EXHIBIT A
DEFINITIONS
“Additional Payments” means the payments so designated and required to be paid by the City pursuant to Section 4.7 of the Lease Agreement.
“Assignment Agreement” means the Assignment Agreement, dated as of June 1, 2022, by and between the Corporation and the Trustee, together with any duly authorized and executed amendments thereto.
“Bond Counsel” means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the City of nationally -recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code.
“Business Day” means a day which i s not a Saturday, Sunday or legal holiday on which banking institutions in the state in which the Designated Corporate Trust Office is located or in the State are closed or are required to close or a day on which the New York Stock Exchange is closed.
“Certificate of Completion ” means the certificate of a City Representative certifying that the Project has been completed by the City and that all costs relating thereto have been paid.
“Certificates” means the $______ aggregate principal amount of certifica tes of participation to be executed and delivered pursuant to the Trust Agreement which evidence direct, undivided fractional Interests of the Owners thereof in Lease Payments.
“City” means City of Marina, a municipal corporation and general law city, dul y organized and existing under and by virtue of the laws of the State.
“City Representative” means the Mayor, the City Manager, the Finance Director or any other person authorized by resolution of the Council delivered to the Trustee to act on behalf of the City under or with respect to the Site and Facility Lease, the Lease Agreement and the Trust Agreement.
“Closing Date” means June 16, 2022, the date upon which there is a physical delivery of the Certificates in exchange for the amount representing the purchase price of the Certificates by the Original Purchaser.
“Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced in the Lease Agreement or the Trust Agreement) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated under the Code.
“Continuing Disclosure Certificate ” shall mean that certain Continuing Disclosure Certificate executed by the City and dated the date of execution and delivery of the Certificates, as it may be amended from time to time in accordance with the terms thereof.
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96 Exhibit A
“Corporation” means the Public Property Financing Corporation of California , a nonprofit public benefit corporation organized and existing under and by virtue of the laws of the State.
“Corporation Representative” means the President, the Executive Director, the Treasurer and the Secretary of the Corporation, or the designee of any such official, or any other person authorized by resolution delivered to the Trustee to act on behalf of the Corporation under or with respect to the Site and Facility Lease , the Lease Agreement, the Assignme nt Agreement and the Trust Agreement.
“Council” means the City Council of the City.
“County” means Monterey County, a political subdivision of the State.
“Defeasance Obligations” means (a) cash, (b) direct non- callable obligations of the United States of America, (c) securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to which direct obligation or guarantee the full faith and credit of the United States of America has been pledged, (d) Refcorp interest strips, (e) CATS, TIGRS, STRPS, and (f) defeased municipal bonds rated AAA by S&P or Aaa by Moody’s (or any combination of the foregoing).
“Delivery Costs ” means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation relating to the execution and delivery of the Site and Facility Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement or the execution, sale and delivery of the Certificates, including but not li mited to filing and recording costs, settlement costs, printing costs, reproduction and binding costs, costs for statistical data, initial fees and charges of the Trustee (including the fees and expenses of its counsel), financing discounts, legal fees and charges, insurance fees and charges (including title insurance), financial and other professional consultant fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates , and charges and fees in connection with the foregoing.
“Delivery Costs Fund” means the fund by that name established and held by the Trustee pursuant to Section 3.01 of the Trust Agreement.
“Designated Corporate Trust Office ” means the corporate trust office of the Trus tee as designated in Section 10.13 of the Trust Agreement or such other office designated by the Trustee from time to time except that with respect to presentation of Certificates for payment or for registration of transfer and exchange or surrender and ca ncellation, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted.
“Event of Default” means an event of default under the Lease Agreement, as defined in Section 9.1 thereof.
“Facility” means, collectively, those facilities described in Exhibit B to the Site and Facility Lease and in Exhibit B to the Lease Agreement.
“Federal Securities” means (a) Cash, and (b) obligations of, or obligations guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States including: (i) United States treasury obligations, (ii) all direct or fully guaranteed oblig ations, (iii) General Services
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97 Exhibit A
Administration, (i v) Guaranteed Title XI financing, (v) Government National Mortgage Association (GNMA), and (vi) State and Local Government Series.
“Fiscal Year” means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period selected by the City as its fiscal year.
“Independent Counsel” means an attorney duly admitted to the pract ice of law before the highest court of the state in which such attorney maintains an office and who is not an employee of the Corporation, the City or the Trustee.
“Information Services” means the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Council (at http://emma.msrb.org) or, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other national information services providing information or disseminating notices of redemption of obligations similar to the Certificates.
“Insurance and Condemnation Fund ” means the fund by that name established and held by the Trustee pursuant to Section 6.01 of the Trust Agreement.
“Interest Payment Date ” means the first (1st ) day of May and November in each year, commencing November 1, 2022, so long as any Certificates are Outstanding.
“Lease Agreement” means that certain agreement for the lease of the Property by the Corporation to the City, dated as of June 1, 2022 , together with any duly authorized and executed amendments thereto.
“Lease Payment Date ” means the fifteenth (15th) day of April and October in each year during the Term of the Lease Agreement, commencing October 15, 2022.
“Lease Payment Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.02 of the Trust Agreement.
“Lease Payments” means the total payments required to be paid by the City pursuant to Section 4.4 of the Lease Agreement, including any prepayment thereof pursuant to Art icle X of the Lease Agreement, which payments consist of an interest component and a principal component, as set forth in Exhibit C to the Lease Agreement.
“Moody’s” means Moody’s Investors Service, New York, New York, or its successors.
“Net Proceeds,” when used with respect to insurance or condemnation proceeds, means any insurance proceeds or condemnation award paid with respect to the Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof.
“Original Purchaser” means the first purchaser of the Certificates upon their delivery by the Trustee on the Closing Date.
“Outstanding,” when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 9.03 of the Trust Agreement) all Certificates theretofore executed and delivered by the Trustee under the Trust Agreement except:
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98 Exhibit A
(a) Certificates theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;
(b) Certificates for the payment or redemption of which funds or Defeasance Obligations in the necessary amount shall have theretofore been deposited with the Trustee or an escrow holder (whether upon or prior to the maturity or redemption date of such Certificates), provided that , if such Certificates are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Section 4.03 of the Trust Agreement or provision satisfactory to the Trustee shall have been made for the giving of such notice;
(c) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to Section 2.09 of the Trust Agreement; and
(d) Certificates paid pursuant to Section 2.09 of the Trust Agreement.
