provided in Sections 2.04, 2.08 and 2.09 hereof. All such Bonds of such Series shall be in fully registered form in Authorized Denominations.
(d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Book-Entry Bond is registered in the name of DTC, or its nominee, all payments with respect to the principal, premium, if any, and interest with respect to such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Representation Letter.
(e) In connection with any notice or other communication to be provided to Owners of Book-Entry Bonds pursuant to this Indenture by the Authority, the City or the Trustee with respect to any consent or other action to be taken by Owners, the Authority, the City or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2024 Bonds. The Authority may, at any time, execute the Series 2024 Bonds for issuance hereunder and deliver the same to the Trustee. The Trustee shall authenticate the Series 2024 Bonds and deliver the Series 2024 Bonds to the original purchaser thereof upon receipt of a Written Request of the Authority and upon receipt of the purchase price therefor.
Section 3.02 Application of Proceeds of the Series 2024 Bonds. (a) On the Closing Date, the net proceeds of the sale of the Series 2024A Bonds received by the Trustee, $_________, shall be deposited by the Trustee as follows:
(i) The Trustee shall deposit the amount of $__________ in the 2024A Account of the Capitalized Interest Fund,
(ii) The Trustee shall deposit the amount of $_________ in the 2024A Account of the Costs of Issuance Fund,
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(iii) The Trustee shall deposit the amount of $_________ in the 2024A Account of the Project Fund, of which $__________ shall be deposited in the Stadium Project Subaccount; and
(iv) The Trustee shall deposit the amount of $_________ in the Series 2024 Account of the Reserve Fund.
(b) On the Closing Date, the net proceeds of the sale of the Series 2024B Bonds received by the Trustee, $_________, shall be deposited by the Trustee as follows:
(i) The Trustee shall deposit the amount of $__________ in the 2024B Account of the Capitalized Interest Fund,
(ii) The Trustee shall deposit the amount of $_________ in the 2024B Account of the Costs of Issuance Fund,
(iii) The Trustee shall deposit the amount of $_________ in the 2024B Account of the Project Fund, all of which shall be deposited in the Stadium Project Subaccount; and (iv) The Trustee shall deposit the amount of $_________ in the Series 2024 Account of the Reserve Fund.
Section 3.03 Costs of Issuance Fund. The Trustee shall establish and maintain a separate fund designated the “Costs of Issuance Fund” and shall establish a 2024A Account and a 2024B Account therein. On the Closing Date, there shall be deposited in the Costs of Issuance Fund the amount specified in Section 3.02 hereof. There shall be additionally be deposited in the Costs of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued.
The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Authority stating (a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the Costs of Issuance Fund, and (e) that such amounts have not been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder. Each such Written Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. On the date that is one hundred eighty (180) days after the Closing Date, or earlier upon the Written Request of the Authority, all amounts, if any, remaining in the Costs of Issuance Fund shall be withdrawn therefrom by the Trustee and transferred to the Project Fund and the Costs of Issuance Fund shall be closed.
Section 3.04 Project Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Project Fund.” Within the Project Fund, the Trustee shall establish a “2024A Account” and a “2024B Account”. Within the 2024A Account of the Project Fund the Trustee shall establish a Stadium Project Subaccount and within the 2024B Account of the Project Fund the Trustee shall establish a Stadium Project Subaccount. 20 4855-6708-5498v3/022283-0612
The moneys in the Project Fund or the accounts therein shall be disbursed by the Trustee on behalf of the City as specified in a Written Request of the City in the form attached hereto as Exhibit B. Each Written Request of the City shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. On the date on which the City determines that amounts in the Project Fund are no longer necessary for payment of the cost of the Projects, the City shall submit a Written Request to the Trustee to transfer any remaining balance in the Project Fund not needed for Project Fund purposes, at the City’s sole discretion, either (a) to the Base Rental Payment Fund for application in accordance with Section
5.02 hereof, or (b) to the City for use on eligible capital facilities or for any other lawful use of such moneys in compliance with this Indenture and the Tax Certificate, and the Project Fund shall be closed.
Notwithstanding the foregoing, the City shall not request funds be disbursed from the Stadium Project Subaccounts for any purpose other than paying Costs of the Stadium Project until the Stadium Project has been completed, as evidenced by a Written Certificate of the City.
Furthermore, following the issuance of the Series 2024 Bonds, the City shall not transfer any proceeds of the Series 2024 Bonds to either of the Stadium Project Subaccounts without an Opinion of Counsel that the exclusion from gross income for federal income tax purposes of interest on the Series 2024A Bonds will not be adversely affected.
Investment earnings on amounts on deposit in the Project Fund shall remain on deposit in the Project Fund (and the accounts or subaccounts therein) for application in accordance with this Section.
Section 3.05 Conditions for the Issuance of Additional Bonds. The Authority may at any time issue one or more Series of Additional Bonds (in addition to the Series 2024 Bonds) payable from Base Rental Payments as provided herein on a parity with all other Bonds theretofore issued hereunder, but only subject to the following conditions, which are hereby made conditions precedent to the issuance of such Additional Bonds:
(a) The issuance of such Additional Bonds shall have been authorized under and pursuant hereto and shall have been provided for by a Supplemental Indenture which shall specify the following:
(1) The application of the proceeds of the sale of such Additional Bonds; (2) The principal amount and designation of such Series of Additional Bonds and the denomination or denominations of the Additional Bonds; (3) The date, the maturity date or dates, the interest payment dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, however, that (i) the serial Bonds of such Series of Additional Bonds shall be payable as to principal annually on May 1 of each year in which principal falls due, and the term Bonds of such Series of Additional Bonds shall have annual mandatory sinking fund redemptions on May 1, (ii) the Additional Bonds shall be payable as to interest semiannually on November 1 and May 1 of each year, except that the first installment of interest may be payable on either November 1 and May 1 and shall be for a period of not longer than twelve months and the interest shall be payable thereafter semiannually on November 1 and May 1, (iii) all Additional Bonds of a Series of like maturity shall be identical in all respects, except as to number or denomination, and (iv) serial 21 4855-6708-5498v3/022283-0612
maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates; (4) The redemption premiums and terms, if any, for such Additional Bonds;
(5) The form of such Additional Bonds;
(6) If necessary; that from such proceeds or other sources an amount shall be deposited in the Reserve Fund (or a subaccount therein) so that following such deposit there shall be on deposit in the Reserve Fund (or a subaccount therein) an amount at least equal to the Reserve Fund Requirement for such Series of Additional Bonds, if any, after issuance of the Additional Bonds; and
(7) Such other provisions that are appropriate or necessary and are not inconsistent with the provisions hereof;
(b) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it;
(c) The City shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; and
(d) The Ground Lease and the Lease Agreement shall have been amended, to the extent necessary, so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times and in such manner as may be necessary to provide for the timely payment of the principal of and interest on such Additional Bonds; provided, however, that no such amendment shall be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith (evidence of the satisfaction of such condition shall be made by a Written Certificate of the City).
Nothing contained herein shall limit the issuance of any bonds or other obligations payable from Base Rental Payments if, after the issuance and delivery of such bonds or other obligations, none of the Bonds theretofore issued hereunder will be Outstanding.
Section 3.06 Procedure for the Issuance of Additional Bonds. At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Authority for issuance hereunder and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following:
(a) Certified copies of the Supplemental Indenture authorizing the issuance of such Additional Bonds, the amendment to the Lease Agreement requited by Section 3.05 hereof and the amendment to the Ground Lease, if any, required by Section 3.05 hereof, together with 22 4855-6708-5498v3/022283-0612
satisfactory evidence that such amendment to the Lease Agreement and such amendment to the Ground Lease, if any, have been (or will be immediately upon issuance of such Additional Bonds) duly recorded;
(b) A Written Request of the Authority as to the delivery of such Additional Bonds;
(c) An opinion of Bond Counsel substantially to the effect that (i) the Indenture (including all Supplemental Indentures), the Lease Agreement (including the amendment thereto required by Section 3.06 hereof) and the Ground Lease (including any amendment thereto required by Section 3.06 hereof) have been duly authorized, executed and delivered by, and constitute the valid and binding obligations of, the Authority and the City, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), (ii) such Additional Bonds constitute valid and binding special obligations of the Authority payable solely from Base Rental Payments as provided herein and are enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California) and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on any tax-exempt Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes; (d) a Written Certificate of the Authority that the requirements of Section 3.05 hereof have been met;
(e) a Written Certificate of the City that the requirements of Section 3.05 hereof and Sections 5.01 and 5.02 of the Lease Agreement have been met, and a Written Certificate of the City as to the fair rental value of the Property, after giving effect to the execution and delivery of the Additional Bonds, and to the use of proceeds received therefrom; and (f) Such further documents as are required by the provisions hereof or by the provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds.
Section 3.07 Additional Bonds. So long as any of the Bonds remain Outstanding, the Authority shall not issue any Additional Bonds or obligations payable from the Base Rental Payments, except pursuant to Sections 3.05 and 3.06 hereof.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2024 Bonds.
(a) Extraordinary Redemption. The Series 2024 Bonds shall be subject to redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of and: (i) Net Insurance Proceeds received with respect to all or a portion of the Property, deposited by 23 4855-6708-5498v3/022283-0612
the Trustee in the Redemption Fund pursuant to Sections 5.03 and 5.04 hereof, and (ii) eminent domain proceeds received pursuant to Section 7.01 of the Lease Agreement, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
(b) Optional Redemption. The Series 2024A Bonds maturing on or after May 1, 20__, shall be subject to optional redemption, in whole or in part, on any date on or after May 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to subsection (a) of Section 7.02 of the Lease, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption.
The Series 2024B Bonds maturing on or after May 1, 20__, shall be subject to optional redemption, in whole or in part, on any date on or after May 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to subsection (a) of Section 7.02 of the Lease, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption. (c) Mandatory Sinking Fund Redemption.
(i) The Series 2024A Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity.
The Series 2024A Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
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Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity.
(ii) The Series 2024B Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity.
In the event of a partial optional redemption or extraordinary mandatory redemption of any of the Term Bonds, each of the remaining mandatory sinking fund payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis in the amount of $5,000 or any integral multiple thereof as directed by an Authorized City Representative.
Section 4.02 Notice of Redemption. The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least 20 but not more than 60 days prior to the date fixed for redemption. Such notice shall state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Such notice may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption date to redeem the Bonds so called for redemption. Such notice of redemption may also state that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.
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With respect to any notice of optional redemption of the Bonds, such notice may state that such redemption shall be conditional upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of, premium if any, and interest on the Bonds to be redeemed and upon other conditions set forth therein and that, if such money shall not have been so received or such other conditions shall not have been satisfied, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. If any condition stated in the redemption notice for an optional redemption shall not have been satisfied on or prior to the redemption date: (i) the redemption notice shall be of no force and effect, (ii) the Authority shall not be required to redeem such Bonds, (iii) the redemption shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the persons in the manner in which the conditional redemption notice was given that such condition or conditions were not met and that the redemption was canceled.
Section 4.03 Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed by lot from all Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Authority provided to the Trustee at least 20 but no more than 60 days prior to the date of such redemption, (b) with respect to any redemption pursuant to Section 4.01(a) hereof and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, as directed in a Written Request of the Authority provided to the Trustee at least 20 but no more than 60 days prior to the date of such redemption, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds which may be separately redeemed.
Section 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds 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 the same Series in authorized denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered.
Section 4.05 Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the Redemption Fund, the Bonds shall become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds shall be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date.
If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon.
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All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof shall be canceled upon surrender thereof and destroyed.
ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Capitalized Interest Fund, the Principal Fund, the Reserve Fund (provided, however, that only amounts in the Series 2024 Account of the Reserve Fund shall secure the Series 2024 Bonds, and amounts in any other subaccount of the Reserve Fund created in connection with the issuance of Additional Bonds shall secure only such Additional Bonds) and the Redemption Fund are hereby pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act. Said pledge shall constitute a first lien on such assets.
All obligations of the Authority under this Indenture shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor hereunder; provided, however, that all obligations of the Authority under the Bonds shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor hereunder. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.
Section 5.02 Flow of Funds.
(a) The Trustee shall establish and maintain separate funds designated the “Base Rental Payment Fund,” the “Interest Fund,” the “Principal Fund,” the “Redemption Fund” (and within the Redemption Fund a “2024A Account” and a “2024B Account”), the “Reserve Fund” (and within the Reserve Fund, a “Series 2024 Account”) and the “Capitalized Interest Fund” (and within the Capitalized Interest Fund, a “2024A Account” and a “2024B Account”).
All Base Rental Payments shall be paid directly by the City to the Trustee, and if received by the Authority at any time shall be transferred by the Authority with the Trustee within one Business Day after the receipt thereof. All Series Base Rental Payments received by the Trustee shall be deposited by the Trustee in the Base Rental Payment Fund. (b) The Trustee shall transfer the amounts on deposit in the Base Rental Payment Fund, at the times and in the manner hereinafter provided, to the following respective funds:
(i) Interest Fund. On the Business Day immediately preceding each Interest Payment Date, the Trustee shall transfer from the Base Rental Fund to the Interest Fund the amount, if any, necessary to cause the amount on deposit in the Interest Fund to be equal to the interest due on the Bonds on such Interest Payment Date. (ii) Principal Fund. On the Business Day immediately preceding each May 1, commencing May 1, 2026, the Trustee shall transfer from the Base Rental Fund to the Principal Fund the amount, if any, necessary to cause the amount on deposit in the Principal Fund to 27 4855-6708-5498v3/022283-0612
be equal to the principal amount of the Bonds due on such May 1, either as a result of the maturity thereof or mandatory sinking fund redemption payments required to be made with respect thereto.
Moneys in the Principal Fund shall be used by the Trustee for the purpose of paying the principal of the Bonds when due and payable at their maturity dates or upon earlier mandatory sinking fund redemption.
(iii) Redemption Fund. The Trustee, on the redemption date specified in the Written Request of the City filed with the Trustee at the time that any prepaid Base Rental Payment is paid to the Trustee pursuant to the Lease Agreement, shall deposit in the Redemption Fund that amount of moneys representing the portion of the Base Rental Payments designated as prepaid Base Rental Payments. Additionally, the Trustee shall deposit in the Redemption Fund any amounts required to be deposited therein pursuant to Sections 5.03 and 5.04 hereof and Section 7.01 of the Lease Agreement. Moneys in the Redemption Fund shall be used by the Trustee for the purpose of paying the principal of and interest and premium, if any, on Series 2024 Bonds redeemed pursuant to the provisions of subsections (a) and (b) of Section 4.01 hereof and Additional Bonds redeemed pursuant to the corresponding provisions of the Supplemental Indenture pursuant to which such Additional Bonds are issued.
(iv) Reserve Fund. All amounts on deposit in the Base Rental Payment Fund on November 2, to the extent not required to pay the principal of any Outstanding Bonds then having come due and payable, shall be transferred to the Reserve Fund, to the extent necessary to satisfy the Reserve Fund Requirement, to the extent such amounts are due and payable. (v) Capitalized Interest Fund. On the second Business Day immediately preceding each Interest Payment Date, the Trustee shall transfer from the Capitalized Interest Fund to the Interest Fund, the following amounts on the dates set forth below. All amounts remaining in the Capitalized Interest Fund following November 1, 2025 shall be transferred to the Interest Fund.
Date 2024A Account 2024B Account
Section 5.03 Application of Net Insurance Proceeds. If the Property or any portion thereof shall be damaged or destroyed, subject to the further requirements of this Section, the City shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or replacement thereof, unless the City elects not to repair or replace the Property or the affected portion thereof in accordance with the provisions hereof.
The Net Insurance Proceeds (other than Net Insurance Proceeds of rental interruption insurance), including the proceeds of any self-insurance, received on account of any damage or destruction of the Property or a portion thereof shall as soon as possible be deposited with the Trustee and be held by the Trustee in a special fund entitled the “Insurance and Condemnation Fund” and made available for and, to the extent necessary, shall be applied to the cost of repair or replacement of the Property or the affected portion thereof upon receipt of a Written Request of the City, together 28 4855-6708-5498v3/022283-0612
with invoices therefor. Each such Written Request of the City shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Pending such application, such proceeds may be invested by the Trustee as directed by the City in Permitted Investments that mature not later than such times moneys are expected to be needed to pay such costs of repair or replacement.
Notwithstanding the foregoing, the City shall, within 60 days of the occurrence of the event of damage or destruction, notify the Trustee in writing as to whether the City intends to replace or repair the Property or the portions of the Property which were damaged or destroyed. If the City does intend to replace or repair the Property or portions thereof, the City shall deposit with the Trustee the full amount of any insurance deductible to be credited to the special account.
If the damage, destruction or loss was such that there resulted a substantial interference with the City’s right to the use or occupancy of the Property and an abatement, of Rental Payments results from such damage or destruction pursuant to Section 3.06 of the Lease Agreement, then the City shall be required either to (a) apply sufficient funds from the insurance proceeds and other legally available funds to the replacement or repair of the Property or the portions thereof which have been damaged to the condition which existed prior to such damage or destruction, or (b) apply sufficient funds from the insurance proceeds and other legally available funds to the redemption, as set forth in subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued, in full of all the Outstanding Bonds or all of those Outstanding Bonds which would have been payable from that portion of the Base Rental Payments which are abated as a result of the damage or destruction. Funds to be applied to the redemption of Bonds in accordance with clause (b) above shall be deposited in the Redemption Fund.
If the City is not required to replace or repair the Property, or the affected portion thereof, as set forth in clause (a) above or to use such amounts to redeem Bonds as set forth in clause (b) above, then such proceeds shall, if there is first delivered to the Trustee a Written Certificate of the City to the effect that the annual fair rental value of the Property after such damage or destruction, and after any repairs or replacements made as a result of such damage or destruction, is at least equal to 100% of the maximum amount of Base Rental Payments becoming due under the Lease Agreement in the then current Rental Period or any subsequent Rental Period and the fair replacement value of the Property after such damage or destruction is at least equal to the principal amount of the Outstanding Bonds, be paid to the City to be used for any lawful purpose.
The proceeds of any award in eminent domain received in respect to the Property shall be deposited by the Trustee in the Redemption Fund and applied to the redemption of Bonds pursuant to subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued.
Section 5.04 Title Insurance. Proceeds of any policy of title insurance received by the Trustee in respect of the Property shall be applied and disbursed by the Trustee as follows:
(a) if the City determines that the title defect giving rise to such proceeds has not substantially interfered with its use and occupancy of the Property and will not result in an abatement of Rental Payments payable by the City under the Lease Agreement, upon Written Request of the City, such proceeds shall be remitted to the City and used for any lawful purpose thereof; or (b) if the City determines that the title defect giving rise to such proceeds has substantially interfered with its use and occupancy of the Property and will result in an abatement of 29 4855-6708-5498v3/022283-0612
Rental Payments payable by the City under the Lease Agreement, then, upon Written Request of the City, the Trustee shall immediately deposit such proceeds in the Redemption Fund and such proceeds shall be applied to the redemption of Bonds in the manner provided in subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued.
Section 5.05 Reserve Fund.
(a) The Authority hereby agrees to establish a separate fund titled the “Reserve Fund” and within the Reserve Fund, the “Series 2024 Account,” solely as security for the Series 2024 Bonds, which shall be held and maintained by the Trustee. The Trustee shall deposit into the Reserve Fund or accounts therein, any amounts transferred from the Base Rental Fund pursuant to Section 5.02(c) above. The Trustee may establish additional accounts in the Reserve Fund in connection with the issuance of Additional Bonds, if any. All moneys in the Reserve Fund and accounts therein shall be used and withdrawn by the Trustee solely for the purpose of funding the Interest Fund or the Principal Fund, in that order, in the event of any deficiency in either of such accounts on an Interest Payment Date.
(b) Amounts in the Series 2024 Account of the Reserve Fund shall be used solely for the purpose of funding the Interest Fund or the Principal Fund, in that order, in the event of any deficiency in either of such accounts with respect to the Series 2024 Bonds on an Interest Payment Date. On the final maturity date for the Series 2024 Bonds, amounts in the Series 2024 Account of the Reserve Fund shall be transferred to the Interest Fund and the Principal Fund to make the final payment on the Series 2024 Bonds, and the amount transferred shall be deemed to be a credit against the remaining Base Rental Payments to be made by the City under the Lease Agreement.
Section 5.06 Rebate Fund.
(a) Establishment. The Trustee shall establish a fund for the Bonds designated the “Rebate Fund” when required in accordance herewith. Absent an Opinion of Counsel that the exclusion from gross income for federal income tax purposes of interest on the Series 2024A Bonds will not be adversely affected, the Authority shall cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the Series 2024A Bonds shall be governed by this Section and the Tax Certificate, unless and to the extent that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds will not be adversely affected if such requirements are not satisfied. Notwithstanding anything to the contrary contained herein or in the Tax Certificate, the Trustee: (1) shall be deemed conclusively to have complied with the provisions thereof if it follows all Written Requests of the Authority or Written Requests of the City; (2) shall have no liability or responsibility to enforce compliance by the Authority or the City with the terms of the Tax Certificate and shall not be deemed to have knowledge of the terms thereof; (3) may rely conclusively on the Authority’s or the City’s calculations and determinations and certifications relating to rebate matters; and (4) shall have no responsibility to independently make any calculations or determinations or to review the Authority’s or the City’s calculations or determinations thereunder.
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(i) Computation. Within 55 days of the end of each fifth Bond Year (as such term is defined in the Tax Certificate), the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The Authority shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section.
(ii) Transfer. Within 55 days of the end of each fifth Bond Year, upon the Written Request of the Authority or Written Request of the City, an amount shall be deposited to the Rebate Fund by the Trustee from any Rental Payments legally available for such purpose (as specified by the Authority or the City in the aforesaid Written Request), if and to the extent required, so that the balance in the Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with clause (i) of this subsection (a). In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon Written Request of the Authority or Written Request of the City, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Base Rental Payment Fund.
(iii) Payment to the Treasury. The Trustee shall pay, as directed by Written Request of the Authority, to the United States Treasury, out of amounts in the Rebate Fund:
(1) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (2) Not later than 60 days after the payment of all of the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations.
In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T (prepared by the Authority), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Series 2024A Bonds and the payments described in 31 4855-6708-5498v3/022283-0612
subsection (a) above being made may be withdrawn by the Authority and utilized in any manner by the Authority.
(c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the Series 2024A Bonds.
Section 5.07 Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Indenture and held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in writing by the Authority.
Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Indenture; provided, however, that such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Date. Absent timely written direction from the Authority, the Trustee shall hold any funds held by it uninvested.
Subject to the provisions of Section 5.06 hereof, all interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Indenture shall be retained therein.
Permitted Investments acquired as an investment of moneys in any fund established under this Indenture shall be credited to such fund. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the cost thereof.
The Trustee may act as principal or agent in the making or disposing of any investment.
Upon the Written Request of the Authority, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder.
The Trustee may make any investments hereunder through the bond or investment department or trust investment department of the entity acting as Trustee hereunder, or those of such entity’s parent or any affiliate, and such entity, or its parent or affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services.
The entity acting as Trustee hereunder, or any of its affiliates, may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder and such entity, or its affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services.
The Authority and the City acknowledge that, to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority and the City the right to receive brokerage confirmations of security transactions as they occur, at no additional cost, the Authority and the City specifically waive receipt of such confirmations to the extent permitted by law. 32 4855-6708-5498v3/022283-0612
ARTICLE VI
COVENANTS
Section 6.01 Compliance with Agreements. The Trustee will not authenticate or deliver any Bonds in any manner other than in accordance with the provisions hereof, and the Authority and the City will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them.
Section 6.02 Compliance with Ground Lease and Lease Agreement. The Authority and the City will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Ground Lease and the Lease Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Ground Lease and the Lease Agreement against the other party thereto in accordance with their respective terms.
Section 6.03 Observance of Laws and Regulations. The Authority, the City and the Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired.
Section 6.04 Other Liens. The City will keep the Property and all parts thereof free from judgments and materialmen’s and mechanics’ liens and free from all claims, demands, encumbrances and other liens of whatever nature or character, and free from any claim or liability which materially impairs the City in conducting its business or utilizing the Property, and the Trustee at its option (after first giving the City ten days’ written notice to comply therewith and failure of the City to so comply within such ten-day period) may, but is in no event obligated to, defend against any and all actions or proceedings, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that, in defending against any such actions or proceedings or in paying or compromising any such claims or demands, the Trustee shall not in any event be deemed to have waived or released the City from liability for or on account of any of its agreements and covenants contained herein, or from its liability hereunder and to perform such agreements and covenants.
So long as any Bonds are Outstanding, none of the Trustee, the Authority or the City shall create or suffer to be created any pledge of or lien on the amounts on deposit in any of the funds or accounts created hereunder, other than the pledge and lien hereof.
The Authority, the City and the Trustee shall not encumber the Property other than in accordance with the Ground Lease, the Lease Agreement, the Indenture and the Assignment Agreement.
Section 6.05 Prosecution and Defense of Suits. The City will promptly, upon request of the Trustee (which request the Trustee is not required to make), take such action from time to time as 33 4855-6708-5498v3/022283-0612
may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Property or any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits or other proceedings as may be appropriate for such purpose and will indemnify and save the Trustee harmless from all cost, damage, expense or loss, including attorneys’ fees and expenses, which it or the Owners may incur by reason of any such cloud, defect, action, suit or other proceeding.
Section 6.06 Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions relating to the receipt, deposit and disbursement of the Base Rental Payments, and such accounting records shall be available for inspection by the Authority and the City at reasonable hours and under reasonable conditions.
Section 6.07 Recordation and Filing. The City will record, or cause to be recorded, with the appropriate county recorder, the Lease Agreement, the Ground Lease and the Assignment Agreement, or memoranda thereof.
Section 6.08 Tax Covenants. Notwithstanding any other provision of the Indenture, absent an Opinion of Counsel that the exclusion from gross income of the interest on the Series 2024A Bonds will not be adversely affected for federal income tax purposes, the City and the Authority covenant to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the Series 2024A Bonds and specifically covenant, without limiting the generality of the foregoing, as follows:
(a) Private Activity. The City and the Authority will not take any action or refrain from taking any action or make any use of the proceeds of the Series 2024A Bonds or of any other moneys or property which would cause the Series 2024A Bonds to be “private activity bonds” within the meaning of Section 141 of the Code;
(b) Arbitrage. The City and the Authority will make no use of the proceeds of the Series 2024A Bonds or of any other amounts or property, regardless of the source, and will not take any action or refrain from taking any action which would cause the Series 2024A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code; (c) Federal Guarantee. The City and the Authority will make no use of the proceeds of the Series 2024A Bonds and will not take or omit to take any action that would cause the Series 2024A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code; (d) Information Reporting. The City and the Authority will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary to preserve the exclusion of interest on the Series 2024A Bonds pursuant to Section 103(a) of the Code;
(e) Hedge Bonds. The City and the Authority will make no use of the proceeds of the Series 2024A Bonds or any other amounts or property, regardless of the source, and will not take any action or refrain from taking any action that would cause the Series 2024A Bonds to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the City and the Authority take all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the Series 2024A Bonds for federal income tax purposes; and
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(f) Miscellaneous. The City and the Authority will not take any action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate and will comply with the covenants and requirements stated therein and incorporated by reference herein.
This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the City and the Authority from causing the Trustee to issue revenue bonds or to execute and deliver contracts payable on a parity with the Series 2024A Bonds, the interest with respect to which has been determined by an Opinion of Counsel to be subject to federal income taxation.
Section 6.09 Continuing Disclosure. The City will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Indenture, failure of the City to comply with the Continuing Disclosure Agreement shall not constitute an event of default hereunder; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its reasonable satisfaction therefor, shall) or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.
Section 6.10 Further Assurances. Whenever and so often as requested to do so by the Trustee, the Authority and the City will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Trustee all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon it hereby or by the Assignment Agreement, the Ground Lease or the Lease Agreement.
ARTICLE VII
DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default. If an event of default (within the meaning of Article VI of the Lease Agreement) shall happen, then such event of default shall constitute an event of default hereunder. The Trustee shall give notice, as assignee of the Authority, of an event of default under the Lease Agreement to the City. In each and every case during the continuance of an event of default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal amount of Bonds then Outstanding, and upon being indemnified to its reasonable satisfaction therefor, shall, upon notice in writing to the City and the Authority, exercise any of the remedies granted to the Authority under the Lease Agreement and, in addition, take whatever action at law or in equity may appear necessary or desirable to enforce its rights as assignee pursuant to the Assignment Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Indenture or by the Bonds, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 7.02 hereof.
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Section 7.02 Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof, the Trustee shall have the right:
(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Authority or the City or any member, director, officer or employee thereof, and to compel the Authority or the City or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or
(c) by suit in equity upon the happening of any event of default hereunder to require the Authority and the City to account as the trustee of an express trust.
Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Owners so affected.
Section 7.03 Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by this Article may be enforced and exercised from time to time and as often the Trustee shall deem expedient.
If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the Trustee, such Owner, the Authority and the City shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.
Section 7.04 Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Section 7.05 No Liability by the Authority to the Owners. Except as expressly provided herein, the Authority shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of the other agreements and covenants required to be performed by it contained in the Lease Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein.
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Section 7.06 No Liability by the City to the Owners. Except for the payment when due of the Base Rental Payments and the performance of the other agreements and covenants required to be performed by it contained in the Lease Agreement, the Ground Lease or herein, the City shall not have any obligation or liability to the Owners with respect to the Trust Indenture or the preparation, execution, delivery or transfer of the Bonds or the disbursement of the Base Rental Payments by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein.
Section 7.07 No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the Authority or the City of the other agreements and covenants required to be performed by them contained in the Lease Agreement, the Ground Lease or herein.
Section 7.08 Application of Amounts After Default. All payments received by the Trustee with respect to the rental of the Property after a default by the City pursuant to Article VI of the Lease Agreement (including, without limitation, any proceeds received in connection with the sale, assignment or sublease of the Authority’s right, title and interest in the Ground Lease), and all damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under Article VI of the Lease Agreement, shall be deposited into the Base Rental Payment Fund and as soon as practicable thereafter applied, together with all other funds held hereunder (except funds in the Rebate Fund):
(a) to the payment of all amounts due the Trustee under Article VIII hereof; (b) to the payment of all amounts then due for interest on the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have become payable-prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest on such Bonds due and payable; and
(c) to the payment of all amounts then due for principal of the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have become payable prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal of such Bonds due and payable.
Section 7.09 Trustee May Enforce Claims Without Possession of Bonds. All rights of action and claims under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners in respect of which such judgment has been recovered.
Section 7.10 Limitation on Suits. No Owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or Trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously 37 4855-6708-5498v3/022283-0612
given written notice to the Trustee of a continuing event of default, (b) the Owners of not less than 25% of the aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e) no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by the Owners of a majority of the aggregate principal amount of Bonds then Outstanding; it being understood and intended that no one or more Owners shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Owner, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Owners.
ARTICLE VIII
THE TRUSTEE
Section 8.01 Employment of the Trustee. The Authority hereby appoints and employs the Trustee to receive, deposit and disburse the Base Rental Payments, to authenticate, deliver and transfer the Bonds and to perform the other functions contained herein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Indenture, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an event of default has occurred and is continuing, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. In case an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
Section 8.02 Duties, Removal and Resignation of the Trustee. The Authority may, by an instrument in writing, remove the Trustee initially a party hereto with 30-days’ prior notice and any successor thereto unless an event of default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a) requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal amount of Bonds at the time Outstanding (or their attorneys duly authorized in writing), or (b) the Trustee shall cease to be eligible in accordance with the following sentence, and shall appoint a successor Trustee. The Trustee and any successor Trustee shall be a banking corporation or association or trust company having (or if such banking corporation or association or trust company is a member of a bank holding company, its bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities. If such banking corporation or association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such banking corporation, association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
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The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the Authority does not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the Authority, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee.
Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipso facto, shall be and become successor trustee under this Indenture and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding.
Section 8.03 Compensation of the Trustee. The City shall from time to time, subject to any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include “overhead expenses” except as such expenses are included as a component of the Trustee’s stated annual fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder. The Trustee may take whatever legal actions are lawfully available to it directly against the Authority or the City.
The City shall, to the extent permitted by law, indemnify and save the Trustee harmless against any liabilities, costs, claims or expenses, including those of its attorneys, which it may incur in the exercise and performance of its powers and duties hereunder, under the Lease Agreement, or in connection with any document or transaction contemplated hereunder or thereunder, including the enforcement of any remedies and the defense of any suit, and which are not due to its negligence or its misconduct. The duty of the City to compensate and indemnify the Trustee shall survive the termination and discharge of this Indenture and the earlier removal or resignation of the Trustee.
No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder.
Upon an event of default hereunder, and only upon an event of default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of and premium, if any, and interest on any Bond, upon the trust estate for the foregoing fees, charges and expenses incurred by it. When the Trustee incurs expenses or renders services after the occurrence of an event of default, such expenses and the compensation for such services are intended to constitute expenses of 39 4855-6708-5498v3/022283-0612
administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.
Section 8.04 Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Owners of the Bonds pursuant to this Indenture, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Authority or the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith.
The Trustee shall not be responsible for the sufficiency of the Bonds or the Lease Agreement, or of the assignment made to it by the Assignment Agreement, or for statements made in any preliminary or final official statement relating to the Bonds, or of the title to the Property.
Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the City or a Written Certificate of the Authority, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable.
The Trustee may buy, sell, own, hold and deal in any of the Bonds and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto, The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Authority or the City, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Authority or the City as freely as if it were not the Trustee hereunder.
The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall in a commercially reasonable manner pursue all remedies of the Trustee against such agent, attorney or receiver. The Trustee shall not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
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The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder.
The Trustee shall not be deemed to have knowledge of an event of default unless it has actual knowledge thereof.
The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Authority or the City is a party and which, in the opinion of the Trustee and its counsel, affects the Bonds or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal amount of Bonds then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action.
The Trustee’s rights to immunities and protection from liability hereunder and its rights to payment of its fees and expenses shall survive its resignation or removal and final payment or defeasance of the Bonds.
All indemnifications and releases from liability granted herein to the Trustee shall extend to the directors, officers, employees and agents of the Trustee.
The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful default. The Trustee shall have no responsibility or liability with respect to any information, statements or recitals in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. The Trustee shall not be accountable for the use or application by the Borrower of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any paying agent.
In acting or omitting to act pursuant to the Lease Agreement or Ground Lease, the Trustee shall be entitled to all of the rights, immunities and indemnities accorded to it under this Indenture and the Lease Agreement, including, but not limited to, this Article VIII.
The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using Electronic Means (“Electronic Means” shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder); provided, however, that the Authority and City shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Authority and City whenever a person is to be added or deleted from the listing. If the Authority and City elect to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s understanding of such Instructions shall be deemed controlling. The Authority and City understand and agrees that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to 41 4855-6708-5498v3/022283-0612
the Trustee have been sent by such Authorized Officer. The Authority and City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority and City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Authority and City. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction.
The Authority and City agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Authority and City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.
The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include but not be limited to acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences.
ARTICLE IX
MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted.
(a) This Indenture and the rights and obligations of the Authority, the City, the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into with the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, which shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or (iii) permit the creation of any lien on the Base Rental Payments and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture or deprive the Owners of the Bonds of the lien created by this Indenture on such Base Rental Payments and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. (b) This Indenture and the rights and obligations of the Authority, the City, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into without the consent of any Bond Owners for any one or more of the following purposes:
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(i) to add to the covenants and agreements of the Authority or the City in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority or the City; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in this Indenture;
(iii) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of Article III hereof; (iv) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute;
(v) to modify, amend or supplement this Indenture in such manner as to cause interest on the Series 2024A Bonds and Additional Bonds issued on a tax-exempt basis to be excludable from gross income for purposes of federal income taxation by the United States of America; and
(vi) in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners hereunder. (c) Promptly after the execution by the Authority, the City and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Authority), by first class mail postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (d) No Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its prior written consent.
Section 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the City, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. The City shall notify the rating agencies in accordance with Section 11.14 hereof upon the execution of any Supplemental Indenture.
Section 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so 43 4855-6708-5498v3/022283-0612
determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand of the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same interest rate and maturity.
Section 9.04 Amendment of Particular Bonds. The provisions of this Article shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner.
Section 9.05 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be provided, and shall be fully protected in relying upon, an Opinion Of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and complies with the terms hereof. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
ARTICLE X
DEFEASANCE
Section 10.01 Discharge of Indenture. If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated herein and therein, then the Owners of such Bonds shall cease to be entitled to the pledge of the Base Rental and the other assets as provided herein, and all agreements, covenants and other obligations of the Authority and the City to the Owners of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority and the City all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the City all money or securities held by it pursuant hereto which are not required for the payment of the principal of and interest and premium, if any, on such Bonds.
Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid and if, at the time of such payment, the Authority and the City shall have kept, performed and observed all of the covenants and promises in such Bonds and in this Indenture required or contemplated to be kept, performed and observed by them on or prior to that time, then this Indenture shall be considered to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien of this Indenture and such lien and all covenants, agreements and other obligations of the Authority and the City hereunder shall cease, terminate become void and be completely discharged as to such Bonds.
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Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non- presentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of and interest and premium, if any, on the Bonds, to pay to the Owners of Bonds the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture relating to the compensation and indemnity of the Trustee shall remain in effect and shall be binding upon the Trustee, the City and the Authority.
Section 10.02 Bonds Deemed To Have Been Paid. If moneys shall have been set aside and held by the Trustee for the payment or redemption of any Bonds and the interest thereon at the maturity or redemption date thereof, such Bonds shall be deemed to have been paid within the meaning and with the effect provided in Section 10.01 hereof. Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in Section 10.01 hereof if (a) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in accordance with the provisions of Section 4.02 hereof, notice of redemption of such Bonds on said redemption date, said notice to be given in accordance with Section 4.02 hereof, (b) there shall have been deposited with the Trustee either (i) money in an amount which shall be sufficient, or (ii) Federal Securities that are not subject to redemption other than at the option of the holder thereof, the interest on and principal of which when paid will provide money which, together with the money, if any deposited with the Trustee at the same time, shall, as verified by an independent certified public accountant, be sufficient to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Bonds, and (c) in the event such Bonds are not by their terms subject to redemption within the next succeeding 60 days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the owners of such Bonds that the deposit required by clause (b) above has been made with the Trustee and that such Bonds, are deemed to have been paid in accordance with this Section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and premium, if any, on such Bonds.
Section 10.03 Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of this Indenture, to the extent permitted by law, any moneys held by the Trustee in trust for the payment of the principal of, or premium or interest on, any Bonds and remaining unclaimed for two years after the date of deposit of such moneys, shall be repaid to the Authority (without liability for interest) free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee may (at the cost of the Authority) first mail, by first class mail postage prepaid, to the Owners of Bonds which have not yet been paid, at the respective addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. 45 4855-6708-5498v3/022283-0612
ARTICLE XI
MISCELLANEOUS
Section 11.01 Benefits of Indenture Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the City, the Trustee and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Authority or the City shall be for the sole and exclusive benefit of the Trustee and the Owners.
Section 11.02 Successor Deemed Included in all References to Predecessor. Whenever the Authority, the City or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Authority, the City or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Authority, the City or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.
Section 11.03 Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his or her attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he or she purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him or her the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient.
The ownership of any Bonds and the amount, payment date, number and date of owning the same may be proved by the Registration Books.