“Owner” or “Certificate Owner” or “Owner of a Certificate,” or any similar term, when used with respect to a Certificate means the person in whose name such Certificate shall be registered on the Registration Books.
“Participating Underwriter” shall have the meaning ascribed thereto in the Continuing Disclosure Certificate.
“Permitted Encumbrances ” means, 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 of the Lease Agreement, permit to remain unpaid; (b) the Site and Facility Lease; (c) the Lease Agreement; (d) the Assignment Agreement; (e) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; ( f) easements, rights-of-way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Closing Date and which the City certifies in writing will not materially impair the use of the Property; and (g) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease Agreement and to which the Corporation and the City agree in writing do not reduce the value of the Property.
“Permitted Investments” means any of the following:
(a) Federal Securities;
(b) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: (i) Export-Import Bank, (ii) Rural Economic Community Development Administration, (iii) U.S. Maritime Administration, (iv) Small Business Administration, (v) U.S. Department of Housing & Urban Development (PHAs), and (vi) Federal Housing Administration;
(c) Direct obligations of any of the following federal agencies which obligations are not fully guaran teed by the full faith and credit of the United States of America: (i) senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), (ii) obligations of the Resolution Funding Corporat ion (REFCORP), and (iii) senior debt obligations of the Federal Home Loan Bank System;
(d) U.S. dollar denominated deposit accounts , demand deposits, including interest bearing money market accounts, time deposits, trust funds, trust accounts, overnight bank
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99 Exhibit A
deposits, interest -bearing deposits, other deposit products, certificates of deposit, including those placed by a third party pursuant to an agreement between the Trustee and the City,, federal funds and bankers’ acceptances with domestic commercial b anks, which may include the Trustee and its affiliates, which have a rating on their short-term certificates of deposit on the date of purchase of “P -1” by Moody’s and “A-1” or “A-1+” by S&P and maturing not more than 360 calendar days after the date of pu rchase. (Ratings on holding companies are not considered as the rating of the bank);
(e) Commercial paper which is rated at the time of purchase in the single highest classification, “P -1” by Moody’s and “A -1+” by S&P and which matures not more than 270 calendar days after the date of purchase;
(f) Investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P, including funds for which the Trustee, its parent holding company, if any, or any affiliate or subsidiary of the Trustee, receives and retains a fee for services provided to the fund whether as custodian, transfer agent investment advisor or otherwise;
(g) Pre- refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specifie d in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the “escrow”), in the highest rating category of Moody’s or S&P or any successors thereto; or (B) (i) which are fully secured as to principal, interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal, interest and redemption premium, if any, on such bonds or other obligations on the ma turity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal, interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate;
(h) Municipal obligations rated “Aaa /AAA” or general obligations of states with a rating of “A2/A” or higher by both Moody’s and S&P (excluding those with a floating net asset value);
(i) The Local Agency Investment Fund maintained by the State;
(j) Investment agreements, including guarant eed investment contracts, repurchase agreements and forward delivery agreements, that are obligations of an entity rated, or whose obligations are rated, or guaranteed by an entity which is rated or whose obligations are rated, (at the time the investment is entered into) not lower than A3 by Moody’s or its equivalent from another Nationally Recognized Rating Agency; and
(k) The Monterey County Investment Pool
“Proceeds,” when used with reference to the Certificates, means the face amount of the Certificates, less original issue discount.
“Project” means the transportation infrastructure improvements to be completed within the geographic boundaries of the City, more particularly described in Exhibit C to the Trust Agreement.
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Exhibit A
“Project Costs” means all costs of payment of, or reimbursement for, the Project.
“Project Fund ” means the fund by that name established and held by the Trustee pursuant to Section 3.03 of the Trust Agreement.
“Property” means, collectively, the Site and the Facility.
“Rating Category” means, with respect to any Permitted Investment, one of the generic categories of rating by Moody’s or S&P applicable to such Permitted Investment, without regard to any refinement or graduation of such rating category by a plus or minus sign or a numeral.
“Registration Books” means the records maintained by the Trustee pursuant to Section
2.12 of the Trust Agreement for registration of the ownership and transfer of ownership of the Certificates.
“Regular Record Date” means the close of business on t he fifteenth ( 15th) day of the month preceding each Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day.
“Rental Period” means each twelve -month period during the Term of the Lease Agreement commencing on May 2 in any year and ending on May 1 in the next succeeding year; provided, however, that the first Rental Period shall commence on the Closing Date and shall end on May 1, 2023.
“S&P” means S&P Global Ratings, a Standard & Poor's Financial Services LLC business, New York, New York, or its successors.
“Securities Depositories ” means The Depository Trust Company, 55 Water Street, 50 th
Floor, New York, NY 10041 Attention: Call Notification Department; or to such other addresses and/or such other registered securities depositories holding substantial amounts of obligations of types similar to the Certificates.
“Site” means, collectively, that certain real property more particularly described in Exhibit A to the Site and Facility Lease and in Exhibit A to the Lease Agreement.
“Site and Facility Lease” means the Site and Facility Lease, dated as of June 1, 2022, by and between the City, as lessor, and the Corporation, as les see, together with any duly authorized and executed amendments thereto.
“State” means the State of California.
“Term of the Lease Agreement” means the time during which the Lease Agreement is in effect, as provided in Section 4.2 of the Lease Agreement.
“Trust Agreement” means the Trust Agreement, dated as of June 1, 2022 , by and among the City, the Corporation and the Trustee, together with any duly authorized amendments thereto.
“Trustee” means U.S. Bank Trust Company, National Association , or any successor thereto, acting as Trustee pursuant to the Trust Agreement.