Any declaration, request or other instrument in writing of the Owner of any Bond shall bind all future Owners of such Bond with respect to anything done or suffered to be done by the Authority, the City or the Trustee in good faith and in accordance therewith.
Section 11.04 Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the Authority or the City shall be individually or personally liable for the payment of any moneys, including without limitation, the principal of or interest on the Bonds, but nothing contained herein shall relieve any member, officer or employee of the City or the Authority from the performance of any official duty provided by any applicable provisions of law, by the Lease Agreement or hereby.
Section 11.05 Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee may, in lieu of such cancellation and delivery, destroy such Bonds.
Section 11.06 Funds and Accounts. Any fund or account required to be established and maintained herein by the Trustee may be established and maintained in the accounting records of the 46 4855-6708-5498v3/022283-0612
Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund, but all such records with respect to all such funds and accounts shall at an times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Bonds and the rights of the Owners.
The Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided, however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Indenture. The Trustee may establish such funds and accounts as it deems necessary or appropriate to perform its obligations hereunder.
Section 11.07 Article and Section Headings Gender and References. The singular form of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall include correlative words of the other genders. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,” “Sections,” subsections or clauses are to the corresponding Articles, Sections, subsections or clauses hereof, and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section, subsection or clause thereof.
Section 11.08 Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms required herein to be observed or performed by or on the part of the Authority, the City or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void to the extent contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants and terms hereof and shall in no way affect the validity hereof or of the Bonds, and the Owners shall retain all the benefit, protection and security afforded to them under any applicable provisions of law.
The Authority, the City and the Trustee hereby declare that they would have executed this Indenture, and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Bonds pursuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.
Section 11.09 Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; except that, in determining whether the Trustee shall be protected in relying upon any such demand, request, direction, consent or waiver of an Owner, only Bonds which the Trustee actually knows to be owned or held by or for the account of the Authority or the City, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City, shall be disregarded unless all Bonds are so owned or held, in which case such Bonds shall be considered Outstanding for the purpose of such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee 47 4855-6708-5498v3/022283-0612
shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Authority and the City shall specify in a certificate to the Trustee those Bonds disqualified pursuant to this Section and the Trustee may conclusively rely on such certificate.
Section 11.10 Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.03 hereof but without any liability for interest thereon.
Section 11.11 Payment on Non-Business Days. In the event any payment is required to be made hereunder on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day with the same effect as if made on such non-Business Day.
Section 11.12 California Law. This Indenture shall be construed and governed in accordance with the laws of the State of California.
Section 11.13 Notices. All written notices to be given hereunder shall be given by mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely:
If to the City: City of Lancaster
44933 Fern Avenue
Lancaster, California 93534
Attention: City Manager
If to the Authority: Lancaster Financing Authority
c/o City of Lancaster
44933 Fern Avenue
Lancaster, California 93534
Attention: Executive Director
If to the Trustee: U.S. Bank Trust Company, National Association 633 West Fifth St., 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust Services
Ref: City of Lancaster 2024 Lease Revenue Bonds
Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender’s receipt of an appropriate answer back or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 48 4855-6708-5498v3/022283-0612
24 hours after delivery to said overnight courier, or (d) if given by any other means, upon delivery at the address specified in this Section.
Section 11.14 Notice to Rating Agencies. The Trustee shall provide S&P, if the Bonds are then rated by S&P, and Moody’s, if the Bonds are then rated by Moody’s, with prompt notice of any substitution or release of property pursuant to Section 9.03 of the Lease Agreement or the execution of any Supplemental Indenture pursuant to Section 9.02 hereof.
Section 11.15 Execution in Counterparts. This Indenture may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Authority and the City have caused this Indenture to be signed in their respective names by their representative thereunto duly authorized, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written,
LANCASTER FINANCING AUTHORITY
By:
Executive Director
ATTEST:
Secretary
CITY OF LANCASTER
By:
City Manager
ATTEST:
City Clerk
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION,
as Trustee
By:
Authorized Officer
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EXHIBIT A
FORM OF SERIES 2024 BOND
No. ____ $___________
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
LANCASTER FINANCING AUTHORITY
LEASE REVENUE BONDS
,
SERIES 2024[A][B] BONDS [(TAX-EXEMPT)] [(FEDERALLY TAXABLE)]
INTEREST RATE MATURITY DATE DATED DATE CUSIP
______% May 1, 20__ _____, 2024 ________
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: _________________________ THOUSAND DOLLARS The Lancaster Financing Authority (the “Authority”), for value received, hereby promises to pay, solely from the Base Rental Payments (as hereinafter defined) or amounts in certain funds and accounts held under the Indenture (as hereinafter defined), to the Registered Owner identified above or registered assigns (the “Registered Owner”); on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the United States of America; and to pay interest thereon at the Interest Rate identified above in like lawful money from the date hereof payable semiannually on May 1 and November 1 in each year, commencing November 1, 2024 (the “Interest Payment Dates”), until payment of such Principal Amount in full.
This Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth calendar day of the month next preceding such Interest Payment Date, whether or not such day is a Business Day, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior to October 15, 2024, in which event it shall bear interest from the Dated Date identified above; provided, however, that if, at the time of authentication of this Bond, interest is in default on this Bond, interest on this Bond shall be payable from the date to which interest hereon has been paid in full, payable on each Interest Payment Date). The Principal Amount hereof is payable upon surrender hereof upon maturity or A-2
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earlier redemption at the Office of the Trustee (as hereinafter defined). Interest hereon is payable by wire or check of U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”), mailed by first class mail, postage prepaid, on each Interest Payment Date to the Registered Owner hereof at the address of the Registered Owner shown on the Registration Books at the close of business on the fifteenth calendar day of the month next preceding such Interest Payment Date. “Office of the Trustee” means the principal corporate trust office of the Trustee in Los Angeles, California, or such other office as may be specified to the Authority and the City of Lancaster (the “City”) by the Trustee in writing, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or the agency of the Trustee at which, at any particular time, its corporate trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing.
This Bond is one of a series of a duly authorized issue of bonds issued for the purpose of financing the acquisition, construction and installation of certain capital improvements constituting the Projects and related improvements, facilities and equipment, and is one of the series of bonds designated “Lancaster Financing Authority Lease Revenue Bonds, Series 2024[A][B] [(Tax- Exempt)] [(Federally Taxable)]” (the “Series 2024[A][B] Bonds”) in the aggregate principal amount of $[________][________]. The Series 2024[A][B] Bonds are issued pursuant to the Indenture, dated as of _____ 1, 2024 (the “Indenture”), by and among the Authority, the City and the Trustee; this reference incorporates the Indenture herein; and by acceptance hereof the owner of this Bond assents to said terms and conditions. Concurrently with the issuance of the Series 2024[A][B] Bonds, the Authority will issue the Lancaster Financing Authority Lease Revenue Bonds, Series 2024[A][B] [(Tax-Exempt)] [(Federally Taxable)]” (the “Series 2024[A][B] Bonds” and together with the Series 2024[A][B] Bonds, the “Series 2024 Bonds”) pursuant to the terms of the Indenture.
Pursuant to and as more particularly provided in the Indenture, additional bonds (“Additional Bonds”), may be issued by the Authority secured by a lien on the Base Rental Payments and certain funds and accounts described below on a parity with the lien securing the Series 2024 Bonds. The Series 2024 Bonds and any Additional Bonds are collectively referred to as the “Bonds.” The Indenture is entered into, and this Bond is issued under, the Marks-Roos Local Bond Pooling Act of 1985 (the “Act”) and the laws of the State of California.
Pursuant to the Indenture, the principal of and interest on the Bonds are payable solely from certain base rental payments (the “Base Rental Payments”) under and pursuant to that certain Lease Agreement, dated as of _____ 1, 2024 (the “Lease Agreement”), by and between the City, as lessee, and the Authority, as lessor, all of which rights to receive such Base Rental Payments have been assigned without recourse by the Authority to the Trustee. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Capitalized Interest Fund, the Principal Fund, the Reserve Fund (provided, however, that only amounts in the Series 2024 Account of the Reserve Fund shall secure the Series 2024 Bonds, and amounts in any other subaccount of the Reserve Fund created in connection with the issuance of Additional Bonds shall secure only such Additional Bonds) and the Redemption Fund established under the Indenture are pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets.
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The Series 2024 Bonds are authorized to be issued in the form of fully registered bonds without coupons in denominations of $5,000 or any integral multiple thereof (“Authorized Denominations”).
The Series 2024 Bonds shall be subject to redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of any: (i) net insurance proceeds received with respect to all or a portion of the property leased under the Lease Agreement, to the extent such moneys are not used by the City for repair or replacement purposes as permitted by the Indenture, remaining after payment therefrom of all reasonable expenses incurred in the collection thereof and (ii) eminent domain proceeds received under the Lease Agreement, that have been deposited by the Trustee in the Redemption Fund established under the Indenture, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
The Series 2024[A][B] Bonds maturing on or after May 1, 20__, shall be subject to optional redemption, in whole or in part, on any date on or after May 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption.
[The Series 2024A Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity.
The Series 2024A Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity]
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[The Series 2024B Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
$
*
* Final Maturity.]
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective owners of any Series 2024 Bonds designated for redemption, at their respective addresses appearing on the Registration Books, at least 20 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed, nor any defect therein, shall affect the validity of the proceedings for the redemption of such Series 2024 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. The Redemption Price of the Series 2024 Bonds to be redeemed shall be paid only upon presentation and surrender thereof at the Office of the Trustee. From and after the date fixed for redemption of any Series 2024 Bonds, interest on such Series 2024 Bonds will cease to accrue and become payable.
Subject to the limitations and upon payment of the charges, if any, provided in the Indenture, fully registered Series 2024 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount and maturity of fully registered Series 2024 Bonds of other authorized denominations.
This Bond is transferable by the Registered Owner hereof, in person or by his duly authorized attorney, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully registered Series 2024 Bond or Series 2024 Bonds, in Authorized Denominations, for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Authority, the City and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority, the City and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the rights and obligations of the Authority, the City, the owners of the Bonds and the Trustee may be modified or amended from time to time and at any time in the manner, to the extent, and upon the terms provided in the Indenture; provided that no such modification or amendment shall (a) extend the fixed maturity of any Bonds, or reduce the principal thereof or the rate of interest thereon, or extend the time of payment, without the consent of the owner of each Bond so affected, or, (b) reduce the percentage of Bonds the consent of the owners of which is required to effect any such amendment or modification, or (c) permit the creation of any lien on the Base Rental Payments and other assets pledged under the Indenture prior to or on a parity with the A-5
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lien created by the Indenture or deprive the owners of the Bonds of the lien created by the Indenture on such the Base Rental Payments and such other assets (except as expressly provided in the Indenture), without the consent of the owners of all Bonds then outstanding.
The Indenture contains provisions permitting the Authority to make provision for the payment of interest on, and the principal and premium, if any, of any of the Bond so that such Bonds shall no longer be deemed to be outstanding under the terms of the Indenture.
All obligations of the Authority under the Indenture shall be special obligations of the Authority, payable solely from Rental Payments and the other assets pledged therefor under the Indenture; provided, however, that all obligations of the Authority under the Bonds shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.
IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name and on its behalf by the facsimile signatures of its Chair and Secretary, all as of the Dated Date identified above.
LANCASTER FINANCING AUTHORITY
By:
Chair
Attest:
Secretary
[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 2024[A][B] Bonds described in the within-mentioned Indenture and registered on the Registration Books.
Date: _______________ U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Signatory
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[FORM OF LEGAL OPINION]
The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office.
Secretary of the Lancaster Financing Authority
[FORM OF ASSIGNMENT]
For value, received the undersigned hereby sells, assigns and transfers unto ____________________________________________ whose address and social security or other tax identifying number is ______________________, the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) ____________________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises.
Dated: ____________________
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible
guarantor.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of the within Bond in every particular without alteration or
enlargement or any change whatsoever.
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EXHIBIT B
PROJECT FUND REQUISITION
REQUISITION NO. _____ FOR
DISBURSEMENT FROM PROJECT FUND
The undersigned hereby states and certifies:
(i) that he/she is the duly appointed, qualified and acting _________ of the City of Lancaster (the “City”), a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California, and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that, pursuant to Section 3.04 of the Indenture, dated as of December 1, 2024 (the “Indenture”), by and among the Lancaster Financing Authority (the “Authority”), the City and U.S.
Bank Trust Company, National Association, as trustee (the “Trustee”), related to the Authority’s Lease Revenue Bonds, Series 2024A (Tax-Exempt) and Series 2024B (Federally Taxable) the undersigned hereby requests the Trustee to disburse this date the following amounts from the [Stadium Project Subaccount of the] 2024[A][B] Account of the Project Fund established under the Indenture, to the payees designated on the attached Exhibit 1; (iii) that each obligation mentioned herein has been incurred by the City and is a proper charge against the [Stadium Project Subaccount of the] 2024[A][B] Account of the Project Fund; and (iv) that there has not been filed with or served upon the City notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on the attached Exhibit 1, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law.
All capitalized terms used herein and not defined herein shall have the meanings ascribed thereto in the Indenture.
Dated: ______________ CITY OF LANCASTER
By:
Its:
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EXHIBIT 1
PROJECT FUND DISBURSEMENTS
Item
Number Payee Name and Address
Purpose of
Obligation Amount
Stradling Yocca Carlson & Rauth
Draft dated June 4, 2024
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This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the 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.
PRELIMINARY OFFICIAL STATEMENT _____, 2024
NEW ISSUE—BOOK-ENTRY ONLY RATING: S&P: “_____”
(See “RATING” herein)
In the opinion of Stradling Yocca Carlson & Rauth LLP (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Series 2024A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the opinion of Bond Counsel, interest on the Series 2024B Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series 2024 Bonds is exempt from State of will be California personal income tax. See “TAX MATTERS” with respect to certain tax consequences relating to the Series 2024 Bonds, including with respect to the alternative minimum tax imposed on certain large corporations.
LANCASTER FINANCING AUTHORITY
$__________
LEASE REVENUE BONDS
SERIES 2024A (TAX-EXEMPT)
$__________*
LEASE REVENUE BONDS
SERIES 2024B (FEDERALLY TAXABLE)
Dated: Date of Delivery Due: May 1, as shown on inside cover The Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) (the “Series 2024A Bonds”) and the Lancaster Financing Authority Lease Revenue Bonds, Series 2024B Federally Taxable) (the “Series 2024B Bonds” and together with the Series 2024A Bonds, the “Series 2024 Bonds”) are payable from base rental payments (the “Base Rental Payments”) to be made by the City of Lancaster (the “City”) for the right to use certain real property (the “Property”) pursuant to a Lease Agreement, dated as of _____ 1, 2024 (the “Lease Agreement”), by and between the City, as lessee, and the Lancaster Financing Authority (the “Authority”), as lessor. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS.” The Series 2024 Bonds are being issued to provide funds to (i) pay a portion of the costs of the acquisition of certain real property and the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center, the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment; (ii) fund capitalized interest on a portion of the Series 2024 Bonds through November 1, 2025, (iii) make a deposit to a reserve fund for the Series 2024 Bonds; and (iv) pay the costs incurred in connection with the issuance of the Series 2024 Bonds. See “THE PROJECTS.” The City has covenanted under the Lease Agreement to make all Base Rental Payments provided for therein, to include all such payments as a separate line item in its annual budgets, and to make all the necessary annual appropriations for such Base Rental Payments. The City’s obligation to make Base Rental Payments is subject to abatement during any period in which, by reason of non-delivery of the Stadium Project (as defined herein) or by reason of material damage to, or destruction or condemnation of, the Property, or any defects in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property. See “RISK FACTORS—Abatements.”
The Series 2024 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Interest on the Series 2024 Bonds is payable semiannually on May 1 and November 1 of each year, commencing November 1, 2024. Purchasers will not receive certificates representing their interest in the Series 2024 Bonds. Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and interest and premium, if any, on the Series 2024 Bonds will be paid by U.S. Bank Trust Company, National Association, as trustee (the “Trustee”) to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the Beneficial Owners of the Series 2024 Bonds. See “THE SERIES 2024 BONDS—Book-Entry Only System” herein.
The Series 2024 Bonds will be issued pursuant to an Indenture, dated as of _____ 1, 2024 (the “Indenture”) by and among the City, the Authority and U.S. Bank Trust Company, National Association, as trustee. The Series 2024 Bonds and any additional bonds issued pursuant to the Indenture (“Additional Bonds”) are collectively referred to as the “Bonds.” The Series 2024 Bonds are subject to optional, extraordinary and mandatory sinking fund redemption prior to maturity. See “THE SERIES 2024 BONDS—Redemption.”
The Series 2024 Bonds are special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the Series 2024 Bonds.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any form of taxation. The Authority has no power to tax.
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.
The Series 2024 Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval as to their validity by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel. Stradling Yocca Carlson and Rauth LLP, Newport Beach, California, is also acting as Disclosure Counsel to the City and the Authority. Certain legal matters will be passed upon for the City and the Authority by the City Attorney of the City of Lancaster, and for the Underwriter by Kutak Rock, LLP, Irvine, Preliminary, subject to change.
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California. It is anticipated that the Series 2024 Bonds in definitive form will be available for delivery to DTC in New York, New York on or about _____, 2024.
[Piper Logo]
Dated: _____, 2024
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MATURITY SCHEDULE
$__________
Lancaster Financing Authority
Lease Revenue Bonds), Series 2024A (Tax-Exempt)
Base CUSIP†: _____
Maturity Date
(May 1) Principal Amount Interest Rate Yield Price CUSIP† $__________ _____% Term Bonds due May 1, 20__ Yield: _____% Price: _____ CUSIP† _____ $__________ _____% Term Bonds due May 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© 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Underwriter, the Authority or the City, or their agents or counsel, assume responsibility for the accuracy of such numbers.
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MATURITY SCHEDULE
$__________
Lancaster Financing Authority
Lease Revenue Bonds, Series 2024B (Federally Taxable)
Base CUSIP†: __________
Maturity Date
(May 1) Principal Amount Interest Rate Yield Price CUSIP† $__________ _____% Term Bonds due May 1, 20__ Yield: _____% Price: _____ CUSIP† _____ $__________ _____% Term Bonds due May 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© 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Underwriter, the Authority or the City, or their agents or counsel, assume responsibility for the accuracy of such numbers.
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No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Series 2024 Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2024 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the Series 2024 Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement and the information contained herein are subject to completion or amendment without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof. These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. This Official Statement is being submitted in connection with the sale of the Series 2024 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City.
All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended.
Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” “intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the captions “RISK FACTORS” and in APPENDIX A“THE CITY OF LANCASTER.”
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES
NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS
SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
IN CONNECTION WITH THE OFFERING OF THE SERIES 2024 BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2024 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2024 BONDS TO CERTAIN DEALERS AND DEALER
BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING
PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
THE SERIES 2024 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website; however, information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Series 2024 Bonds. 4895-1287-2897v3/022283-0612
LANCASTER FINANCING AUTHORITY
CITY OF LANCASTER
BOARD OF DIRECTORS/CITY COUNCIL
R. Rex Parris, Chair/Mayor
Marvin Crist, Vice Chair/Vice Mayor
Ken Mann, Director/Councilmember
Raj Malhi, Director/Councilmember
Lauren Hughes-Leslie, Director/Councilmember
_____________
CITY AND AUTHORITY OFFICIALS
Jason Caudle, City Manager/Executive Director
Trolis Niebla, Assistant City Manager
George Harris, Finance Director/Treasurer
Andrea Alexander, City Clerk/Secretary
Allison E. Burns, City Attorney/Authority Counsel
_____________
BOND COUNSEL AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California
_____________
MUNICIPAL ADVISOR
NHA Advisors, LLC.
San Rafael, California
_____________
TRUSTEE
U.S. Bank Trust Company, National Association
Los Angeles, California
_____________
i
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INTRODUCTION .................................................................................................................................................1 THE SERIES 2024 BONDS..................................................................................................................................3 General...............................................................................................................................................................3 Registration, Transfers and Exchanges..............................................................................................................3 Redemption ........................................................................................................................................................4 Book-Entry Only System...................................................................................................................................6 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS .............................................6 Pledge of Revenues............................................................................................................................................6 Base Rental Payments........................................................................................................................................7 Additional Rental Payments ..............................................................................................................................8 Abatement ..........................................................................................................................................................8 Substitution, Addition and Removal of Property.............................................................................................10 Action on Default.............................................................................................................................................10 Reserve Fund ...................................................................................................................................................11 Capitalized Interest Fund .................................................................................................................................11 Additional Bonds .............................................................................................................................................11 Insurance ..........................................................................................................................................................12 SOURCES AND USES OF FUNDS...................................................................................................................13 BASE RENTAL PAYMENT SCHEDULE ........................................................................................................13 THE PROPERTY ................................................................................................................................................14 THE PROJECTS..................................................................................................................................................15 The Multi-Agency Regional Resiliency Center...............................................................................................15 The Stadium Project.........................................................................................................................................15 The Parks and Recreation Projects...................................................................................................................16 The Public Art Projects....................................................................................................................................17 THE AUTHORITY .............................................................................................................................................17 THE CITY OF LANCASTER.............................................................................................................................17 RISK FACTORS .................................................................................................................................................18 General Considerations – Security for the Series 2024 Bonds ........................................................................18 Abatements ......................................................................................................................................................18 Natural Disasters..............................................................................................................................................19 Hazardous Substances......................................................................................................................................20 Other Financial Matters ...................................................................................................................................20 Substitution, Addition and Removal of Property; Additional Bonds ..............................................................20 Limited Recourse on Default; No Acceleration of Base Rental ......................................................................21 Limitations on Remedies Available; Bankruptcy ............................................................................................22 Possible Insufficiency of Insurance Proceeds..................................................................................................23 Loss of Tax Exemption....................................................................................................................................23 No Liability of Authority to the Owners..........................................................................................................23 Dependence on State for Certain Revenues.....................................................................................................23 Cybersecurity ...................................................................................................................................................24 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.............25 Article XIIIA of the State Constitution............................................................................................................25 Legislation Implementing Article XIIIA .........................................................................................................25 Article XIIIB of the State Constitution............................................................................................................26 Articles XIIIC and XIIID of the State Constitution.........................................................................................26 Proposition 62 ..................................................................................................................................................27 Proposition 1A .................................................................................................................................................28 ii
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Proposition 22 ..................................................................................................................................................28 Proposition 26 ..................................................................................................................................................29 Possible Future Initiatives................................................................................................................................29 TAX MATTERS..................................................................................................................................................30 Series 2024A Bonds.........................................................................................................................................30 Series 2024B Bonds.........................................................................................................................................32 CERTAIN LEGAL MATTERS ..........................................................................................................................32 ABSENCE OF LITIGATION .............................................................................................................................33 UNDERWRITING ..............................................................................................................................................33 RATING ..............................................................................................................................................................33 MUNICIPAL ADVISOR.....................................................................................................................................34 CONTINUING DISCLOSURE...........................................................................................................................34 FINANCIAL STATEMENTS OF THE CITY....................................................................................................34 MISCELLANEOUS ............................................................................................................................................35 APPENDIX A THE CITY OF LANCASTER ...................................................................................................A-1 APPENDIX B SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS...................................................B-1
APPENDIX C ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2023 ...........................................................................................................................C-1 APPENDIX D PROPOSED FORM OF BOND COUNSEL OPINION............................................................D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT .....................................................E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM .............................................................................................F-1 1 4895-1287-2897v3/022283-0612
OFFICIAL STATEMENT
LANCASTER FINANCING AUTHORITY
$__________
LEASE REVENUE BONDS
SERIES 2024A (TAX-EXEMPT)
$__________*
LEASE REVENUE BONDS
SERIES 2024B (FEDERALLY TAXABLE)
INTRODUCTION
This Official Statement (which includes the cover page and the appendices hereto) (the “Official Statement”) provides certain information concerning the sale and delivery of $__________ * aggregate principal amount of Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) (the “Series 2024A Bonds”) and $___________ * Lancaster Financing Authority Lease Revenue Bonds, Series 2024B (Federally Taxable) (the “Series 2024B Bonds and, together with the Series 2024B Bonds, the “Seres 2024 Bonds”).
The net proceeds of the sale of the Series 2024 Bonds will be used to (i) costs of the acquisition of certain real property and the acquisition, construction and installation of certain capital improvements, including but not limited to the Multi-Agency Regional Resiliency Center and the conversion of the existing minor league baseball stadium for use as a minor league soccer stadium, certain parks and recreation improvements within the City, certain public art projects located within the City, and other improvements, facilities and equipment (collectively, the “Projects”), (ii) fund capitalized interest on a portion of the Series 2024 Bonds through November 1, 2025, (iii) make a deposit to a reserve fund for the Series 2024 Bonds; and (iv) pay the costs incurred in connection with the issuance of the Series 2024 Bonds. See “THE PROJECTS” herein for a further description of the Projects.
The Series 2024 Bonds are equally and ratably payable from base rental payments (the “Base Rental Payments”) to be made by the City for the right to use certain real property (the “Property”) described under the caption “THE PROPERTY” pursuant to a Lease Agreement, dated as of _____ 1, 2024 (the “Lease Agreement”), between the City, as lessee, and the Lancaster Financing Authority (the “Authority”), as lessor.
The Series 2024 Bonds will be issued pursuant to an Indenture, dated as of _____ 1, 2024 (the “Indenture”), by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Pursuant to the Indenture, the Authority may issue additional bonds (the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2024 Bonds (the Series 2024 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”). See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS—Additional Bonds.”
Pursuant to a Ground Lease, dated as of _____ 1, 2024 (the “Ground Lease”), by and between the City and the Authority, the City has leased the Property to the Authority. The Authority has subleased the Property to the City under the Lease Agreement. The Lease Agreement obligates the City to make Base Rental Payments to the Authority.
The Trustee and the Authority have entered into an Assignment Agreement, dated as of _____ 1, 2024, pursuant to which the Authority has assigned to the Trustee for the benefit of the Bond Owners substantially all of the Authority’s right, title and interest in and to the Ground Lease and the Lease Agreement, including its right to receive the Base Rental Payments due under the Lease Agreement and to enforce any remedies in the event of a default by the City. Preliminary, subject to change.
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The City will covenant under the Lease Agreement to take such action as may be necessary to include all Rental Payments, which are comprised of Base Rental Payments and Additional Rental Payments (which include taxes and assessments affecting the Property, administrative costs of the Authority relating to the Property, fees and expenses of the Trustee and other amounts payable under the Lease Agreement), due under the Lease Agreement as a separate line item in its annual budgets and to make the necessary annual appropriations therefor, subject to abatement as described herein.
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 Property or any portion thereof, including but not limited to non-delivery of the Stadium Project (as defined herein). See the captions “THE PROPERTY,” THE “PROJECTS” and “RISK FACTORS—Abatements.” Abatement of Base Rental Payments under the Lease Agreement, to the extent that payment is not made from alternative sources as set forth below, would result in all Bond Owners receiving less than the full amount of principal of and interest on the Bonds. To the extent that proceeds of insurance are available, Base Rental Payments (or a portion thereof) may be made during periods of abatement.
THE SERIES 2024 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE
SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2024 BONDS. THE AUTHORITY HAS NO TAXING POWER.
THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL
SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE
CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
The City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission (“Rule 15c2- 12”) certain annual financial information and operating data and, in a timely manner, notice of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12.
See “CONTINUING DISCLOSURE” herein for a description of the Authority’s and the City’s compliance with its prior continuing disclosure undertakings pursuant to Rule 15c2-12 and APPENDIX—E “FORM OF CONTINUING DISCLOSURE AGREEMENT” for a description of the specific nature of the annual report and notices of listed events and a summary description of the terms of the disclosure undertaking pursuant to which such reports are to be made.
U.S. Bank Trust Company, National Association, Los Angeles, California, will act as Trustee with respect to the Series 2024 Bonds. The Series 2024 Bonds will be issued subject to the approval as to their legality by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney of the City and by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Irvine, California. The City’s financial statements for the fiscal year ended June 30, 2023 included as Appendix C hereto have been audited by CliftonLarsonAllen LLP, Irvine, California (the “Auditor”). See APPENDIX C—“ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2023” herein. The City’s 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 review of the financial condition of the City and also has not performed any procedures relating to this Official Statement. 3 4895-1287-2897v3/022283-0612
Certain events could affect the ability of the City to make the Base Rental Payments when due. See “RISK FACTORS” for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Series 2024 Bonds.
The presentation of information, including tables of receipt of revenues, is intended to show recent historical information and, except for a budget discussion for fiscal year 2024-25, is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. See APPENDIX A“THE CITY OF LANCASTER” for financial and operating information related to the City.
The summaries or references to the Indenture, the Lease Agreement, the Ground Lease, the Assignment Agreement and other documents, agreements and statutes referred to herein, and the description of the Series 2024 Bonds included in this Official Statement, do not purport to be comprehensive or definitive, and such summaries, references and descriptions are qualified in their entireties by reference to each such document or statute. All capitalized terms used in this Official Statement (unless otherwise defined herein) which are defined in the Indenture or the Lease Agreement shall have the meanings set forth therein. See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS.”
THE SERIES 2024 BONDS
General
The Series 2024 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Series 2024 Bonds will be dated as of and bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the dated date thereof at the rates set forth on the inside cover page hereof. Interest on the Series 2024 Bonds will be paid semiannually on May 1 and November 1 (each, an “Interest Payment Date”) of each year, commencing November 1, 2024.
Interest on the Series 2024 Bonds will be payable from the Interest Payment Date next preceding the date of authentication thereof (a “Record Date”) unless (i) a Series 2024 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, (ii) a Series 2024 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the dated date thereof, or (iii) interest on any Series 2024 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest will be paid in lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership of the Series 2024 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series 2024 Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date.
The principal and premium, if any, of the Series 2024 Bonds will be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. The Series 2024 Bonds will be subject to redemption as set forth herein.
Registration, Transfers and Exchanges
The Series 2024 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. as nominee of DTC, and will be available to actual purchasers of the Series 2024 Bonds (the “Beneficial Owners”) in the denominations set forth above, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants (as defined in Appendix F) as described herein. 4 4895-1287-2897v3/022283-0612
Beneficial Owners will not be entitled to receive physical delivery of the Series 2024 Bonds. See “THE SERIES 2024 BONDS—Book-Entry Only System.”
Redemption
Extraordinary Redemption from Condemnation Award or Insurance Proceeds. The Series 2024 Bonds are subject to redemption, in whole or in part, on any date, in denominations of $5,000 or any integral multiple thereof, from and to the extent of any insurance proceeds or condemnation award received with respect to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to the Indenture, at a Redemption Price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
Optional Redemption of Series 2024A Bonds. The Series 2024A Bonds maturing on or after May 1, 20__, are subject to optional redemption, in whole or in part, on any date on or after May 1, 20__, in denominations of $5,000 or any integral multiple thereof, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease, at a Redemption Price equal to the principal amount of the Series 2024A Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
Optional Redemption of Series 2024B Bonds. The Series 2024B Bonds maturing on or after May 1, 20__, are subject to optional redemption, in whole or in part, on any date on or after May 1, 20__, in denominations of $5,000 or any integral multiple thereof, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease, at a Redemption Price equal to the principal amount of the Series 2024B Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
Mandatory Sinking Fund Redemption. The Series 2024A Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
* Final Maturity.
The Series 2024B Bonds with stated maturities on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:
Redemption Date
(May 1)
Principal
Amount
* Final Maturity.
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In the event of a partial optional redemption or extraordinary mandatory redemption of any of the Term Bonds, each of the remaining mandatory sinking fund payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis in the amount of $5,000 or any integral multiple thereof as directed by an Authorized City Representative.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Authority provided to the Trustee at least 20 but no more than 60 days prior to the date of such redemption, (b) with respect to any redemption from and to the extent of any insurance proceeds or condemnation award received with respect to all or a portion of the Property and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, as directed in a Written Request of the Authority provided to the Trustee at least 20 but no more than 60 days prior to the date of such redemption, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole discretion deems appropriate and fair. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Bonds which may be separately redeemed.
Notice of Redemption. So long as the Bonds are held in book-entry form, notices of redemption will be mailed by the Trustee only to DTC and not to any Beneficial Owners. The Trustee on behalf and at the expense of the Authority will mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least 20 but not more than 60 days prior to the date fixed for redemption. Such notice will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be then surrendered at the principal corporate trust office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Such notice may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption date to redeem the Bonds so called for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.
With respect to any notice of optional redemption of the Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of, premium if any, and interest on the Bonds to be redeemed and upon other conditions set forth therein and that, if such money has not been so received or such other conditions have not been satisfied, said notice is of no force and effect and the Trustee is not required to redeem such Bonds. If any condition stated in the redemption notice for an optional redemption have not been satisfied on or prior to the redemption date: (i) the redemption notice will be of no force and effect, (ii) the Authority will not be required to redeem such Bonds, (iii) the redemption will not be made, and (iv) the Trustee will within a reasonable time thereafter give notice to the persons in the manner in which the conditional redemption notice was given that such condition or conditions were not met and that the redemption was canceled.
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same Series in authorized denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered. 6 4895-1287-2897v3/022283-0612
Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the Redemption Fund, the Bonds will become due and payable on said date, and, upon presentation and surrender thereof at the principal corporate trust office of the Trustee, said Bonds will be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date.
If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, will be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof has been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of the Indenture will be canceled upon surrender thereof and destroyed.
Book-Entry Only System
General. DTC will act as securities depository for the Series 2024 Bonds. The Series 2024 Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee).
One fully-registered Series 2024 Bond will be issued for each maturity of the Series 2024 Bonds, each in the initial aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX F— “BOOK-ENTRY ONLY SYSTEM.”
Transfer and Exchange of Bonds. The following provisions regarding the exchange and transfer of the Series 2024 Bonds apply only during any period in which the Series 2024 Bonds are not subject to DTC’s book- entry system. While the Series 2024 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC.
Any Bond may, in accordance with its terms, be transferred upon the books required to be kept by the Trustee pursuant to the provisions of the Indenture by the Person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds will be surrendered for transfer, the Authority will execute and the Trustee will authenticate and will deliver a new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized Denomination. The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.
The Bonds may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Bonds of the same Series of other authorized denominations. The Trustee will require the payment by the Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
The Trustee is not obligated to make any transfer or exchange of Bonds of a Series during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption.
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS Pledge of Revenues
The Series 2024 Bonds are equally and ratably payable from and secured by Base Rental Payments and certain amounts on deposit in the funds and accounts established under the Indenture. Base Rental 7 4895-1287-2897v3/022283-0612
Payments will be paid by the City from any and all legally available funds. See APPENDIX A“THE CITY OF LANCASTER” and the caption “RISK FACTORS” for a description of such available funds and the potential risks associated with the availability of such funds to make Base Rental Payments. The City has covenanted in the Lease Agreement to take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease Agreement as a separate line item in its annual budgets and to make the necessary annual appropriations therefor.
The Authority, pursuant to the Assignment Agreement, will assign to the Trustee for the benefit of the Series 2024 Bond Owners all of the Authority’s right, title and interest in and to the Ground Lease and the Lease Agreement, including, without limitation, its right to receive Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided that, the Authority will retain the rights to indemnification and to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City will pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See “—Base Rental Payments” below. Pursuant to the Indenture, the Authority may issue Additional Bonds payable from the Base Rental Payments on a parity with the Series 2024 Bonds. See the caption “— Additional Bonds.”
Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Capitalized Interest Fund, the Principal Fund, the Reserve Fund (provided, however, that only amounts in the Series 2024 Account of the Reserve Fund shall secure the Series 2024 Bonds, and amounts in any other subaccount of the Reserve Fund created in connection with the issuance of Additional Bonds shall secure only such Additional Bonds) and the Redemption Fund are pledged by the Authority pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets.
THE SERIES 2024 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE
SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
AUTHORITY, THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2024 BONDS. THE AUTHORITY HAS NO TAXING POWER.
Base Rental Payments
Rental Payments (collectively, the Base Rental Payments and the Additional Rental Payments) will be paid by the City to the Authority for and in consideration of the right to use and occupy the Property and in consideration of the continued right to the quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid. Each Base Rental Payment will be deposited with the Trustee no later than the second Business Day preceding each Interest Payment Date (the “Base Rental Deposit Date”) on which such Base Rental Payment is due. All Base Rental Payments will be paid directly by the City to the Trustee, and if received by the Authority at any time will be transferred by the Authority to the Trustee within one Business Day after the receipt thereof. All Base Rental Payments received by the Trustee will be deposited by the Trustee in the Base Rental Payment Fund.
Pursuant to the Indenture, on the Business Day immediately preceding each Interest Payment Date and on the Business Day immediately preceding each Principal Payment Date, the Trustee will transfer amounts in the Base Rental Payment Fund as are necessary to the Interest Fund and the Principal Fund to provide for the payment of the interest on and principal of the Series 2024 Bonds.
Scheduled Base Rental Payments relating to the Series 2024 Bonds are set forth below under the caption “BASE RENTAL PAYMENT SCHEDULE.”
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THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY OR THE STATE OF CALIFORNIA OR OF ANY POLITICAL
SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE
CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Additional Rental Payments
For the right to use and occupy the Property, the Lease Agreement requires the City to pay, as Additional Rental payments thereunder, in addition to the Base Rental Payments, such amounts as shall be required for the payment of the following:
(i) All taxes and assessments of any type or nature charged to the Authority or the City or affecting the Property or the respective interests or estates of the Authority or the City therein. (ii) All reasonable administrative costs of the Authority relating to the Property including, but without limiting the generality of the foregoing, salaries, wages, fees and 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 Indenture or the Lease Agreement or to defend the Authority and its members, officers, agents and employees.
(iii) Insurance premiums for all insurance required pursuant to the Lease Agreement. (iv) Any amounts with respect to the Lease Agreement or the Bonds required to be rebated to the federal government in accordance with section 148(f) of the Internal Revenue Code of 1986. (v) All other payments required to be paid by the City under the provisions of the Lease Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable under the Lease Agreement will be paid by the City directly to the person or persons to whom such amounts are payable. The City will pay all such amounts when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days after notice in writing from the Trustee to the City stating the amount of Additional Rental Payments then due and payable and the purpose thereof.
Abatement
Base Rental Payments and Additional Rental Payments are paid by the City in each Rental Period for and in consideration of the right to use and occupy the Property. Base Rental Payments and Additional Rental Payments may be abated in the event of non-delivery of the Stadium Project or in the event of damage, destruction, condemnation or title defect affecting the Property, each as described further below. The Trustee cannot terminate the Lease Agreement in the event of such substantial interference. Abatement of Base Rental Payments and Additional Rental Payments is not an event of default under the Lease Agreement and does not permit the Trustee to take any action or avail itself of any remedy against the City. See APPENDIX B— “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—RENTAL PAYMENTS—Rental Abatement.”
As described under the captions “THE PROPERTY” and “THE PROJECTS—The Stadium Project,” a portion of the Property leased under the Ground Lease and the Lease Agreement consists of the property on which the Stadium Project will be constructed (the “Stadium Property”). The City has funded capitalized 9 4895-1287-2897v3/022283-0612
interest on a portion of the Series 2024 Bonds through November 1, 2025, which is calculated to be the portion of the Base Rental Payments attributable to the Stadium Project through the period which is approximately nine months after estimated completion of the Stadium Project, which is currently expected to occur in February 2025.