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Exhibit B 13072.01
EXHIBIT B
FORM OF THE CERTIFICATES
Certificate of Participation
(2022 Transportation Infrastructure Financing Project)
Evidencing a Direct, Undivided Fractional Interest of the Owners Hereof in Lease Payments to be Made by the
CITY OF MARINA
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
RATE OF INTEREST MATURITY DATE DATED DATE CUSIP
______% May 1, ____ June 16, 2022 ___
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: __________________________ DOLLARS
THIS IS TO CERTIFY THAT the registered owner identified above, or registered assigns (the “Owner”), as the registered owner of this Certificate of Participation (the “Certificate”), is the owner of a direct, undivided, fractional interest in a portion of the lease payments (the “Lease Payments”) to be paid by the City of Marina, a municipal corporation and general law city, duly organized and existing under the laws of the State of California (the “City”), pursuant to that certain Lease Agreement, dated as of June 1, 2022 , by and between the Public Property Financing Corporation of California , a nonprofit public benefit corporation organized and existing under the laws of the State of California (the “Corporation”) and the City (the “Lease Agreement”), which Lease Payments, prepayments and certain other rights and interests under the Lease Agreement have been assigned to U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), having a corporate trust office in San Francisco, California, or any other such location so designated by the Trustee (the “Designated Corporate Trust Office”).
The Owner is entitled to receive, subject to the terms of the Lease Agreement, on the Maturity Date identified above, the Principal Amount identified above, representing a direct, undivided fractional portion of the Lease Payments designated as principal coming due on such date, and to receive on May 1 and November 1 of each year, commencing November 1, 2022 (each, an “Interest Payment Date”), until payment in full of said Principal Amount, the Owner’s direct, undivided fractional share of the Lease Payments designated as interest coming due during the six months immediately preceding each of the Interest Payment Dates; provided that interest represented hereby shall be payable from the Interest Payment Date next preceding the date of execution of this Certificate unless (i) this Certificate is executed on an Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (ii) this Certificate is executed after the close of business on the fifteenth (15th) day of the month immediately preceding an Interest Payment Date, and prior to such Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (iii) this Certificate is executed on or before October 15, 2022, in which event interest shall be payable from the Dated Date stated above; provided, however, that if, as of the date of execution of any Certificate, interest is in default with respect to any Outstanding Certificates, interest represented by such
EXHIBIT D
102
Exhibit B
Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by check of the Trustee mailed to the registered owners of the Certificates as of a special record date to be fixed by the Trustee, notice of which shall be given to the registered owners of the Certificates not less than ten (10) days prior to such special record date. Said direct, undivided fractional share of the portion of the Lease Payments designated as interest is the result of the multiplication of the afores aid portion of the Lease Payments designated as principal by the Rate of Interest per annum identified above. Interest represented hereby is payable in lawful money of the United States of America by check mailed by the Trustee on each Interest Payment Date by first class mail to the Owner at his address as it appears on the registration books of the Trustee, as of the close of business on the fifteenth (15th) day of the month immediately preceding each Interest Payment Date or, upon written request filed w ith the Trustee prior to the fifteenth (15th) day of the month immediately preceding the Interest Payment Date by a registered owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by each registered owner in such written request. Principal represented hereby is payable in lawful money of the United States of America by check of the Trustee upon presentation and surrender hereof at the Designated Corporate Trust Office.
This Certificate has been executed and delivered by the Trustee pursuant to the terms of a Trust Agreement by and among the Trustee, the Corporation and the City, dated as of June 1, 2022 (the “Trust Agreement”). The City is authorized to enter into the Lease Agreement and the Trust Agreement under the laws of the State of California. Reference is hereby made to the Lease Agreement and the Trust Agreement (copies of which are on file at the Designated Corporate Trust Office) for a description of the terms on which the Certificates are delivered, the rights thereunder of the registered owners of the Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease Agreement, all of the provisions of which the Owner of this Certificate, by acceptance hereof, assents and agrees.
The City is obligated under the Lease Agreement to pay Lease Payments from any source of legally available moneys and the City has covenanted in the Lease Agreement to make the necessary annual appropriations therefor. The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
The obligation of the City to pay Lease Payments does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.
To the e xtent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by the parties thereto with the written consent of the registered owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then outstanding and may be amended without such consent under certain circumstances; provided that no such amendment shall impair the right of any registered owner to receive, in any case, such registered owner’s fractional share of any Lease Payment or prepayment thereof in accordance with such registered owner’s Certificate, without the consent of such registered owner.
This Certificate is transferable and exchangeable by the Owner, in person or by his attorney duly authorized in writing, at the Designated Corporate Trust Office , but only in the manner, subject to the limitations and upon payment of any charges provided i n the Trust Agreement and upon surrender and cancellation of this Certificate. Upon such transfer, a new Certificate or Certificates of an authorized denomination or denominations for the same aggregate principal amount will be delivered to the transferee in exchange for this Certificate.
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Exhibit B
The City, the Corporation and the Trustee may treat the Owner as the absolute owner hereof for all purposes, whether or not the payments represented by this Certificate shall be overdue and the City, the Corporation and the Trustee shall not be affected by any notice to the contrary.
The Certificates maturing on or before May 1, ____, are not subject to optional redemption. Certificates maturing on and after May 1, ____, are subject to redemption prior to their respective stated maturity dates, at the option of the City, from the proceeds of optional prepayments of Lease Payments made by the City pursuant to the Lease Agreement, in whole or in part, on any date on or after May 1, ____, at a redemption price equal to the pri ncipal amount to be redeemed, together with accrued interest to the date fixed for redemption, from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement, without premium.
The Certificates maturing on May 1, ____, are subject to mandatory redemption in part on May 1 in each year on and after May 1, ____, to and including May 1, ____ from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date, at a redemption price equal to the principal amount thereof to be redeemed, together with a ccrued interest to the date fixed for redemption, without premium, as follows:
Year Principal Amount of
(May 1) Certificates to be Redeemed
†Maturity.
The Certificates are subject to extraordinary redemption, in whole or in part, on any Interest Payment Date, in an order of maturity determined by the City, from the Net Proceeds of insurance or eminent domain proceedings credited towards the redemption of the Lease Payments pursuant to the Lease Agreement, at a redemption price equal to 100% of the principal amount to be redeemed, together with accrued interest represented thereby to the date fixed for redemption, without premium.