In the Event of Non-Delivery of the Stadium Project. To the extent described below, the amount of Rental Payments due under the Lease Agreement will be partially abated during any period in which by reason of delay in the completion of the Stadium Project there is substantial interference with the City’s use and occupancy of the Stadium Property; provided, however, that the Rental Payments due for any Rental Period may not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. The City and the Authority will calculate such abatement and provide the Trustee with a certificate setting forth such calculation and the basis therefor. Such abatement will continue until the substantial completion of the Stadium Project, and the term of the Lease Agreement will be extended until the date upon which (i) all Bonds shall be fully paid, or provision therefor made in accordance with the Indenture, or (ii) the Indenture shall be discharged by its terms and all Rental Payments shall have been paid in full. Notwithstanding the foregoing, the term of the Lease Agreement will in no event be extended beyond May 1, 20__. Notwithstanding the foregoing, the City will remain obligated to make Rental Payments under the Lease Agreement, as an obligation of the City payable from a special fund, (i) to the extent there are proceeds of any completion or performance bonds or moneys paid to the City by the contractors or any other person as liquidated damages as a result of any defect or delay in completion of Stadium Project, or (ii) to the extent that amounts in the Series 2024 Account of the Reserve Fund or the Capitalized Interest Fund are available to pay Rental Payments which would otherwise be abated under the Lease Agreement in the event of non-delivery of the Stadium Project. Any amounts received by the City as liquidated damages will be deposited by the City immediately upon receipt in the Base Rental Payment Fund.
In the Event of Damage, Destruction, Condemnation or Title Defect. Except as otherwise specifically provided in the Lease Agreement, during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property, Rental Payments are subject to abatement proportionately, and 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 Lease Agreement by virtue of any such interference, and the Lease Agreement will continue in full force and effect. The amount of such abatement will be agreed upon by the City and the Authority; provided, however, that the Rental Payments due for any Rental Period may not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. Any such abatement will continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed; and the term of the Lease Agreement will be extended as provided in the Lease Agreement, except that the term will in no event be extended ten years beyond the stated termination date of the Lease Agreement. The Trustee cannot terminate the Lease Agreement in the event of such substantial interference. Abatement of Base Rental Payments and Additional Rental Payments is not an event of default under the Lease Agreement and does not permit the Trustee to take any action or avail itself of any remedy against the City. See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Rental Payments—Rental Abatement.”
Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental Payments due under the Lease Agreement in any of the funds and accounts established under the Indenture (including as a result of the availability of insurance proceeds), such Rental Payments will not be abated as provided above but, rather, will be payable by the City as a special obligation payable solely from said funds and accounts.
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The Lease Agreement provides that if the Bonds have not been fully paid or defeased by the final maturity thereof, or if the Rental Payments remain due and payable or have been abated at any time and for any reason, then the term of the Lease Agreement will be extended until the date upon which (i) all Bonds are fully paid or defeased, or (ii) the Indenture is discharged by its terms and all Rental Payments are paid in full, up to an additional ten years beyond the final maturity of the Bonds.
Substitution, Addition and Removal of Property
The Authority and the City may amend the Lease Agreement to substitute alternate real property for any portion of the Property to add additional real property or to release a portion of the Property from the Lease Agreement or to add additional property to the encumbrance of the Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement and described below. After a substitution or release, the portion of the Property for which the substitution or release has been effected will be released from the leasehold encumbrance of the Lease Agreement.
The Lease Agreement provides that there will be no reduction in or abatement of the Base Rental Payments due from the City thereunder as a result of such substitution, release or addition. Any such substitution, release or addition is subject to the following specific conditions precedent to such substitution, release or addition:
(a) a Written Certificate of the City to the effect that the Property, as constituted after such substitution, release or addition: (i) has an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a useful life in excess of the final maturity of any Outstanding Series 2024 Bonds.
(b) with respect to any substituted or added property, the City obtains or causes to be obtained a CLTA or ALTA title insurance policy or policies with respect to the Property (as such term will be defined after such substitution or addition) in an amount at least equal to the aggregate principal amount of any Outstanding Bonds, of the type and with the endorsements described in the Lease Agreement; (c) the City, the Authority and the Trustee execute, and the City causes to be recorded with the Los Angeles County Recorder, any document necessary to reconvey to the City the portion of the Property being released and to include any substituted or added real property in the description of the Property contained in the Lease Agreement and in the Ground Lease; and (e) the City provides notice of such release, substitution or addition to each rating agency then rating the Bonds.
See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—No Consequential Damages; Use of Property; Substitution or Release.” Action on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis, and will have the right to re-enter and re-let the Property. In the event such re-letting occurs, the City would be liable for any resulting deficiency in Base Rental Payments. Base Rental Payments may not be accelerated upon a default under the Lease Agreement. See “RISK FACTORS—Limited Recourse on Default; No Acceleration of Base Rental.”
For purposes of certain actions of Bond Owners under the Indenture and the Lease Agreement, such as certain consents and amendments and the direction of remedies following default, Series 2024 Bond Owners 11 4895-1287-2897v3/022283-0612
do not act alone and may not control such matters to the extent such matters are not supported by the requisite number of the Owners of all Series 2024 Bonds and Additional Bonds, if any.
For a description of the events of default and permitted remedies of the Trustee (as assignee of the Authority) contained in the Lease Agreement and the Indenture, see APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Defaults and Remedies” and “—THE INDENTURE—Default and Limitations of Liability.”
Reserve Fund
The Indenture establishes a separate Reserve Fund and within the Reserve Fund, a Series 2024 Account solely as security for the Series 2024 Bonds, which will be held and maintained by the Trustee. The Trustee may establish additional accounts in the Reserve Fund in connection with the issuance of Additional Bonds, if any.
Amounts in the Series 2024 Account of the Reserve Fund shall be used solely for the purpose of funding the Interest Fund or the Principal Fund, in that order, in the event of any deficiency in either of such accounts with respect to the Series 2024 Bonds on an Interest Payment Date. On the final maturity date for the Series 2024 Bonds, amounts in the Series 2024 Account of the Reserve Fund shall be transferred to the Interest Fund and the Principal Fund to make the final payment on the Series 2024 Bonds, and the amount transferred shall be deemed to be a credit against the remaining Base Rental Payments to be made by the City under the Lease Agreement.
See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—SECURITY FOR THE BONDS; FLOW OF FUNDS—Reserve Fund.” Capitalized Interest Fund
A portion of the debt service on the Series 2024 Bonds (which is calculated to be the portion of the Base Rental Payments attributable to the Stadium Project) through November 1, 2025 will be paid from capitalized interest. On the second Business Day immediately preceding each Interest Payment Date, the Trustee will transfer from the Capitalized Interest Fund to the Interest Fund, the following amounts on the dates set forth below. All amounts remaining in the Capitalized Interest Fund following November 1, 2025 will be transferred to the Interest Fund.
Date 2024A Account 2024B Account
November 1, 2024
May 1, 2025
November 1, 2025
See the captions “SOURCES AND USES OF FUNDS,” “DEBT SERVICE SCHEDULE” and “THE PROJECTS—The Public Safety Campus Project, “as well as APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—SECURITY FOR THE BONDS; FLOW OF FUNDS—Flow of Funds.”
Additional Bonds
Pursuant to the Indenture, the Authority may issue Additional Bonds payable from the Base Rental Payments on parity with the Series 2024 Bonds upon satisfaction of certain conditions, including, but not limited to, the following:
(a) The issuance of such Additional Bonds has been authorized under and pursuant to the Indenture and provided for by a Supplemental Indenture; 12 4895-1287-2897v3/022283-0612
(b) The Authority and the City are in compliance with all agreements, conditions, covenants and terms contained in the Indenture, the Lease Agreement and the Ground Lease required to be observed or performed by each of them;
(c) The Ground Lease and the Lease Agreement have been amended, to the extent necessary, so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times and in such manner as may be necessary to provide for the timely payment of the principal of and interest on such Additional Bonds; provided, however, that no such amendment is permitted to be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period is in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith.
See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—Issuance of Bonds; Application of Proceeds.”
Insurance
The Lease Agreement requires the City to maintain or cause to be maintained fire, lightning and special extended coverage insurance (which includes coverage for vandalism and malicious mischief, but need not include coverage for earthquake damage) on all improvements constituting any part of the Property in an amount equal to the greater of 100% of the replacement cost of such improvements or 100% of the outstanding principal amount of the Bonds. All insurance required to be maintained pursuant to the Lease Agreement may be subject to a deductible in an amount not to exceed $500,000. The City’s obligation to maintain the insurance described above may be satisfied by self-insurance, provided such self-insurance complies with the requirements of the Lease Agreement.
The Lease Agreement requires the City to maintain rental interruption insurance to cover the Authority’s loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the hazards covered by the casualty insurance described in the preceding paragraph, in an amount sufficient at all times to pay an amount not less than the product of two times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period.
The City is also required to maintain or cause to be maintained, throughout the term of the Lease Agreement, a standard commercial general liability insurance policy or policies in protection of the City, the Authority and their respective members, officers, agents and employees, and worker’s compensation insurance as described in APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Insurance.”
The City is required under the Lease Agreement to provide, at its own expense, one or more CLTA or ALTA title insurance policies for the Property, in the aggregate amount of not less than the initial aggregate principal amount of the Bonds, insuring the fee interest of the City in the Property, the Authority’s leasehold estate in the Property under the Ground Lease, and the City’s subleasehold estate in the Property under the Lease Agreement, subject only to Permitted Encumbrances, and providing that all proceeds thereunder are payable to the Trustee for the benefit of the Owners.
See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Insurance.”
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SOURCES AND USES OF FUNDS
The sources and uses of funds with respect to the Series 2024 Bonds are shown below.
Sources Series 2024A Bonds Series 2024B Bonds
Principal Amount
[Net] Original Issue Premium/(Discount)
Total Sources
Uses
Project Fund
Capitalized Interest Fund(1)
Costs of Issuance(2)
Total Uses
(1) To fund a portion of the interest on the Series 2024 Bonds through June 1, 2025. (2) Includes legal, municipal advisory, rating agency, printing fees, underwriter’s discount and other miscellaneous costs of issuance.
BASE RENTAL PAYMENT SCHEDULE
Following is the annual schedule of Base Rental Payments due with respect to the Series 2024 Bonds, assuming no redemption prior to maturity:
Bond Year
(Ending
May 1)
Series 2024A
Bond
Principal
Series 2024A
Bond
Interest
Series 2024B
Bond
Principal
Series 2024B
Bond
Interest Total
Total
(1) A portion of the debt service on the Series 2024 Bonds through November 1, 2025 will be paid from capitalized interest. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS—Capitalized Interest Fund.”
Source: The Underwriters.
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THE PROPERTY
General. A description of each of the properties consisting of the Property initially leased under the Ground Lease and the Lease Agreement are described below. The City has the right to substitute, add to or release all or portion of the Property subject to certain conditions precedent. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDSSubstitution, Addition and Removal of Property.” The table below summarizes the properties consisting of the Property initial leased under the Ground Lease and the Lease Agreement, and further descriptions of such properties are set forth below.
Property Description
Building
Square
Footage
Building
Insured Value(1)
Lancaster Municipal Stadium(1) Stadium/Sporting Venue 29,230 $26,749,179 Lancaster Performing Arts Center Performing Arts Center 41,950 20,295,368 Economic Development Office Office/Small Business Incubator 30,000 7,353,910 Public Safety Building Police Headquarters 29,623 7,250,091 Lancaster Museum of Art and
History Museum 21,334 9,284,676
Lancaster Community Center Community Facility 16,056 3,993,288 Corporation Yard Public Works Modular Office 10,080 2,938,824 Total $77,865,336
(1) See the caption “THE PROJECTS—The Stadium Project” for more information regarding the use of a portion of the proceeds of the Series 2024 Bonds to finance renovations to the Lancaster Municipal Stadium.
Source: The City.
Lancaster Municipal Stadium. The Lancaster Municipal Stadium was constructed in 1996 and is located at 45116 Valley Central Way in the City. The Lancaster Municipal Stadium hosted the Lancaster JetHawks, a minor league professional baseball team, until 2020. The Lancaster Municipal Stadium, formerly known as the Hangar, currently consists of an approximately 4,500-seat baseball stadium and includes a home and visitor’s clubhouse. The City estimates the insured value of the Lancaster Municipal Stadium is approximately $26,748,179. However, as described under the caption “THE PROJECTS—The Stadium Project,” a portion of the proceeds of the Series 2024 Bonds are expected to be used to finance a retrofit of the Lancaster Municipal Stadium in order to host a USL League One professional soccer team. See the caption “THE PROJECTS—The Stadium Project.”
Lancaster Performing Arts Center. The City’s Performing Arts Center was constructed in 1991 and consists of an approximately 41,950 square foot building located at 750 West Lancaster Boulevard in the City.
The Performing Arts Center contains two separate theaters which are used for City-sponsored entertainment events, as well as local music, dance and theater groups. The City estimates the insured value of the Performing Arts Theater is approximately $20,295,368.
Economic Development Office. The Economic Development Office was constructed in 1985 and is located at 104 East Avenue K-4 in the City. The Economic Development Office consists of an approximately 30,000 square foot building containing the Lancaster Small Business Incubator. The City estimates the insured value of the Economic Development Office is approximately $7,353,910.
Public Safety Building. The Public Safety Building was originally constructed in 1950 and underwent renovations which were completed in June 2024. The Public Safety Building is an approximately 15 4895-1287-2897v3/022283-0612
29,623 square foot building located at 44811 Sierra Highway in the City and serves as the City’s Police Headquarters. The City estimates the insured value of the Public Safety Building is approximately $7,250,091.
Lancaster Museum of Art and History. The City acquired the Lancaster Museum of Art and History from a non-profit organization on _____, 2024. The Lancaster Museum of Art and History is an approximately 21.334 square foot building constructed in 2012 which the City expects to continue to operate as a museum. The City estimates the insured value of the Lancaster Museum of Art and History is approximately $9,284,676.
Lancaster Community Center. The Lancaster Community Center was constructed in 2008 and remodeled in 2022, and is located at 44611 Yucca Avenue in the City. The Lancaster Community Center consists of an approximately 16,056 square foot building which is used for community events and contains various dedicated spaces for community events, including a teen space, computer lab, library, kitchen and food demonstration area, game room, arts and crafts room, dance room, music room and early education space. The City estimates the insured value of the Lancaster Community Center is approximately $3,993,288.
Corporation Yard. The City’s Corporation Yard was constructed in 2006 and is located at ___________ in the City. The Corporation Yard contains an approximately 10,080 square foot modular office for the City’s Public Works Department, which includes offices, conference rooms and other meeting rooms.
The City estimates the insured value of the Corporation Yard is approximately $2,938,824.
THE PROJECTS
The Multi-Agency Regional Resiliency Center
The City expects to use a portion of the Series 2024A Bonds to finance the City’s share of the costs of the Multi-Agency Regional Resilience Center (the “MARRC”). The MARCC is expected to be a large-scale, off-grid, emergency evacuation center and events center, which will include an emergency operations center and a culinary community kitchen, and is expected to provide community resiliency during emergencies in the Antelope Valley, including evacuations driven by flood, fire and earthquake. The MARCC will be located at the Antelope Valley Fair and Event Center and operated by the Antelope Valley Fair Authority under various joint use agreements.
The MARRC is expected to cost a total of $81.5 million dollars and to be financed by a combination of City funds (including a portion of the proceeds of the Series 2024A Bonds), funds from the County of Los Angeles, State grants, funds from the City of Palmdale, and funds from the Antelope Valley Union High School District. The City Council has authorized the City to commit up to $50 million to the MARCC project Construction of the MARCC is currently expected to begin in August 2024 and be completed in late 2025.
The Stadium Project
General. The Lancaster Municipal Stadium was constructed in 1996 and is located at 45116 Valley Central Way in the City. The Lancaster Municipal Stadium hosted the Lancaster JetHawks, a minor league professional baseball team, until 2020. A portion of the proceeds of the Series 2024A Bonds and the proceeds of the Series 2024B Bonds is expected to be used to finance renovations to the Lancaster Municipal Stadium to allow the stadium to host a USL League One professional soccer team (the “Stadium Project”).
In August 2023, the City entered into a ten-year operating agreement with Antelope Valley Soccer, Inc. pursuant to which the Lancaster Municipal Stadium will host the USL Antelope Valley professional soccer team. The Stadium Project consists of converting the stadium from its minor-league baseball configuration to a soccer-specific stadium by expanding the playing field at the existing stadium and adding additional seating in the former outfield of the existing baseball field, which is expected to bring the seating capacity to approximately 5,300. Design of the Stadium Project is expected to be completed in June 2024, and 16 4895-1287-2897v3/022283-0612
the City currently expects to award a contract for the construction of the Stadium Project in July or August 2024. The current estimate for the costs of constructing the Stadium Project is $11.5 million, and construction is currently expected to begin in August 2024 and be completed in February 2025.
The Lease Agreement. [The Property leased under the Ground Lease and the Lease Agreement includes the property on which the Stadium Project is being constructed (the “Stadium Property”). The City will fund capitalized interest on a portion of the Series 2024 Bonds through November 1, 2025, which is calculated to be the portion of the Base Rental Payments attributable to the Stadium Property through the period which is approximately nine months after the estimated completion date of the Stadium Project, which is currently expected to occur in February 2024. Should the Stadium Project not be timely completed and if the City does not have beneficial use and occupancy of the Stadium Property prior to the date through which capitalized interest has been funded, a portion of the City’s Base Rental Payments under the Lease Agreement may be subject to abatement. Each of the construction contracts entered into by the City for the Stadium Project is expected to provide that the various contractors will be required to pay liquidated damages to the City in the event the applicable portion of the Stadium Project is not completed within _____ calendar days of the commencement of construction, which is expected to begin in August 2024. The amount of such liquidated damages is either $_____ or $_____ per day depending upon the bid classification of the applicable construction contract. However, certain force majeure and other provisions of the construction contracts may prohibit or reduce the collection of liquated damages. In the event of abatement of all or a portion of the Rental Payments due to non-delivery of the Stadium Project, the City is required under the Lease Agreement to continue to make Rental Payments from such liquidated damages or any proceeds of any completion or performance bonds or other moneys paid to the City by the various contractors. The City can make no assurances regarding the availability, amounts or timing of funds that could be collected as liquidated damages or from the proceeds of any completion or performance bonds. See the captions “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS—Abatement” and “RISK FACTORS— Abatement.”]
Under the Lease Agreement, the City agrees to proceed with all due diligence to complete the construction, acquisition, delivery and installation of the Stadium Project, all in accordance with the plans and specifications for the Stadium Project (the “Plans and Specifications”) approved by the City Engineer. The City shall comply with all statutes and laws applicable to the performance of its obligations hereunder, including all public laws applicable thereto and all laws regarding the approval, acquisition and construction of public projects by cities in the State of California. The City shall make certain that each contract relating to the Stadium Project is awarded in accordance with applicable law and contains a scheduled completion date which requires completion on or before the scheduled Completion Date.
Subject to any other restrictions imposed upon the City, the City may approve any changes to the Plans and Specifications so long as any change does not, and all such changes as a whole do not, (i) substantially alter the nature of the Project, (ii) delay the completion of the Stadium Project beyond [_____ 1, 20__], (iii) reduce the fair rental value of the Stadium Property, or (iv) increase the total Costs of the Stadium Project to an amount in excess of the amount in the Stadium Project Subaccounts of the Project Fund unless there has been deposited with the City an amount equal to such excess or unless there has been deposited with the City a certificate of an Authorized Representative of the City, together with a revised construction budget demonstrating that the total amount on deposit to pay for the Stadium Project is adequate to allow the completion of the Stadium Project as planned;
Payment of the portion of the Costs of the Stadium Project being financed by the City shall be made from moneys deposited in the Stadium Project Subaccounts of the Project Fund, and shall be disbursed for such purpose in accordance and upon compliance with the Indenture. Neither the Authority nor the City shall be liable for the payment of Costs of the Stadium Project other than from amounts on deposit in the Stadium Project Subaccounts of the Project Fund.]
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The Parks and Recreation Projects
Avenue J Neighborhood Park. The Avenue J Neighborhood Park project consists of a playground, pedestrian/bike lane with lighting and benches, shaded picnic area, fitness course with exercise stations, shaded open space areas, drought tolerant-demonstration garden, landscaping and perimeter fence. The City has been awarded $2.4 million in funds from the California Department of Parks and Recreation Land and Water Conservation Fund Grant for the project. The grant requires $2.5 million in matching funds to complete, and the City currently expects to use a portion of the proceeds of the Series 2024A Bonds for such matching funds.
Indoor Recreation Complex. The City currently expects to use a portion of the Series 2024A Bonds to design and build a new indoor recreation complex to host youth and adult indoor sports programming. The new facility is expected to provide two full size basketball courts, which can double as four volleyball courts, eight pickleball courts, as well as host a multitude of indoor athletic programs. Furthermore, the facility will have the ability to host private rentals for practice and tournaments. The indoor recreation complex is currently expected to cost approximately $3.5 million to complete.
The Public Art Projects
The City’s Parks, Arts, Recreation & Community Services Department is currently in the process of developing and adopting a Public Art Master Plan. Through extensive internal and external community engagement the Master Plan is expected to develop the vison, values and goals for public art; identify clear action strategies; as well as identify cultural opportunities and locations for future art installations. The adoption of the Master Plan is expected to result in the identification of approximately $3 million in public art to be procured and installed throughout the City and the City currently expects to use a portion of the Series 2024A Bonds to finance such public art projects.
THE AUTHORITY
The Lancaster Financing Authority was formed pursuant to the provisions of Articles 1 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Joint Powers Act”) and a Joint Exercise of Powers Agreement, dated September 1, 1989 (the “Joint Powers Agreement”), by and between the City and the Lancaster Redevelopment Agency (the “Agency”). The Authority was formed to assist the City in the financing and refinancing of public capital improvements. Pursuant to the Joint Powers Act, the Authority is authorized to issue lease revenue bonds to provide funds to acquire or construct public capital improvements, such revenue bonds to be repaid from the lease payments for such improvements, such as the lease payments described herein. The Authority is governed by a five-member board whose members are the same as the City Council. The Authority has no employees and all staff work is done by City staff or by consultants to the Authority. The Authority has acted as a conduit issuer for the City for a variety of financings.
THE CITY OF LANCASTER
The City is located in the County of Los Angeles approximately 60 miles northeast of the City of Los Angeles in the southwest portion of the Antelope Valley between the City of Palmdale and Edwards Air Force Base. The City was incorporated on November 22, 1977 as a general law city. On April 13, 2010, the qualified electors within the City voted to convert the City to a charter city. The City maintains a council- manager form of government. The mayor and city council are elected at large for staggered four-year terms.
The City is at an elevation of 2,356 feet and experiences a dry climate. The average annual rainfall is
7.36 inches per year and the average temperature is 62 degrees.
The City provides a broad range of services, including highway, street, drainage, sewer, and infrastructure construction and maintenance; planning and zoning; and parks, recreation and cultural activities. 18 4895-1287-2897v3/022283-0612
Sheriff’s and animal control services are provided under contract with the County, whereas fire protection, water, sanitation, school, and library are funded by special districts not under City control.
For financial and demographic information regarding the City, see APPENDIX A“THE CITY OF LANCASTER.”
A copy of the financial statements of the City for the fiscal year ended June 30, 2023 is attached hereto as Appendix C which should be read in its entirety. See APPENDIX C—“ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”
RISK FACTORS
The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating the purchase of the Series 2024 Bonds. However, they do not purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in the Series 2024 Bonds. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks.
General Considerations – Security for the Series 2024 Bonds The Series 2024 Bonds are special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the Series 2024 Bonds. The Authority has not taxing power.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation.
Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement to pay the Base Rental Payments and Additional Rental Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that it will take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease Agreement as a separate line item in its annual budgets and to make necessary annual appropriations for all such Rental Payments, subject to abatement. The City is currently liable and may become liable on other obligations payable from general revenues. See “CITY FINANCIAL INFORMATION—Indebtedness.”
The City has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to make Base Rental Payments may be decreased. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other activities before making Base Rental Payments and other payments due under the Lease Agreement. 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. However, the City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Article XIIIB of the California Constitution.” 19 4895-1287-2897v3/022283-0612
Abatements
In the event of substantial interference with the City’s right to use and occupy any portion of the Property by reason of non-delivery of the Stadium Project or by reason of damage to, or destruction or condemnation of the Property, or any defects in title to the Property, Base Rental Payments will be subject to abatement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS— Abatement.” In the event that such portion of the Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the City’s rental interruption insurance will be available in lieu of Base Rental Payments, plus the period for which funds are available from the funds and accounts established under the Indenture, or in the event that casualty insurance proceeds are insufficient to provide for complete repair or replacement of such portion of the Property or redemption of the Series 2024 Bonds, there could be insufficient funds to make payments to Owners in full.
It is not always possible to predict the circumstances under which abatement of rental may occur. In addition, there is no statute, case or other law specifying how such an abatement of rental should be measured.
For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter, it may be that the value of the Property is substantially higher or lower than its value at the time of the execution and delivery of the Series 2024 Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the Series 2024 Bonds.
If damage, destruction, title defect or eminent domain proceedings with respect to the Property results in abatement of the Base Rental Payments related to such Property and if such abated Base Rental Payments, if any, together with moneys from rental interruption or use and occupancy insurance (in the event of any insured loss due to damage or destruction), and eminent domain proceeds, if any, are insufficient to make all payments of principal and interest with respect to the Series 2024 Bonds during the period that the Property is being replaced, repaired or reconstructed, then all or a portion of such payments of principal and interest may not be made. Under the Lease Agreement and the Indenture, no remedy is available to the Series 2024 Bond Owners for nonpayment under such circumstances.
Any such abatement will continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed; and the term of the Lease Agreement will be extended as provided in the Lease Agreement, up to a maximum of ten years beyond the stated termination date of the Lease Agreement.
As described above under “THE PROJECTS” and “THE PROPERTY,” the Property leased under the Ground Lease and the Lease Agreement includes the Stadium Project. The City has funded capitalized interest on a portion of the Series 2024 Bonds through November 1, 2025, which is calculated to be the portion of the Base Rental Payments attributable to the Stadium Project through the period which is approximately nine months after estimated completion of the Stadium Project, which is currently expected to occur in February 2025. Should the Stadium Project not be timely completed and if the City does not have beneficial use and occupancy of the Stadium Project prior to the period through which capitalized interest has been funded, a portion of the City’s Base Rental Payments under the Lease Agreement may be subject to abatement. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS—Abatement.” Natural Disasters
The occurrence of any natural disaster in the City, including, without limitation, fire, windstorm, drought, earthquake, landslide, mudslide, flood or a rise in sea levels as result of climate change, could have an adverse material impact on the economy within the City, its General Fund and the revenues available for the payment of Base Rental Payments.
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Seismic. The City, like most regions in the State of California, is located in an area of seismic activity and, therefore, could be subject to potentially destructive earthquakes. According to the Safety Element contained in the City’s General Plan, the City is prone to significant earthquake activity from nearby faults.
The San Andreas fault is located approximately nine miles south of the City’s central core, and other major subsidiary faults in the area include the Garlock, Punchbow, Nadeau, Cemetery, and Littlerock faults. For more information, see the Safety Element of the City’s General Plan on file with the City Clerk.
The occurrence of severe seismic activity in the City could result in substantial damage to property located in the City, and could lead to successful appeals for reduction of assessed values of such property. [Should an earthquake occur that results in substantial interference with the use of the Property, under the abatement provisions of the Lease, the City would not be obligated to make the Base Rental Payments.
While the City currently maintains earthquake insurance as to the Property there is no assurance that the City will do so in the future. See “RISK FACTORS – Abatement” above.] Flooding. According to information contained in the Safety Element of the City’s General Plan, Much of the City is susceptible to flooding because of its relatively flat topography. Flooding is primarily caused by runoff from the San Gabriel and Sierra Pelona mountains to the south. The Antelope Valley drainage basin consists of a series of alluvial fans extending north from these mountains to the dry lake beds at Edwards Air Force Base. The basin has no natural outlet to the sea, which restricts the removal of runoff to percolation or evaporation. Major floods in the Antelope Valley generally coincide with winter storms that occur between November and April. The highest frequency and greatest intensity of winter flooding normally occurs between December and March. Infrequent thunderstorms during the summer and fall may also produce major flash floods.
For more information, see the Safety Element of the City’s General Plan on file with the City Clerk.
As with seismic hazards, the occurrence of flood damage to property located in the City could lead to successful appeals for reduction of assessed values of such property.
If any portion of the Property is destroyed by a flood or other natural disaster, an abatement could occur and result in the Trustee having inadequate funds to pay the principal and interest with respect to the Bonds as and when due.
The Property may also be at risk from other events of force majeure, such as damaging storms, fires and explosions, strikes, sabotage, riots and spills of hazardous substances, among other events. The City cannot predict what force majeure events may occur in the future.
Hazardous Substances
An additional environmental condition that may result in the reduction in the assessed value of property, and therefore property tax revenue available to make Base Rental Payments, would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the City. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required 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. The effect, therefore, should any of the property within the City be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition. The City is not aware of any hazardous substances located on the Property.
Other Financial Matters
Due to weakness in the economy of the State and the United States, it is possible that the general revenues of the City will decline. Such financial matters may have a detrimental impact on the City’s General 21 4895-1287-2897v3/022283-0612
Fund, and, accordingly, may reduce the City’s ability to make Base Rental Payments. See APPENDIX A“THE CITY OF LANCASTER” for financial and operating information related to the City.
Substitution, Addition and Removal of Property; Additional Bonds The Authority and the City may amend the Lease Agreement to substitute alternate real property for any portion of or add additional real property to the Property or to release a portion of the Property from the Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement. After a substitution or release, the portion of the Property for which the substitution or release has been effected will be released from the leasehold encumbrance of the Lease Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS― No Consequential Damages; Use of the Property; Substitution or Release.” Moreover, the Authority may issue Additional Bonds secured by Base Rental Payments which are increased from current levels.
Although the Lease Agreement requires, among other things, that the Property, as constituted after such substitution or release, have an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, it does not require that such Property have an annual fair rental value equal to the annual fair rental value of the Property at the time of substitution or release. Thus, a portion of the Property could be replaced with less valuable real property, or could be released altogether.
Such a replacement or release could have an adverse impact on the security for the Series 2024 Bonds, particularly if an event requiring abatement of Base Rental Payments were to occur subsequent to such substitution or release. See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS— THE LEASE AGREEMENT—No Consequential Damages; Use of the Property; Substitution or Release.” The Indenture requires, among other things, that upon the issuance of Additional Bonds, the Ground Lease and the Lease Agreement will be amended, to the extent necessary, so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds; provided, however, that no such amendment will be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period is in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith. See APPENDIX B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE— Issuance of Bonds; Application of Proceeds.”
Limited Recourse on Default; No Acceleration of Base Rental Failure by the City to make Base Rental Payments or other payments required to be made under the Lease Agreement, or failure to observe and perform any other terms, covenants or conditions contained in the Lease Agreement or in the Indenture for a period of 30 days after written notice of such failure and request that it be remedied has been given to the City by the Authority or the Trustee, constitute events of default under the Lease Agreement and permit the Trustee or the Authority to pursue any and all remedies available. In the event of a default, notwithstanding anything in the Lease Agreement or in the Indenture to the contrary, there is no right under any circumstances to accelerate the Base Rental Payments or otherwise declare any Base Rental Payments not then in default to be immediately due and payable, nor do the Authority or the Trustee have any right to re-enter or re-let the Property except as described in the Lease Agreement.
The enforcement of any remedies provided in the Lease Agreement and the Indenture could prove both expensive and time consuming. If the City defaults on its obligation to make Base Rental Payments with respect to the Property, the Trustee, as assignee of the Authority, may retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis and enforce any other terms or provisions of the Lease Agreement to be kept or performed by the City. 22 4895-1287-2897v3/022283-0612
Alternatively, the Authority or the Trustee may terminate the Lease Agreement, retake possession of the Property and proceed against the City to recover damages pursuant to the Lease Agreement. Due to the specialized nature of the Property or any property substituted therefor pursuant to the Lease Agreement and the restrictions on its use, no assurance can be given that the Trustee will be able to re-let the Property so as to provide rental income sufficient to make all payments of principal of, interest and premium, if any, on the Series 2024 Bonds when due, and the Trustee is not empowered to sell the Property for the benefit of the Owners of the Series 2024 Bonds. Any suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS” and APPENDIX B—“SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Defaults and Remedies.”
Limitations on Remedies Available; Bankruptcy
The enforceability of the rights and remedies of the Owners and the obligations of the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose.
Under Chapter 9 of the United States Bankruptcy Code (Title 11, United States Code) (the “Bankruptcy Code”), which governs bankruptcy proceedings of public entities such as the City, no involuntary bankruptcy petition may be filed against a public entity. However, upon satisfaction of certain prerequisite conditions, a voluntary bankruptcy petition may be filed by the City. The filing of a bankruptcy petition results in a stay against enforcement of remedies under agreements to which the bankrupt entity is a party. A bankruptcy filing by the City could thus limit remedies under the Lease Agreement. A bankruptcy debtor may choose to assume or reject executory contracts and leases, such as the Lease Agreement. In the event of rejection of a lease by debtor lessee, the leased property is returned to the lessor and the lessor has a claim for a limited amount of the resulting damages.
Under the Indenture, the Trustee holds a security interest in the Base Rental Payments for the benefit of the Owners of the Bonds, but such security interest arises only when the Base Rental Payments are actually received by the Trustee following payment by the City. The Property is not subject to a security interest, mortgage or any other lien in favor of the Trustee for the benefit of Owners. In the event of a bankruptcy filed by the City and the subsequent rejection of the Lease Agreement by the City, the Authority would recover possession of the Property and the Trustee, as assignee of the Authority, would have a claim for damages against the City. The Trustee’s claim would constitute a secured claim only to the extent of Revenues in the possession of the Trustee; the balance of such claim would be unsecured.
Bankruptcy proceedings would subject the Owners of the Series 2024 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently entail risks of delay, limitation, or modification of their rights with respect to the Series 2024 Bonds. In a bankruptcy case, the amount recovered by Owners of the Series 2024 Bonds could be affected by whether the Lease Agreement is determined to be a “true lease” or a loan or other financing arrangement (a “financing lease”), and the Owners’ recovery could be reduced in either case. If the Lease Agreement is determined by the bankruptcy court to constitute a “true lease” (rather than a financing lease), the City could choose not to perform under the Lease Agreement by rejecting it and the claim of the Owners could be substantially limited pursuant to Section 365 of the Bankruptcy Code to a fraction of the scheduled amount of Base Rental Payments, and that reduced claim amount could be impaired as an unsecured claim under a plan of adjustment. If a bankruptcy court were to treat the Lease Agreement as a financing lease then, under a plan of adjustment, the priority, payment terms, 23 4895-1287-2897v3/022283-0612
collateral, payment dates, payment sources, covenants and other terms or provisions of the Lease Agreement and the Series 2024 Bonds may be altered. Such a plan could be confirmed even over the objections of the Trustee and the Owners, and without their consent. For example, the amount of the Base Rental Payments from the City might be substantially reduced because of the power of the bankruptcy court under the Bankruptcy Code to adjust secured claims to the value of their collateral, which, as described above, could be limited to the Base Rental Payments held by the Trustee. In addition, there can be a substantial disparity in treatment based on the nature of the Property. Whether the Lease Agreement is characterized by the bankruptcy court as a true lease or a financing lease, either scenario could result in the Owners not receiving the full amount of the principal and interest due on the Series 2024 Bonds.
The opinions of counsel, including Bond Counsel, delivered in connection with the issuance of the Series 2024 Bonds will be so qualified. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the Owners 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.
Possible Insufficiency of Insurance Proceeds
The Lease Agreement obligates the City to keep in force various forms of insurance, subject to deductibles, for repair or replacement of the Property in the event of damage, destruction or title defects, subject to certain exceptions. The Authority and the City make no representation as to the ability of any insurer to fulfill its obligations under any insurance policy obtained pursuant to the Lease Agreement and no assurance can be given as to the adequacy of any such insurance to fund necessary repair or replacement or to pay principal of and interest on the Series 2024 Bonds when due. In addition, certain risks, such as earthquakes and floods, are not required to be insured under the Lease Agreement, and therefore, are not carried by the City. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS— Insurance.”
Loss of Tax Exemption
As discussed under the heading “TAX MATTERS—Series 2024A Bonds,” the interest on the Series 2024A Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of delivery of the Series 2024A Bonds, as a result of acts or omissions of the Authority or the City in violation of its covenants in the Indenture and the Lease Agreement. Should such an event of taxability occur, the Series 2024A Bonds would not be subject to a special redemption and would remain Outstanding until maturity or until redeemed under the redemption provisions contained in the Indenture.
No Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the Owners of the Series 2024 Bonds with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease Agreement or the Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture.
Dependence on State for Certain Revenues
On January 10, 2024, the Governor released his proposed State budget for fiscal year 2024-25 (the “Proposed 2024-25 State Budget”). The following is drawn from the Department of Finance (“DOF”) and Legislative Analyst’s Office (“LAO”) summaries of the Proposed 2024-25 State Budget. The Proposed 2024- 25 State Budget reports that the State is facing a budgetary shortfall in 2024 of approximately $37.9 billion.
The shortfall is rooted in two separate but related developments that have occurred over the past two fiscal years—a substantial decline in the stock market that drove down revenues and an unprecedented delay in 24 4895-1287-2897v3/022283-0612
critical income tax collections. The Proposed 2024-25 State Budget indicates that, typically, the bulk of cash data relating to the prior tax year is available by April, leading to a revised May budget informed by actual cash collections. In calendar year 2023, due to federal and state income tax deadline delays resulting from several winter storms, the majority of the State’s revenues did not arrive until October and November. As a result, the corrections that would have been necessary to account for the decline in State revenues that would have normally come as part of last year’s May revision are instead being made in the Proposed 2024-25 State Budget.
The Proposed 2024-25 State Budget also includes multiyear projections of revenues and spending.
Under the administration’s projections, the State faces operating deficits in 2025-26 through 2027-28 of $37 billion, $30 billion and $28 billion, respectively. The LAO notes that although these deficits are smaller than the one projected for 2024-25, the State will have fewer options—such as one-time spending and draws on reserves—which could necessitate ongoing spending cuts or revenue increases The City cannot predict the extent of the budgetary problems the State may encounter in future fiscal years, and it is not clear what measures would be taken by the State to balance its budget, as required by law.
In addition, the City cannot predict the impact that State budgets will have on the City’s finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affected by international, national and State economic conditions and other factors over which the City has no control.
A number of the City’s revenues are collected and dispersed by the State (such as sales taxes and the VLF) or allocated in accordance with State law (most importantly, property taxes). Therefore, State budget decisions can have an impact on City finances. In the event of a material economic downturn in the State, there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of the State’s efforts to address any such related State financial difficulties.
Cybersecurity
The City, like many other public and private entities, relies on a complex tiered approach of security products and processes to protect its network environment, from the backend network infrastructure to the end- users desktop computers. These measures provide a strong presence in combating cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks. Cybersecurity incidents could result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City’s network or systems for the purposes of malicious activity, such as misappropriation of information or causing operational disruption and damage. The City’s Information Technology Division (“IT Division”) evaluates the City’s security infrastructure annually to assess the current hardware and software tools that are in place, and provide recommendations regarding any further enhancements. The IT Division also conducts periodical testing of the City’s information security systems and provides cybersecurity training for City staff.
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.