Notice of r edemption is to be given by the Trustee by mailing a redemption notice by first class mail at least twenty (20) days and not more than sixty (60) days prior to the date fixed for redemption to the registered owner of the Certificate or Certificates to be r edeemed at the address shown on the Certificate registration books maintained by the Trustee. Notice of redemption having been given as aforesaid, the Certificates or portions of Certificates so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) interest with respect to such Certificates or portions of Certificates shall cease to accrue and be payable. Neither the failure to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for the redemption of Certificates.
Notwithstanding the foregoing, in the case of any optional redemption of the Certificates, the notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Certificates on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Certificates have not been deposited with the
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Exhibit B
Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Certificates to be opti onally redeemed, such event shall not constitute an Event of Default; the Trustee shall send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anti cipated, and the Certificates for which notice of optional redemption was given shall remain Outstanding for all purposes of the Trust Agreement.
The Trustee has no obligation or liability to the registered owners of the Certificates to make payments of p rincipal or interest with respect to the Certificates. The Trustee’s sole obligations are to administer, for the benefit of the registered owners of the Certificates, the various funds and accounts established under the Trust Agreement. The Trustee makes no representation concerning the recitals contained in the Trust Agreement or in this Certificate.
The City has certified, recited and declared that all conditions, things and acts required by the constitution and statutes of the State of California, the L ease Agreement and the Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of this Certificate, do exist, have happened and have been performed in due time, form and manner as required by law.
Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation (“DTC”), to the City or its agent for registration of transfer, exchange, or payment, and any Certificate executed is registered in the name o f Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
IN WITNESS WHEREOF, this Certificate has been executed by U.S. Bank Trust Company, National Association, as Trustee, acting pursuant to the Trust Agreement.
Date of Execution:
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By
Authorized Signatory
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105
Exhibit B
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Certificate and do(es) hereby irrevocably constitute and appoint ,
attorney, to transfer the same on the registration books of the Trustee, with full power of substitution i n the premises.
Dated: _________________________
Signature Guaranteed:
NOTICE: Signature guarantee shall be made by a
guarantor institution participating in the Securities
Transfer Agents Medallion Program or in such other
guarantee program acceptable to the Trustee.
NOTICE: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Certificate in every particular, without
alteration or enlargement or any change whatsoever.
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106
Exhibit C
EXHIBIT C
DESCRIPTION OF THE PROJECT
EXHIBIT D
107
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13072.01
$________
CERTI
FICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
CERTIFICATE PURCHASE AGREEMENT
Jun
e 2, 2022
City of Marina
211 Hillcrest Avenue
Marina, CA 93933
Attention: City Manager
Ladies and Gentlemen:
The undersigned, Stifel, Nicolaus & Company, Incorporated , as underwriter (the “Underwriter”), hereby offers to enter into this Certificate Purchase Agreement (this Certificate Purchase Agreement, together with the exhibits hereto, being herein called the “Purchase Agreement”) with the City of Marina (the “ City”), which, upon acceptance, will be binding upon the City and the Underwriter. This offer is made subject to the acceptance by the City, by execution of this Purchase Agreement and its delivery to the Underwriter prior to 11:59 P.M., Pacific Standard time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to such acceptance.
Capitalized terms used in this Purchase Agreement and not otherwise defined herein shall have the meanings given to such terms as set forth in Trust Agreement, dated as of June 1, 2022 (the “Trust Agreement”) by and among Trust Agreement by and among the Public Property Financing Corporation of California (the “Corporation”), the City, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The City hereby acknowledges and agrees that (a) the Underwriter has financial and other interests that differ from those of the City, (b) the primary role of the Underwriter is to purchase securities for sale to investors in an arm’s -length commercial transaction between the City and the Underwriter, (c) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as t he agent or fiduciary of the City, (d) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and has not assumed any advisory or fiduciary responsibility to the City with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading
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108
-2-
thereto (irrespective of whether the Underwriter has provided or is currently providing other services to the City on other matters), (e) the only obligations the Underwriter has to the City with respect to the transaction contemplated hereby are expressly set forth in this Certificate Purchase Agreement, and (f) the City has consulted its own financial, municipal, legal, accounting, tax and/or other advisors, as applicable, to the extent it has deemed appropriate in connection with the issuance of the Certificates and the other matters contemplated by this Certificate Purchase Agreement. The City has a municipal advisor in this transaction that has legal fiduciary duties to the City.
The City hereby acknowledges receipt from the Underwriter of disclosures required by the Municipal Securities Rulemaking Board (“MSRB”) Rule G -17 (as set forth in MSRB Notice 2012-25 (May 7, 2012), relating to disclosures concerning the Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any.
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements herein set forth, the City hereby agrees to sell and deliver to the Underwriter all of the $________ aggregate principal amount of City of Marina Certificates of Participation ( 2022 Transportation Infrastructure Financing Project ) (the “Certificates”), evidencing the direct, undivided fractional interests of the owners thereof in lease payments (the “Lease Payments”) to be made by the City pursuant to a Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”), with the Corporation. The purchase price of the Certificates shall be $_________ (representing an aggregate principal amount of the Certificates of $________, plus a n et original issue premium of $_______, less an Underwriter’s discount of $_______).
Section 2. The Certificates. The Certificates will be dated their date of delivery and will be substantially in the form described in, shall be authorized, executed and delivered under the provisions of, and shall be payable as p rovided in, the Trust Agreement. The Certificates are being executed and delivered to provide funds to: ( a) to finance the cost of transportation infrastructure improvements within the geographic boundaries of the City that are eligible for application of Measure X revenues, and (b) pay costs incurred in connection with executing and delivering the Certificates.
The City will lease certain property and the site thereof (the “ Property”) to the Corporation pursuant to a Site and Facility Lease, dated as of June 1, 2022 (the “Site Lease”).
The Corporation will sublease the Property back to the City pursuant to the Lease Agreement.
The Corporation will assign its right to receive Lease Payments from the City under the Lease to the Trustee pursuant to an Assignment Agreement, dated as of June 1, 2022 (the “Assignment Agreement”).
The City will also enter into a Continuing Disclosure Certificate, dated the Closing Date (the “Continuing Disclosure Certificate ”). The Trust Agreement, the Site Lease, the Lease Agreement, the Assignment Agreement, the Continuing Disclosure Certificate and this Purchase Agreement are hereinafter referred to as the “Legal Documents.”
Section 3. Public Offering and Establishment of Issue Price.
(a) The Underwriter agrees to assist the City in establishing the issue price of the Certificates and shall execute and deliver to the City at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the City and Special
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Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Certificates.
(b) Except as otherwise set forth in Schedule I to Exhibit B, the City will treat the first price at which 10% of each maturity of the Certificates (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the City the price or prices at which it has sold to the public each maturity of Certificates. If at that time the 10% test has not been satisfied as to any maturity of the Certificates, the Underwriter agrees to promptly report to the City the prices at which it sells the unsold Certificates of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Certificates of that maturity or until all Certificates of that maturity have been sold to the public.
(c) The Underwriter confirms that it has offered the Certificates to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Schedule I to Exhibit B, except as otherwise set forth therein. Schedule I to Exhibit B also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Cer tificates for which the 10% test has not been satisfied and for which the City and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the City to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the- offering-price rule”). So long as the hold -the-offering-price rule remains applicable to any maturity of the Certificates, the Underwriter will neither offer nor sell unsold Certificates of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(i) the close of the fifth (5th) business day after the sale date; or
(ii) the date on which the Underwriter has sold at least 10% of that maturity of the Certificates to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the City when it has sold 10% of that maturity of the Certificates to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date.
(d) The Underwriter confirms that any selling group agreement and any retail distribution agreement relating to the initial sale of the Certificates to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker -dealer that is a party to such retail distribution agreement, as applicable, to (A) report the prices at which it sells to the public the unsold Certificates of each maturity allotted to it until it is notified b y the Underwriter that either the 10% test has been satisfied as to the Certificates of that maturity or all Certificates of that maturity have been sold to the public and (B) comply with the hold -the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter. The City acknowledges that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Certificates to the public, the agreement of each dealer who is a member of the selling group to comply with the hold -the-offering-price rule, if applicable, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed in connection with the initial sale of the Certificates to the public, the agreement
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of each broker -dealer that is a party to such agreement to comply with the hold -the-offering- price rule, if applicable, as set forth in the retail distribution agreement and the r elated pricing wires. The City further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker- dealer that is a party to a retail distribution agreement, to comply with its co rresponding agreement regarding the hold -the- offering-price rule as applicable to the Certificates.
(e) The Underwriter acknowledges that sales of any Certificates to any person that is a related party to the Underwriter shall not constitute sales to the public for purposes of this section. Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party,
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to par ticipate in the initial sale of the Certificates to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the public),
(iii) a purchaser of any of the Cert ificates is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (includi ng direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and
(iv) “sale date” means the date of execution of this Purchase Agreement by all parties.
Section 4. The Official Statement.
(a) By its acceptance of this proposal, the City ratifies, confirms and approves of the use and distribution by the Underwriter prior to the date hereof of the preliminary official statement, dated May 23, 2022, relating to the Certificates (including the cover page, the inside cover page, all appendices and all information incorporated therein, the “Preliminary Official Statement”). The City hereby certifies that such Preliminary Official Statement is deemed final as of its date, for purposes of Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”) except for certain omissions with respect to the pricing of the Certificates permitted to be omitted therefrom by Rule 15c2-12, and has executed and delivered a certificate in substantially the form attached hereto as Exhibit B.
The City hereby agrees to deliver or cause to be delivered to the Underwriter, within seven business days of the date hereof, copies of the final official statement, dated the date hereof, relating to the Certi ficates (including all information previously permitted to have been omitted by Rule 15c2 -12, the cover page, the inside cover page all appendices, all information incorporated therein and any amendments or supplements as have been approved by the City
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and the Underwriter, the “Official Statement ”) in such quantity as the Underwriter shall reasonably request. The City has approved the use and distribution by the Underwriter of the Official Statement, and the City hereby authorizes the use by the Underwriter of the Legal Documents in connection with the offer and sale of the Certificates.
Section 5. Closing. At 8:00 A.M., Pacific Daylight time, on June 16, 2022, or at such other time and date as may be agreed upon by the City and the Underwriter (the “Closing Date”), (i) the City will cause to be delivered to the Underwriter the Certificates in definitive form, bearing CUSIP numbers and fully registered, through the book-entry system of The Depository Trust Company, New York, New York ( “DTC”); and (ii) the City will cause to be delivered to the Underwriter the other documents herein mentioned at the offices of Quint & Thimmig LLP in Larkspur, California, or anoth er place to be agreed upon by the City and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Certificates as set forth in Section 1 hereof in immediately available funds to the order of the Trustee on behalf of th e City. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” Notwithstanding the foregoing, neither the failure to print CUSIP numbers on any Certificate nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept delivery of and pay for the Certificates on the Closing Date in accordance with the terms of this Purchase Agreement.
Section 6. Representation, Warranties and Covenants of the City. The City represents, warrants and covenants to the Underwriter that:
(a) The City is a municipal corporation and general law city duly organized and validly existing under the Constitution and laws of the State of California (the “State”). The City has all necessary power and authority and has taken all official action necessary to enter into and perform its duties under the Site Lease, the Lease Agreement, the Trust Agreement and this Purchase Agreement (collectively, the “City Documents”). The City Documents and the Official Statement have been duly executed and delivered by the City and, assuming the due authorization, execution and delivery by the other respective parties thereto, the City Documents to the best knowledge of the City will constitute legally valid and binding obligations of the City enforceable against the City in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or other similar laws or equitable principles relating to or limiting creditors’ rights generally.
(b) To the best of its knowledge, except as may be required under Blue Sky or other securities laws of any state (as to which no representa tion is made), there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over the City required for the execution, delivery and sale of the Certificates or the consumma tion by the City of the transactions contemplated by the City Documents and by the Official Statement, which has not been duly obtained or made on or prior to the date hereof.
(c) There is no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court or governmental or public entity pending , or to the best knowledge of the City, threatened against the City which affects or seeks to prohibit, restrain or enjoin the execution or delivery of the Certificates, or contesting the powers of the City to enter into or perform its obligations under any of the City Documents or the existence or powers of the City.
(d) the distribution of the Preliminary Official Statement and the Official Statement have been duly authorized by the City and as of the date hereof and at all times subsequent thereto up to and including the time of the Closing, the statements and information contained in the
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Official Statement (excluding statements under the captions “ THE CORPORATION,” “UNDERWRITING,” i nformation relating to DTC and the book -entry only system and information as to bond prices on the cover of the Official Statement, as to which no opinion o r view is expressed) are and will be true, correct and complete in all material respects and the Official Statement does not and will not omit to state a material fact required to be stated therein or necessary to make such statements and information therein, in the light of the circumstances under which they were made, not misleading in any material respect;
(e) The City agrees that, if at any time before the Closing Date any event of which it has knowledge occurs, as a result of which the Official Statem ent as then in effect would include any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading, the City shall promptly prepare or cooperate in the preparation of an amen dment or supplement to the Official Statement if in the opinion of the City and the Underwriter or their respective counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement. The City shall advise the Underwriter promptly of any proposal to so amend or supplement the Official Statement and shall effect such amendment or supplement in a form and manner approved by the Underwriter. The City shall promptly advise the Underwriter of the institution of an y action, suit, proceeding, inquiry or investigation seeking to prohibit, restrain or otherwise affect the use of the Official Statement in connection with the offering, sale or distribution of the Certificates.
If any information relating to the City contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein concerning the City or the City’s affairs, in the light of the circumstances under which it was presented, not misleading.
(f) The City shall furnish or cause to be furnished to the Underwriter, in such quantities as shall be reasonably required by the Underwriter, copies of the Official Statement and all amendments and supplements thereto, in each case as soon as available.
(g) The proceeds from the sale to the Underwriter of the Certificates will be applied in the manner and for the purposes specified in the Trust Agreement.
(h) The resolution of the City approving the execution and delivery of the City Documents and the Official Statement has been duly adopted by the City, has not been amended, modified or repealed and is in full force and effect on the date hereof.
(i) To the best of its knowledge, neither the execution and delivery by the City of the City Documents nor the City’s adoption of the resolution, nor the City’s compliance with such documents or such resolution, nor the consummation of the transactions contemplated by such documents, such resolution or the Official Statement, conflicts with or constitutes a breach of or default under, or will conflict with or constitute a breach of or default under, any term or provision of any applicable law or any administrative rule or regulation of the State or the United States or any applicable judgment, decree, order, license, permit, agreement or instrument to which the City is subject or is otherwise bound has or will have a material adverse effect on the ability of the City to perform its obligations under the City Documents,
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and no event has occurre d and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instruments.
(j) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Certificates for offer and sale under the securities or Blue Sky laws of as many jurisdictions of the states of the United States as the Underwriter may request; provided, however, that the City will not be required to expend any of its own funds in connection wi th such qualifications and will not be required to consent to service of process in any such jurisdiction in which it is not now subject to service of process or to qualify as a broker or a foreign corporation in connection with any such qualification in any jurisdiction.
(k) The City covenants that it will not take any action which would cause interest payable with respect to the Certificates to be subject to federal income taxation or State personal income taxation.
(l) Other than as described in the Pr eliminary Official Statement and the Official Statement, the City has not failed to comply with any previous continuing disclosure undertaking within the prior 5 years.
Section 7. Conditions to the Obligations of the Underwriter. The Underwriter has entered into this Purchase Agreement in reliance upon the representations and warranties of the City contained herein. The obligations of the Underwriter to accept delivery of and pay for the Certificates on the Closing Date shall be subject, at the option of t he Underwriter, to the performance by the City of its obligations, to be performed hereunder and to the performance by the City and the Corporation of their obligations, to be performed under the Legal Documents, at or prior to the Closing Date and the following additional conditions:
(a) The representations, warranties and covenants of the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the Closing Date;
(b) At the time of Closing, the Leg al Documents shall be in full force and effect as valid and binding agreements between or among the various parties thereto and the Legal Documents and the Official Statement shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter, and all such reasonable actions as, in the opinion of Special Counsel or counsel to the Underwriter, shall reasonably deem necessary in connection with the transactions contemplated hereby;
(c) Between the date hereof and the Closing Date, the market price or marketability, at the initial public offering prices set forth on the inside cover page of the Official Statement, of the Certificates shall not have been materially adversely affected, in the reasonable judgment of the Underwriter, by reason of any of the following:
(i) the marketability of the Certificates or the market price thereof, in the opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of the Purchase Agreement in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee or by any member thereof, or the
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presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any federal or state court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the Unit ed States Treasury Department, the Internal Revenue Service or other federal or state authority affecting the federal or state tax status of the Corporation or the City, or the interest with respect to bonds or notes (including the Certificates);
(ii) the declaration of war or engagement in major military hostilities by the United States or the occurrence or escalation of any other national emergency or calamity relating to the normal operation of the government of or the financial community in the United States;
(iii) the declaration of a general banking moratorium by federal, New York or California authorities, or the general suspension of trading on any national securities exchange;
(iv) the imposition by the New York Stock Exchange or other national s ecurities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Certificates or obligations of the general character of the Certificates or securities generally, or the material increase of any such rest rictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, underwriters;
(v) an order, decree or injunction issued by any court of competent jurisdiction, or order, ruling, regulation ( final, temporary or proposed), official statement or other form of notice or communication issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that (i) obligations of the general character of the Certificates, or the Certificates, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Trust Agreement is not exempt from qualification under the Trust Indenture Act of 1939, as amended, or (ii) the execution and delivery, offering or sale of obligations of the general character of the Certificates, or the execution and delivery, offering or sale of the Certificates, inclu ding any or all underlying obligations, as contemplated hereby or by the Official Statement, is or would be in violation of the federal securities laws as amended and then in effect;
(vi) any event shall occur which makes untrue any material statement or results in an omission to state a material fact that is necessary to make the statements in the Official Statement, in the light of the circumstances under which they were made, not misleading, which event, in the reasonable opinion of the Underwriter would materially or adversely affect the ability of the Underwriter to market the Certificates
(vii) any legislation, ordinance, rule or regulation shall be enacted by any governmental body, department or authority of the State, or a decision by any court of competent jurisdiction within the State shall be rendered which materially adversely affects the market price of the Certificates;
(viii) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, to the effect that obligations of the general character of the Certificates, or the Certificates, are not exempt from
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registration under or other requirements of the Sec urities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or that the Trust Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect;
(ix) any rating of the Certificates or the rating of any obligations of the City shall have been downgraded or withdrawn by a national rating service, which, in the opinion of the Underwriter, materially adversely affects the market price of the Certificates; or
(x) the commencement of any action, suit or proceeding described in Section 6(c).
(d) at or prior to the Closing, the Underwriter shall receive the following documents, in each case to the reasonable satisfaction in form and substance of the Underwriter:
(i) the Legal Documents duly executed and delivered by the respective parties thereto, with only such amendments, modifications or supplements as may have been agreed to in writing by the Underwriter;
(ii) the approving opinion of Special Counsel, dated the Closing Date and addressed to the City, in substantially the form attached as Appendix B to the Official Statement, together with a reliance letter addressed to the Underwriter;
(iii) a supplemental opinion of Special Counsel dated the Closing Date and addressed to the Underwriter and the City, in form and substance acceptable to each of them to the effect that:
(A) the statements in the Official Statement under the captions, “INTRODUCTION,” “ THE CERTIFICATES, ” “ CONTINUING DISCLOSURE,” “LEGAL MATTERS—Tax Matters ,” “ APPENDIX A– SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS,” “APPENDIX C–FORM OF CONTINUING DISCLOSURE CERTIFICATE ” AND “APPENDIX D–FORM OF SPECIAL COUNSEL OPINION,” insofar as such statements purport to summarize certain provisions of the Certificates, security for the Certificates, the Trust Agreement, the Site Lease, the Lease, the Assignment Agreement, the Continuing Disclosure Certificate and the legal opinion of Special Counsel with respect thereto concerning the validity and tax status of interest with respect to the Certificates, are accurate in all material respects; but excluding therefrom information about DTC and the book-entry only system;
(B) the Purchase Agreement has been duly authorized, e xecuted and delivered by the City and, assuming due authorization, execution and delivery by the other respective parties thereto, constitute s the valid and binding agreement of the City and is enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or other similar laws affecting enforcement of creditors ’ rights and by the application of equitable principles if equitable remedies are sought; and
(C) the Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification as an Trust Agreement pursuant to the Trust Indenture Act of 1939, as amended;
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(iv) the le tter of Quint & Thimmig LLP, in its capacity as Disclosure Counsel, dated the Closing Date and addressed to the City and the Underwriter, to the effect that, based upon its participation in the preparation of the Official Statement as Disclosure Counsel and upon the information made available to it in the course of the foregoing, but without having undertaken to determine or verify independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement (except to the extent expressly set forth in the opinion referred to in Section 7(c)(iii) above), nothing has come to the attention of the personnel directly involved in rendering legal advice and assistance in connection with the preparatio n of the Official Statement that causes them to believe that the Official Statement as of its date or as of the Closing Date contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the st atements therein, in the light of the circumstances under which they were made, are not misleading (except for the description of any litigation, any information relating to information relating to the Municipal Bond Insurer, the Municipal Bond Insurance P olicy, the Reserve Fund Insurance Policy, DTC, Cede & Co., the book -entry system, any financial statements, forecasts, projections, estimates, assumptions and expressions of opinions and the other financial and statistical data included therein, as to all of which they express no view);
(v) the opinion of the City Attorney, dated the Closing Date, and addressed to the Underwriter, to the effect:
(A) the City is a municipal corporation and general law city organized and existing under and by virtue of the laws and the Constitution of the State and has full legal power and lawful authority to execute and deliver and perform all obligations under the City Documents and to participate in the transactions contemplated by the Official Statement;
(B) the resolution adopted by the City Council of the City approving the form and authorizing the execution of the City Documents has been duly adopted at a meeting of the City Council of the City, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and such Resolution is in full force and effect and has not been modified, amended or rescinded;
(C) the City has duly autho rized, executed and delivered the City Documents and, assuming due authorization, execution and delivery by the parties thereto other than the City, the City Documents constitute the legally valid and binding obligations of the City enforceable against the City in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles, if equitable remedies are sought.
(D) there is no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, government agency, public board or body, pending or, to our knowledge after reasonable investi gation, threatened: (1) which would materially adversely affect the financial position of the City; (2) affecting, contesting or seeking to prohibit, restrain or enjoin the execution and delivery of any of the Certificates or the City Documents, or in any way contesting or affecting the validity of or security for the Certificates or the City Documents or the consummation of the transactions contemplated thereby, or
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contesting the powers of the City or its authority to execute and deliver the City Documents or perform its obligations thereunder; or (3) contesting the completeness or accuracy of the Official Statement or asserting that the Official Statement contains any untrue statement of a material fact or omits to state any material fact required to be st ated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and to our knowledge there is no basis for any action, suit, proceeding, inquiry or investigation of the nature described in subparagraphs (1) through (3) of this paragraph (D);
(E) the City is not in material breach of or default under any applicable constitutional provision, law or administrative regulation of the State or the United States of America or any applicable judgm ent or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or to which the City or any of its property or assets is otherwise subject, and no event has occurred or is continuing which with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument; and the execution and delivery of the City Documents and compliance with the provisions thereof by the City, will not result in a violation of, a breach of, or a default under the articles of incorporation or bylaws of the City or any statute, indenture, mortgage, deed of trust, note agreement, or other agreement or instrument to which the City is a party or by which it or any of its property is bound, or any order, rule, law or regulation of any court or other governmental body having jurisdiction of the City;
(F) no authorization, approval, consent or order of the State or any other governmental authority or agency within the State, other than the governing body of the City, is required for the valid authorization, execution and delivery by the City of the City Documents and the performance by the City of its obligations thereunder.
(G) as of the date hereof, nothing has come to such attorney’s attention causing us to believe that the information contained in the Official Statement relating to the City under the caption “THE CITY” as of its date or as of the date hereof contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(vi) a certificate, dated the Closing Date, signed by a duly authorized off icial of the City satisfactory in form and substance in the reasonable judgment of the Underwriter to the effect that:
(A) the City is a municipal corporation and chartered city, duly organized and existing under the laws of the State and has all necessary power and authority to enter into and perform its duties under the City Documents;
(B) by official action of the City, the City has approved the execution and delivery of and the performance by the City of the obligations on its part contained in the City Documents;
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(C) the execution and delivery of the City Documents to which it is a party, compliance with the provisions thereof and performance of its duties thereunder, will not conflict with or constitute a breach of or default under the City’s duties under any law, administrative regulation, judgment, decree, note, resolution, charter, by -law or other agreement to which the City is a party or is otherwise subject or by which its properties may be affected;
(D) the information relating to the City contained in the Official Statement does not contain any untrue or misleading statement of a material fact or omit to state any material fact which is necessary to make such statements therein, in the light of the circumstances under which they were made, not misleading;
(E) to the best knowledge of the City, there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over the City required for the execution, delivery and sale of the Certificates or the consummation by the City of the transactions on its part contemplated by the City Documents;
(F) to the best knowledge of the City, the City is not in breach of or default under any applicable law or administrative regula tion of the State or the United States or any applicable judgment or decree, agreement or other instrument to which the City is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument, which breach or default has or may have a material adverse effect on the ability of the City to perform its obligations under the City Documents;
(G) there is no a ction, suit, proceeding, inquiry or investigation, at law or in equity before or by any court or governmental agency or body, pending or, to the best knowledge of the City, threatened against the City, except as disclosed in the Official Statement, to rest rain or enjoin the execution or delivery of the Certificates, or in any way contesting or affecting the validity or enforceability of the Certificates or the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing; and
(H) the City covenants that it will not take any action which would cause interest with respect to the Certificates to be subject to federal income taxation or California personal income taxes;
(vii) a certificate, dated the Closing Date, signed by a duly authorized official of the Corporation satisfactory in form and substance in the reasonable judgment of the Underwriter to the effect that:
(A) the Corporation is nonprofit, public benefit corporation, duly organized and validly existing under the laws of the State;
(B) the Corporation has all necessary power and authority and has taken all official actions necessary to execute, deliver and perform its duties under each of the Corporation Documents and each of the Legal Documents has been duly authorized, executed and delivered by the Corporation and, assuming the due authorization, execution and delivery by the other respective parties thereto, will constitute legally valid and binding obligations of the Corporation enforceabl e
EXHIBIT E
119
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against the Corporation in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors’ rights generally or principles of equity involving judicial discretion;
(C) the Corporation is not in material breach of, or default under, any applicable constitutional provision, law or administrative rule or regulation of the State or the United States of America material to the conduct of its functions or any applicable judgment or decree or any loan agreement, indenture, bond, certificate, note, resolution or other agreement or instrument to which the Corporation is a party or to which the Corporation or any of its properties is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any of the foregoing; and the authorization, execution and delivery of the Legal Documents, and compliance with the provisions thereof, will not conflict with or constitute a breach of or default under any constitutional provision, law, administrative rule or regulation, or any judgment, decree, license, permit, loan agreement, indenture, bond, certificate, note, resolution, agreement or other instrument to which the Corporation (or any of its officers in their respective capacities as such) is subject or by which it or any of its properties is bound, nor will any such authorization, ex ecution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of any such law, regulation or instrument except as may be provided by the Legal Documents;
(D) there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory entity having jurisdiction over the Corporation required for the execution and delivery of the Legal Documents, or the consummation by the Corporation of the transactions contemplated in the Official Statement or in the Legal Documents, which has not been duly obtained or made on or prior to the date hereof;
(E) there is no action, suit, pr oceeding, inquiry or investigation, at law or in equity, before or by any court or governmental or public entity pending or, to the knowledge of the Corporation, threatened against the Corporation which affects or seeks to prohibit, restrain or enjoin the execution or delivery of the Certificates or any of the Legal Documents, or contesting the validity of the Certificates or any of the Legal Documents or the powers of the Corporation to enter into or perform its obligations under the Legal Documents or the existence or powers of the Corporation;
(F) no event affecting the Corporation has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date the statements or information regar ding the Corporation contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein regarding the Corporation not misleading in any material respect;
(viii) a certificate of the Trustee, dated the Closing Date, signed by a duly authorized officer of the Trustee, and in form and substance satisfactory to the Underwriter, to the effect that:
EXHIBIT E
120
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(A) the Trustee is a national banking association duly organi zed and existing under and by virtue of the laws of the United States of America authorized to carry out corporate trust powers and has all necessary power and authority to enter into and perform its duties under the Trust Agreement and the Assignment Agreement and to execute the Certificates;
(B) the representations of the Trustee in the Trust Agreement and the Assignment Agreement are true and correct in all material respects as of the Closing Date;
(C) to the best of its knowledge, no litigation is pending or threatened (either in state or federal courts) (1) to restrain or enjoin the execution or delivery of any of the Certificates, or (2) in any way contesting or affecting any authority for the execution or delivery of the Certificates or the validity or enforceability of the Trust Agreement or the Assignment Agreement;
(D) the Trustee is duly authorized to execute and deliver the Certificates to the Underwriter upon instruction by the City pursuant to the terms of the Trust Agreement, and the Trust Agreement and the Assignment Agreement constitute legal, valid and binding obligations of the Trustee enforceable in accordance with its respective terms;
(E) to the best of its knowledge, the e xecution and delivery of the Trust Agreement and the Assignment Agreement, and compliance with the provisions thereof, will not conflict with, or constitute a breach of or default under, the Trustee’s duties under said documents or any law, administrative regulation, court decree, resolution, charter, bylaws or other agreement to which the Trustee is subject or by which it is bound; and
(F) the Certificates have been validly executed and delivered by the Trustee;
(ix) the opinion of counsel to the Trustee , addressed to the Underwriter and the City, dated the Closing Date, to the effect that;
(A) the Trustee has been duly organized and is validly existing in good standing as a national banking association under the laws of the United States of America, with full corporate power to enter into the