In January 2017, the City experienced a ransomware attack. A user opened an email attachment that triggered the ransomware encryption program. The City’s information technology department was able to restore files on several servers including the financial system. The has replaced the antivirus software since the incident.
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The City’s current Cyber Security Posture consists of three layers to reduce the City’s exposure to unauthorized access, data breach or loss be it unintentional or malicious as well as threats from natural disasters. The City uses network protection devices such as firewalls, routers, switches and email filtering as first layer. This layer monitors all incoming and outgoing traffic for threats and minimizing what traffic is allowed in or out of the network as well as segmenting the network into different virtual LANs for device segmentation. The second layer employs the use of end point protection software installed on all workstations, laptops and servers monitoring the systems for unknown programs and processes that could cause harm. The third layer is user access control using Microsoft Active Directory and role-based security groups that limits user access to only authorized devices, applications and datasets.
The City employs industry leading security products for its firewalls from Barracuda Networks, Sophos Antimalware, antivirus and antiransomeware end point management and VMware Workspace One mobile device management for tablet security, Carbonite Evault network backup applicant with cloud storage.
The City keeps these programs current with the use of the vendors automatic updates which updates each of the products daily. Attached are statistics and basic overview of each product.
No assurances can be given that the City’s efforts to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Principal of and interest on the Series 2024 Bonds are payable from Base Rental Payments made from the City’s General Fund. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2024 BONDS.” Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111, 218, 1A and 22, and certain other provisions of law discussed below are included in this Official Statement to describe the potential effect of these Constitutional and statutory measures on the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.
Article XIIIA of the State Constitution
On June 6, 1978, State voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service: (i) on indebtedness approved by the voters prior to December 1, 1978; (ii) on bonded indebtedness approved by a two-thirds vote on or after December 1, 1978, for the acquisition or improvement of real property; or (iii) bonded indebtedness incurred by a school district, 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. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, including a general economic downturn, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways.
Legislation Implementing Article XIIIA
Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA.
Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay 26 4895-1287-2897v3/022283-0612
voter-approved indebtedness). The 1% property tax is automatically levied by counties and distributed according to a formula among taxing agencies.
Increases in assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.
All taxable property is shown at full cash value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.
Article XIIIB of the State Constitution
In addition to the limits that Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues that such 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 and the investment proceeds thereof, 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” excludes 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 as of October 1, 1979, or subsequently authorized by the voters (such as the Bonds), 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 case of emergency; however, the appropriations limit for the next 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 local government’s actual appropriations be tested against its limit every two years.
If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years.
The City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB.
Articles XIIIC and XIIID of the State Constitution
On November 5, 1996, State voters approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the State Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments and property-related fees and charges. The interpretation and application of Proposition 218 will 27 4895-1287-2897v3/022283-0612
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.
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 require a majority vote and taxes for specific purposes, even if deposited in the City’s General Fund, require a two-thirds vote. The voter approval requirements of Proposition 218 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.
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, such as hearings and stricter and more individualized benefit requirements and findings. 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. If the City is unable to continue to collect these revenues, the services and programs funded with these revenues would have to be curtailed and/or the City’s General Fund might have to be used to support them. The City is unable to predict whether or not in the future it will be able to continue all existing services and programs funded by the fees, charges and assessments in light of Proposition 218 or, if these services and programs are continued, which amounts (if any) would be used from the City’s General Fund to continue to support such activities.
Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. This extension of the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional principles relating to the impairments of contracts. Legislation implementing Proposition 218 provides that the initiative power provided for in Proposition 218 “shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights” protected by the United States Constitution. However, 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.
Although a portion of the City’s General Fund revenues are derived from taxes purported to be governed by Proposition 218, all of such taxes were imposed in accordance with the requirements of Proposition 218. 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 which support the City’s General Fund.
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; 28 4895-1287-2897v3/022283-0612
(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 July 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.
California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995 in Fresno County Transportation Authority v. Guardino.
This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of Proposition 62.
Proposition 1A
Proposition 1A, proposed by the State Legislature in connection with the State’s fiscal year 2004-05 budget, approved by the voters in November 2004 and generally effective in State fiscal year 2006-07, 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 State fiscal year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. The State also will not be able to borrow from local property tax revenues for more than two fiscal years within a period of ten fiscal years. In addition, the State cannot reduce the local sales tax rate or restrict the authority of local governments to impose or change the distribution of the State-wide local sales tax. 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, 0.65% of vehicle value, 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.
Many of the provisions of Proposition 1A have been superseded by Proposition 22 enacted in November 2010 and described below.
Proposition 22
On November 2, 2010, the voters of the State approved Proposition 22, known as “The Local Taxpayer, Public Safety, and Transportation Protection Act” (“Proposition 22”). Proposition 22, among other 29 4895-1287-2897v3/022283-0612
things, broadens the restrictions established by Proposition 1A. While Proposition 1A permits the State to appropriate or borrow local property tax revenues on a temporary basis during times of severe financial hardship, Proposition 22 amends Article XIII of the State Constitution to prohibit the State from appropriating or borrowing local property tax revenues under any circumstances. The State can no longer borrow local property tax revenues on a temporary basis even during times of severe financial hardship. Proposition 22 also prohibits the State from appropriating or borrowing proceeds derived from any tax levied by a local government solely for the local government’s purposes. Furthermore, Proposition 22 restricts the State’s ability to redirect redevelopment agency property tax revenues to school districts and other local governments and limits uses of certain other funds although this provision no longer has any meaningful impact given the statewide dissolution of redevelopment agencies. Proposition 22 is intended to stabilize local government revenue sources by restricting the State government’s control over local revenues. The City cannot predict whether Proposition 22 will have a beneficial effect on the City’s financial condition Proposition 26
On November 2, 2010, State voters also approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City does not believe that Proposition 26 will adversely affect its General Fund revenues.
Possible Future Initiatives
General. Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 218, 111, 62, 1A, 22 and 26 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. The nature and impact of these measures cannot be anticipated by the City.
Initiative Measure Qualified for November 2024 Ballot – Taxpayer Protection and Government Accountability Act. A ballot initiative known as the “Taxpayer Protection and Government Accountability Act” (“Initiative 1935”) received the required number of signatures to appear on the November 5, 2024 Statewide ballot. If approved by a majority of voters casting a ballot at the November 5, 2024 Statewide election, Initiative 1935 would make numerous significant changes to Articles XIII, XIIIA, XIIIC and XIIID of the California Constitution to further limit the authority of local governments, and electors via the initiative process, to adopt and impose taxes and fees. The full text of Initiative 1935 may be viewed at the website of the California Attorney General.
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Among other things, Initiative 1935 would amend the definition “tax” in Article XIIIC to include “every levy, charge, or exaction of any kind imposed by a local law that is not an exempt charge.” Initiative 1935 defines “exempt charge” to mean a “reasonable charge for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the actual costs [as opposed to the reasonable costs] of providing the service or product to the payor.” “Exempt charges” also encompass existing exceptions from the definition of “tax” added to Article XIIIC by Proposition 26, including property-related fees imposed in accordance with Article XIIID (see “—Articles XIIIC and XIIID of the California Constitution – Proposition 218,” above). “Actual costs” is defined as “the minimum amount necessary to reimburse the government for the cost of providing the service or product … less all other sources of revenue including, but not limited to taxes, other exempt charges, grants, and state or federal funds received to provide such service or product.” Initiative 1935 further provides that the local government adopting an exempt charge would bear the burden of proving by clear and convincing evidence (as opposed to a preponderance of the evidence) that: (a) a levy, charge or exaction is an exempt charge and not a tax; and (b) the amount of the exempt charge is reasonable and that the amount charged does not exceed the actual cost of providing the service or product to the payor. Initiative 1935 would also amend Article XIIIC to provide that no local law, whether proposed by the governing body or by an elector, may impose any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote. The full definitions of the terms referenced above, along with the full text of Initiative 1935, may be viewed at the website of the California Attorney General.
Initiative 1935 is retroactive, and provides that any tax or exempt charge adopted after January 1, 2022 but prior to the effective date of Initiative 1935, which was not adopted in compliance with the requirements thereof, would be void 12 months after the effective date of Initiative 1935, unless the tax or exempt charge is reenacted in compliance with the provisions of Initiative 1935.
The City cannot predict whether Initiative 1935 will be approved at the November 5, 2024 Statewide election. If Initiative 1935 is approved, the City cannot provide any assurances that it will not have a material adverse effect on the City’s ability to adopt or increase rates, fees, and charges for the various services provided by the City.
TAX MATTERS
Series 2024A Bonds
In the opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Series 2024A Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. However, it should be noted that, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the Series 2024A Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series 2024A Bonds is exempt from State of California personal income tax.
The difference between the issue price of a Series 2024A Bond (the first price at which a substantial amount of the Series 2024A Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Series 2024A Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner’s basis in the applicable Series 2024A Bond. 31 4895-1287-2897v3/022283-0612
Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Series 2024A Bonds is based upon certain representations of fact and certifications made by the Authority and the City and is subject to the condition that the Authority and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2024A Bonds to assure that interest (and original issue discount) on the Series 2024A Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Series 2024A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2024A Bonds. The Authority and the City will covenant to comply with all such requirements.
The amount by which a Beneficial Owner’s original basis for determining loss on sale or exchange in the applicable Series 2024A Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner’s basis in the applicable Series 2024A Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a Series 2024A Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2024A Bond to the Beneficial Owner. Purchasers of the Series 2024A Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.
Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Series 2024A Bonds permit certain actions to be taken or to be omitted if a favorable opinion of a bond counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (or original issue discount) on any Series 2024A Bond if any such action is taken or omitted based upon the advice of counsel other than Bond Counsel.
Although Bond Counsel will render an opinion that interest (and original issue discount) on the Series 2024A Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the City continue to comply with certain requirements of the Code, the ownership of the Series 2024A Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Series 2024A Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Series 2024A Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Series 2024A Bonds.
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Series 2024A Bonds will be selected for audit by the IRS. It is also possible that the market value of the Series 2024A Bonds might be affected as a result of such an audit of the Series 2024A Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Series 2024A Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Series 2024A Bonds or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE SERIES 2024A BONDS THERE MIGHT BE
FEDERAL, STATE, OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY
CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE, OR LOCAL TAX TREATMENT OF THE SERIES 2024A BONDS INCLUDING THE
IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX- EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE SERIES 2024A BONDS. THESE
CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE SERIES 32 4895-1287-2897v3/022283-0612
2024A BONDS. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE SERIES 2024A BONDS STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR
JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE SERIES 2024A BONDS, ALL
POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE
STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE SERIES 2024A BONDS.
A copy of the proposed form of opinion of Bond Counsel with respect to the Series 2024 Bonds is attached hereto in APPENDIX D.
Series 2024B Bonds
In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2024B Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code but interest (and original issue discount) on the Series 2024B Bonds is exempt from State of California personal income tax.
Except for certain exceptions, the difference between the issue price of a Series 2024B Bond (the first price at which a substantial amount of the Series 2024B Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series 2024B Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The amount of original issue discount deemed received by the Beneficial Owner of a Series 2024B Bond will increase the Beneficial Owner's basis in the Series 2024B Bond.
Beneficial Owners of Series 2024B Bonds should consult their own tax advisors with respect to taking into account any original issue discount on the Series 2024B Bonds.
In the event of a legal defeasance of a Series 2024B Bond, such bond might be treated as retired and “reissued” for federal tax purposes as of the date of the defeasance, potentially resulting in recognition of taxable gain or loss to the applicable Beneficial Owner of the Series 2024B Bond generally equal to the difference between the amount deemed realized from the deemed redemption and reissuance of the Beneficial Owner’s adjusted tax basis in such bond.
The amount by which a Beneficial Owner’s original basis of a Series 2024B Bond for determining gain or loss on sale or exchange of the applicable Series 2024B Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which the Beneficial Owner of a Series 2024B Bond may elect to amortize under Section 171 of the Code. Such amortizable bond premium reduces the Beneficial Owner’s basis in the applicable Series 2024B Bond (and the amount of taxable interest received). The basis reduction as a result of the amortization of bond premium may result in the Beneficial Owner of a Series 2024B Bond realizing a taxable gain when a Series 2024B Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2024B Bond to the Beneficial Owner. The Beneficial Owners of the Series 2024B Bonds that have a basis in the Series 2024B Bonds that is greater than the principal amount of the Series 2024B Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code.
The federal tax and state personal income tax discussion set forth above with respect to the Series 2024B Bonds is included for general information only and may not be applicable depending upon a Beneficial Owner’s particular situation. The ownership and disposition of the Series 2024B Bonds and the accrual or receipt of interest with respect to the Series 2024B Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. 33 4895-1287-2897v3/022283-0612
A copy of the proposed form of opinion of Bond Counsel with respect to the Series 2024 Bonds is attached hereto in APPENDIX D.
CERTAIN LEGAL MATTERS
The validity of the Series 2024 Bonds and certain other legal matters are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel. Stradling Yocca Carlson & Rauth LLP, is also acting as Disclosure Counsel for the City. A complete copy of the proposed form of Bond Counsel opinion is contained in Appendix D hereto. Bond Counsel and Disclosure Counsel will receive compensation from the City contingent upon the sale and delivery of the Series 2024 Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Series 2024 Bonds. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Irvine, California. Counsel to the Underwriter will receive compensation contingent upon the issuance of the Series 2024 Bonds.
ABSENCE OF LITIGATION
The City is involved in a variety of litigation from time to time in the normal course of its operations.
However, to the best knowledge of the City and the Authority, there is no action, suit or proceeding pending or threatened either restraining or enjoining the execution or delivery of the Series 2024 Bonds, the Lease Agreement, the Ground Lease or the Indenture, or in any way contesting or affecting the validity of the foregoing or any proceedings of the Authority or the City taken with respect to any of the foregoing.
See the caption “INFORMATION REGARDING THE CITY OF LANCASTER—Employees and Employee Relations” in Appendix A for a description of certain ongoing litigation between the City and the County of Los Angeles regarding the City’s contract with the County of Los Angeles Sheriff’s Department to provide police services within the City.
UNDERWRITING
The Series 2024 Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”). The Underwriter will purchase the Series 2024A Bonds from the Authority at an aggregate purchase price of $__________ (representing the principal amount of the Series 2024A Bonds, [plus/less] a [net] original issue [premium/discount] of $__________ and less an Underwriter’s discount of $___________) and will purchase the Series 2024B Bonds from the Authority at an aggregate purchase price of $__________ (representing the principal amount of the Series 2024B Bonds, less an Underwriter’s discount of $___________).
The purchase agreement relating to the Series 2024 Bonds provides that the Underwriter will purchase all of the Series 2024 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions.
The initial offering prices that are stated on the inside front cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Series 2024 Bonds to certain dealers (including dealers depositing Series 2024 Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than said public offering prices.
The Underwriter has entered into a distribution agreement (“Distribution Agreement”) with Charles Schwab & Co., Inc. (“CS&Co”) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement, CS&Co. will purchase Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells.
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RATING
S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”) has assigned an issuer credit rating of “_____” with a stable outlook to the Series 2024 Bonds. Such ratings reflect only the views of S&P and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same. Generally, a rating agency bases its ratings on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant.
Any such downward revision or withdrawal of either rating may have an adverse effect on the market price of the Series 2024 Bonds. None of the Authority, the City, or the Underwriter has undertaken any responsibility either to bring to the attention of the owners of the Series 2024 Bonds a proposed change in or withdrawal of any rating or to oppose any such proposed revision or withdrawal.
MUNICIPAL ADVISOR
NHA Advisors, LLC, San Rafael, California (the “Municipal Advisor”), served as municipal advisor to the Authority and the City with respect to the sale of the Series 2024 Bonds. The Municipal Advisor will receive compensation contingent upon the sale and delivery of the Series 2024 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the Owners of the Series 2024 Bonds to provide annually certain financial information and operating data relating to the Series 2024 Bonds and the City (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events. For a complete listing of items of information which will be provided in each Annual Report and further description of the City’s undertaking with respect to the Annual Report and certain enumerated events, see APPENDIX E—“FORM OF CONTINUING DISCLOSURE AGREEMENT.” The Annual Report is to be provided by the City not later than March 31 after the end of the City’s fiscal year, commencing with the report for fiscal year 2023-24.
The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board.
These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12.
The annual report filed on March 31, 2021 with respect to a series of lease revenue bonds issued by the Authority omitted certain operating data; when the error was discovered the missing information was filed on May 5, 2021. Finally, a rating change from “A” to “A+” with respect to certain tax allocation bonds of the former Lancaster Redevelopment Agency occurred on June 22, 2021 and the Successor Agency to the Lancaster Redevelopment Agency filed a notice of this rating change on September 16, 2021.
The City adopted in March 2015 an internal continuing disclosure policy relating to the City and all related entities, including the successor agency to the former Lancaster Redevelopment Agency, to assist compliance with the continuing disclosure undertakings of the City and other related entities of the City. The City and the Authority intend to continue working with outside consultants to ensure that they comply with all of their respective continuing disclosure obligations.
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FINANCIAL STATEMENTS OF THE CITY
Included herein as Appendix C are the audited financial statements of the City for the year ended June 30, 2023, together with the report thereon dated April 9, 2024 of CliftonLarsonAllen LLP, Irvine, California, certified public accountants (the “Auditor”). Such audited financial statements have been included herein in reliance upon the report of the Auditor. The City’s 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 review of the financial condition of the City and also has not performed any procedures relating to this Official Statement. The Auditor has not undertaken to update the audited financial statements of the City or its report, and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated April 9, 2024.
MISCELLANEOUS
References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of the Indenture, the Lease Agreement, the Ground Lease and other documents are available, upon request, and upon payment to the City of a charge for copying, mailing and handling, from the City Clerk at the City of Lancaster, 44933 Fern Avenue, Lancaster, California 93534.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority or the City and the purchasers or Owners of any of the Series 2024 Bonds.
The execution and delivery of this Official Statement have been duly authorized by the Authority and the City.
LANCASTER FINANCING AUTHORITY
By:
Executive Director
CITY OF LANCASTER
By:
City Manager
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APPENDIX A
THE CITY OF LANCASTER
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APPENDIX B
SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS
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APPENDIX C
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2023 D-1
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APPENDIX D
PROPOSED FORM OF BOND COUNSEL OPINION
[Closing Date]
Lancaster Financing Authority
Lancaster, California
Re:Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) and Series 2024B (Federally Taxable)
Ladies and Gentlemen:
We have acted as bond counsel to the Lancaster Financing Authority (the “Authority”) in connection with the issuance by the Authority of $__________ Lease Revenue Bonds, Series 2024A (Tax-Exempt) (the “Series 2024A Bonds”) and $__________ Lease Revenue Bonds, Series 2024B (Federally Taxable) (the “Series 2024B Bonds” and, together with the Series 2024A Bonds, the “Series 2024 Bonds”), pursuant to the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”), and pursuant to an Indenture, dated as of _____ 1, 2024 (the “Indenture”), by and among the Authority, the City of Lancaster (the “City”) and U.S. Bank Trust Company, National Association, as Trustee. The Series 2024 Bonds will be principally secured by lease payments to be made by the City pursuant to a Lease Agreement, dated as of _____ 1, 2024 (the “Lease”), by and between the Authority and the City. We have examined the law and such certified proceedings and other documents, agreements, opinions and matters as we deem necessary to render this opinion. This opinion is based on current statutory and constitutional law and published court decisions as of the date hereof. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Indenture.
As to questions of fact material to our opinion, we have relied upon representations of the Authority contained in the Indenture and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation.
We have assumed the genuineness of all documents and signatures presented to us, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions referred to in the preceding paragraphs of this opinion. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Lease and the Ground Lease. We call attention to the fact that the rights and obligations under the Series 2024 Bonds, the Indenture, the Lease, the Ground Lease, the Assignment Agreement and the Tax Certificate may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, by the application of equitable principles and the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities and public agencies in the State of California.
We express no opinion herein with respect to any indemnification, contribution, choice of law, choice of forum, penalty or waiver provisions contained in the Series 2024 Bonds, the Indenture, the Lease, the Ground Lease or the Assignment Agreement; nor do we express any opinion with respect to the state or quality of title to any of the real or personal property described in the Indenture, the Lease or the Ground Lease, or the accuracy or sufficiency of the description contained therein, or the remedies available to enforce liens on, any such property contained therein.
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Based upon the foregoing we are of the opinion, under existing law, as follows:
1. The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California with the full power to enter into the Indenture and the Lease, to perform the agreements on its part contained therein and to issue the Series 2024 Bonds.
2. The Indenture and the Lease have each been duly authorized and approved by the Authority and the Indenture and the Lease constitute the valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms. The Indenture creates a valid pledge of the Base Rental Payments and other moneys pledged under the Indenture, subject to the provisions of the Indenture.
3. The Indenture and the Lease have each been duly authorized and approved by the City and the Indenture and the Lease constitute the valid and binding obligations of the City enforceable against the City in accordance with their respective terms.
4. The Series 2024 Bonds have been duly and validly authorized by the Authority and are legal, valid and binding limited obligations of the Authority, enforceable in accordance with their terms and the terms of the Indenture. The Series 2024 Bonds are limited obligations of the Authority payable solely from the Base Rental Payments and other moneys pledged under the Indenture as provided in the Indenture, but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. The Authority has no taxing power.
5. Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Series 2024A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals; however, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), interest (and original issue discount) with respect to the Series 2024A Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed on such corporations.
6. Interest (and original issue discount) on the Series 2024 Bonds is exempt from personal income taxes imposed in the State of California.
7. The difference between the issue price of a Series 2024A Bond (the first price at which a substantial amount of the Series 2024A Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series 2024A Bond constitutes original issue discount.
Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Series 2024A Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Series 2024A Bond Owner will increase the Series 2024A Bond Owner’s basis in the applicable Series 2024A Bond. Original issue discount that accrues to the Series 2024A Bond Owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals (as described in paragraph 5 above) and is exempt from State of California personal income tax.
8. Interest (and original issue discount) on the Series 2024B Bonds is not excluded from gross income for federal income tax purposes.
9. With certain exceptions, the difference between the issue price of a Series 2024B Bond (the first price at which a substantial amount of the Series 2024B Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series 2024B Bond (to the extent the D-3
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redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method, and the amount of original issue discount deemed received by the Owner of a Series 2024B Bond will increase the Series 2024B Bond Owner’s basis in the Series 2024B Bond. Owners of the 2024B Bonds should consult their own tax advisors with respect to taking into account any original issue discount on the Series 2024B Bonds.
10. The amount by which a Series Series 2024A Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Series 2024A Bond premium which must be amortized under Section 171 of the Code; such amortizable Series 2024A Bond premium reduces the Series 2024A Bond Owner’s basis in the applicable Series 2024A Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Series 2024A Bond premium may result in a Series 2024A Bond Owner realizing a taxable gain when a Series 2024A Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2024A Bond to the owner.
The opinions expressed in paragraphs (5) and (7) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Series 2024A Bonds are subject to the condition that the Authority and the City comply with all requirements of the Code, that must be satisfied subsequent to the issuance of the Series 2024A Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Series 2024A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2024A Bonds. The Authority and the City have covenanted to comply with all such requirements. Except as set forth in paragraphs (5), (6), (7) , (8), (9) and (10) above, we express no opinion as to any tax consequences related to the Series 2024A Bonds.
Certain requirements and procedures contained or referred to in the Indenture, the Lease and Tax Certificate may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in the Indenture, the Lease and Tax Certificate, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. We express no opinion as to the effect on the exclusion of interest on the Series 2024A Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth LLP.
Our opinion is limited to matters governed by the laws of the State of California and federal law.
We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.
The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement with respect to the Series 2024 Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Series 2024 Bonds. We expressly disclaim any duty to advise the owners of the Series 2024 Bonds with respect to the matters contained in the Official Statement and any other offering material relating to the Series 2024 Bonds.
Respectfully submitted,
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated as of _____, 2024 (the “Disclosure Agreement”) is by and between the City of Lancaster (the “City”) and Willdan Financial Services (the “Dissemination Agent”), in connection with the issuance of the $__________ Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) (the “Series 2024A Bonds) and the $__________ Lancastger Financing Authority Lease Revenue Bonds, Series 2024B (Federally Taxable) (the “Serie 2024B Bonds” and, together with the Series 2024A Bonds, the “Series 2024 Bonds”) by the Lancaster Financing Authority (the “Authority”).
WHEREAS, the Bonds are being issued pursuant to an Indenture, dated as of _____ 1, 2024 (the “Indenture”), by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
WHEREAS, the Bonds are payable from the base rental payments to be made by the City under the Lease Agreement, dated as of _____ 1, 2024 (the “Lease Agreement”), between the City, as lessee, and the Authority, as lessor; and
WHEREAS, this Disclosure Agreement is being entered into by the City for the benefit of the Owners and Beneficial Owners of the Series 2024 Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below).
NOW, THEREFORE, the City and the Dissemination Agent agree as follows:
SECTION 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Comprehensive Financial Report provided by the City pursuant to, and as described in, Sections 2 and 3 of this Disclosure Agreement. “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2024 Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2024 Bonds for federal income tax purposes.
“Disclosure Representative” shall mean the City Manager of the City, or their designee, or such other officer or employee as the City shall designate in writing from time to time. “Dissemination Agent” shall mean Willdan Financial Services, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. “Financial Obligation” means a (a) debt obligation; (b) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). 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. “Listed Events” shall mean any of the events listed in Section 4(a) and (b) of this Disclosure Agreement.
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“MSRB” shall mean 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” shall mean the Official Statement relating to the Series 2024 Bonds, dated _____, 2024.
“Participating Underwriter” shall mean the original underwriter of the Series 2024 Bonds required to comply with the Rule in connection with the offering of the Series 2024 Bonds. “Repository” shall mean the Electronic Municipal Market Access system of the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California.
SECTION 2. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent, not later than March 31 following the end of the City’s fiscal year (which presently ends on June 30) (the “Annual Report Date”), commencing with the report for the fiscal year ending June 30, 2024 due March 31, 2025, provide to the MSRB an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement. The Annual Report shall be provided to the MSRB in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. 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 3 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.
The Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The City’s fiscal year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The City will promptly notify the MSRB and the Dissemination Agent (if other than the City) of a change in the fiscal year dates. The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report. (b) If by five (5) 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 notify the City of such non-receipt.
(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the Annual Report Date, the Dissemination Agent shall provide in a timely manner to the MSRB (with a copy to the Trustee and the Underwriters) a notice, in substantially the form attached as Exhibit A. (d) Unless the City has done so pursuant to Section 3(a) above, the Dissemination Agent (if other than the City) 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 E-3
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(ii) if the Dissemination Agent is other than the City, file a certificate with the City to the effect that the Annual Report has been provided pursuant to this Disclosure Agreement, stating, to the extent it can confirm such filing of the Annual Report, the date it was provided.
SECTION 3. Content of Annual Reports. The City’s Annual Report shall contain or include by reference the following:
(a) The City’s audited financial statements, prepared in accordance with generally accepted auditing standards for municipalities in the State of California. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 2(a), 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) The Original Budget and any Final Budget for the then-current fiscal year. (c) Numerical and tabular information for the immediately preceding fiscal year of the type contained in Appendix A to the Official Statement, in the following charts and tables: Table 5 (General Fund Tax Revenues by Source) and Table 6 (General Fund Property Tax Revenues by Source).
Financial information relating to the City referenced in this Section 3 may be updated from time to time, and such updates may involve displaying data in a different format or table or eliminating data that is no longer available.
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 have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference.
SECTION 4. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 4, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds in a timely manner not more than ten (10) business days after the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposal Issue (IRS Form 5701-TEB);
6. Tender Offers;
7. Defeasances;
8. Rating changes;
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9. Bankruptcy, insolvency, receivership or similar proceedings; and Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governmental 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 obligated person.
10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.
(b) Pursuant to the provisions of this Section 4, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds, if material, in a timely manner not more than ten (10) business days after occurrence:
1. unless described in Section 4(a)(5), adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Series 2024 Bonds or other material events affecting the tax status of the Series 2024 Bonds;
2. modifications to the rights of Series 2024 Bondholders;
3. bond calls;
4. release, substitution or sale of property securing repayment of the Series 2024 Bonds;
5. non-payment related defaults;
6. the consummation of a merger, consolidation, or acquisition involving the City or the Authority or the sale of all or substantially all of the assets of the City or the Authority, 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;
7. appointment of a successor or additional trustee or the change of the name of a trustee; and
8. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect Series 2024 Bond Owners. (c) If the City determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. (d) If the City determines that the Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence.
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(e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall not be responsible for determining whether the City’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule.
SECTION 5. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB.
SECTION 6. Termination of Reporting Obligation. The obligations of the City, the Trustee and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2024 Bonds. If such termination occurs prior to the final maturity of the Series 2024 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 4(c).
SECTION 7. 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 Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 4(c), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, any Series 2024 Bond Owners or Beneficial Owner of the Series 2024 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court E-6
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order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance.
No Series 2024 Bond Owner or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall also be entitled to any further protections and limitations from liability afforded to the Trustee under the Indenture as if such provisions were fully set forth herein. 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 all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, the Series 2024 Bond Owners, 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 Series 2024 Bonds.
SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:
City: City of Lancaster
44933 Fern Avenue
Lancaster, California 93534
Attention: City Manager
Dissemination Agent: Willdan Financial Services
27368 Via Industria, Suite 200
Temecula, California 92590
Attention: Federal Compliance Group
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, if any, the Underwriters and Owners and Beneficial Owners from time to time of the Series 2024 Bonds, and shall create no rights in any other person or entity.
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SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the date hereof, and such signature binds the City to the undertaking herein provided.
CITY OF LANCASTER
By:
City Manager
WILLDAN FINANCIAL SERVICES, as Dissemination
Agent
By:
Authorized Officer
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EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Lancaster Financing Authority
Name of Issue: Lancaster Financing Authority Lease Revenue Bonds, Series 2024A (Tax-Exempt) and Series 2024B (Federally Taxable)
Date of Issuance: _____, 2024
NOTICE IS HEREBY GIVEN that the City of Lancaster (the “City”) has not provided an Annual Report with respect to the above-named Series 2024 Bonds as required by the Continuing Disclosure Agreement, dated as of _____, 2024, by and between the City and Willdan Financial Services. [The City anticipates that the Annual Report will be filed by __________.] Dated: __________
[DISSEMINATION AGENT]
By: _______________________
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APPENDIX F
BOOK-ENTRY ONLY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Series 2024 Bonds, payment of principal, premium, if any, accreted value and interest on the Series 2024 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Series 2024 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Series 2024 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 Standard & Poor’s highest rating: “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 and www.dtc.org.
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 F-2
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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 affect 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.
Stradling Yocca Carlson & Rauth
Draft dated 6/4/24
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APPENDIX A
THE CITY OF LANCASTER
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TABLE OF CONTENTS
Page
INFORMATION REGARDING THE CITY OF LANCASTER .....................................................................A-1 General...........................................................................................................................................................A-1 City Council...................................................................................................................................................A-1 City Management...........................................................................................................................................A-1 Employee and Employee Relations ...............................................................................................................A-2 Risk Management ..........................................................................................................................................A-2 CITY FINANCIAL INFORMATION ..............................................................................................................A-3 Accounting and Financial Reporting .............................................................................................................A-3 City Blended Component Units and Discrete Component Units ..................................................................A-4 Financial Policies...........................................................................................................................................A-4 Budget Procedure...........................................................................................................................................A-6 Budget Information........................................................................................................................................A-7 Capital Improvement Program ......................................................................................................................A-9 Comparative Change in Fund Balance of the City General Fund ...............................................................A-10 Comparative General Fund Balance Sheets of the City ..............................................................................A-12 General Fund Tax Revenues........................................................................................................................A-14 Property Taxes .............................................................................................................................................A-15 Sales Taxes ..................................................................................................................................................A-15 Franchise Taxes ...........................................................................................................................................A-19 Licenses and Permits ...................................................................................................................................A-20 Other Revenues............................................................................................................................................A-20 Appropriations Limit ...................................................................................................................................A-20 Indebtedness ................................................................................................................................................A-20 Retirement System.......................................................................................................................................A-23 Other Post-Employment Benefits ................................................................................................................A-28 ECONOMIC AND DEMOGRAPHIC INFORMATION ...............................................................................A-30 Population ....................................................................................................................................................A-30 Education .....................................................................................................................................................A-30 Building Activity .........................................................................................................................................A-30 Personal Income...........................................................................................................................................A-31 Employment.................................................................................................................................................A-32 Industry ........................................................................................................................................................A-34 A-1
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APPENDIX A
INFORMATION REGARDING THE CITY OF LANCASTER
General
The City is located in the County of Los Angeles (the “County”) approximately 60 miles northeast of the City of Los Angeles in the southwest portion of the Antelope Valley between the City of Palmdale and Edwards Air Force Base. The City was incorporated on November 22, 1977 as a general law city. On April 13, 2010, the qualified electors within the City voted to convert the City to a charter city. The City maintains a council- manager form of government. The mayor and city council are elected at large for staggered four-year terms.
The City is at an elevation of 2,356 feet and experiences a dry climate. The average annual rainfall is
7.36 inches per year and the average temperature is 62 degrees.
The City provides a broad range of services, including highway, street, drainage, sewer, and infrastructure construction and maintenance; planning and zoning; and parks, recreation and cultural activities.
Sheriff’s and animal control services are provided under contract with the County, whereas fire protection, water, sanitation, school, and library are funded by special districts not under City control.
City Council
The City operates under a council-manager form of government. The Mayor and members of the City Council are elected at-large for staggered, four-year terms. As the City's legislative and policy entity, the Mayor and four members of the City Council are responsible to the residents of the City for all municipal programs and services as well as any legislative matters concerning the City. The City Council approves and adopts ordinances, resolutions and contracts, and enacts regulations and policies. The members of the City Council and the expiration dates of their respective terms are as follows:
CITY OF LANCASTER
City Council
Name Term Expires
R. Rex Parris, Mayor April 2028
Marvin Crist, Vice Mayor April 2026
Ken Mann, Council Member April 2028
Raj Malhi, Council Member April 2026
Lauren Hughes-Leslie, Council Member April 2028
The City Council appoints the City Manager, who heads the executive branch of the government, implements City Council directives and policies and manages the administrative and operational functions through the various departmental heads. The City Council also appoints the City Attorney, as well as members of various commissions and citizen advisory committees that provide broad perspective in the decision-making process.
City Management
A summary of certain City executive staff are described below.
City Manager. Jason Caudle is the City Manager of the City and the Executive Director of the Authority. Mr. Caudle has over 25 years of local government experience, previously serving for five years as a field representative for a Kern County Supervisor and serving ten years as the City Manager of the City of Tehachapi. Prior to joining the City, Mr. Caudle served as a Vice President of Public Sector Finance for Kinsell, A-2
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Newcomb, and De Dios, a broker-dealer specializing in municipal bonds. Mr. Caudle holds a bachelor's degree in Political Science and a master's degree in Public Policy and Administration from the California State University at Bakersfield and was a Licensed General Securities Representative.
Assistant City Manager. Trolis Niebla is the Assistant City Manager of the City. Mr. Niebla is a professional civil engineer with more than 20 years of experience in civil engineering related to land development, grading, drainage, hydrology, geotechnical, street design, traffic engineering, project and construction management, and building and safety review. Mr. Niebla has a bachelor’s degree in civil engineering and a master’s degree in geotechnical engineering from the University of California, Los Angeles.
Mr. Niebla started his career working for Leroy Crandall and Associates in 2000 and then moved into the public sector in 2001. Since that time, Mr. Niebla has worked for the Los Angeles County Department of Public Works, the City of Santa Clarita, and the City, previously serving as the City Engineer for the City.
Finance Director. George Harris is the Finance Director of the City and the Treasurer of the Authority.
Mr. Harris has served as Finance Director for four local government agencies since 2008, including the City and the cities of Adelanto, Rialto and Victorville. Mr. Harris also previously served for five years as a Finance Analyst at the City of Rialto and with Willdan Financial Services (formally known as Munifinancial). Mr. Harris previously held a Series 7 and 65 securities licenses during his term as a financial advisor with Ameriprise Financial Advisors (formally known as American Express Financial Advisors). Mr. Harris also serves as the Treasurer for the California Class local government investment pool as a statewide appointed member of the California Class Board of Trustees. Mr. Harris holds a bachelor’s degree in business administration from the University of California, Riverside and a master’s degree in public administration from California Baptist University.
Employee and Employee Relations
General. As of June 30, 2023, the City had approximately 298.00 full-time equivalent employees. In accordance with the provisions of California Government Code Section 3500, the City participates in labor negotiations with its employee associations. The result of the negotiations processes is memorialized in memoranda of understanding reached between the City and the City employee associations. The City currently recognizes one employee organization, the California Teamsters, Public, Professional and Medical Employees Union Local 911. The majority (approximately two-thirds) of City employees are unrepresented in a variety of regular full-time and temporary part-time classifications. In particular, the City employs approximately 382 part-time employees, the majority of which are in the City’s Parks and Recreation Department. The City has not experienced a major work stoppage by City Employees in the last ten years.
The table below lists the City’s employee associations and the approximate membership as of June 30, 2023, as well as the City’s unrepresented employees:
Unit/Affiliation
Contract
Expiration
Date
Number of
Members
Teamsters Local 911 June 30, 2026 61
Unrepresented Employees N/A 237
Part-time/Temporary N/A 382
Total 680
Source: City of Lancaster.
Police Services Within the City. The City contracts with the Los Angeles County Sheriff’s Department (“LASD”) to provide police services. The contract with LASD is composed of personnel costs, pension expenses and a liability insurance component, and the City’s LASD contract costs has increased less than three percent per year on average since fiscal year 2013-14. Separate from the LASD contract, the City has developed a hybrid A-3
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policing model to utilize sworn and non-sworn City staff to handle lower priority calls and provide support for LASD.
On April 3, 2024 the City filed suit against the County regarding the LASD contract. The suit is pending in Los Angeles Superior Court, Case No. 24STCV08440. The suit is brought as a putative class action on behalf of the City and all cities that contract with the County for law enforcement services (the “Contract Cities”). The City alleges the County has been overcharging Contract Cities for law enforcement services, in breach of contract and in violation of California Government Code section 51350. The suit seeks those alleged overcharges as damages. Per Court order the lawsuit is stayed pending a July 26, 2024 initial status conference. No trial date has been set.
Risk Management
The City is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City handles those risks with the purchase of commercial insurance. The City maintains liability insurance coverage up to a limit of $10,000,000 with $250,000 self-insurance retention for its general liabilities. Workers’ compensation insurance is provided by Public Risk Innovation, Solutions, and Management, with statutory limit coverage. The City also maintains property coverage including earthquake and flood.
At June 30, 2023, $2,550,000 had been accrued for general liability claims. This amount represents an estimate of amounts to be paid for reported claims and incurred but not yet reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2023, is dependent on future developments, the City’s claims administrators, and others involved with the administration of the programs, City management believes the accrual is adequate to cover such losses.
For workers’ compensation insurance, the City has transferred all risk of loss with the purchase of commercial insurance policies and has not reported any estimated loss in the financial statements.
There were no significant reductions in insurance coverage from the previous year. In addition, insurance coverage exceeded the amount of settlements for each of the past three fiscal years. For additional information with respect to the City’s risk management program as the changes in claims liability for fiscal year 2021-22 and 2022-23, see Note 12 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
CITY FINANCIAL INFORMATION
Accounting 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”).
All governmental funds are accounted for using the modified accrual basis of accounting. The City’s revenues are recognized when they become measurable and available as net current assets. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred.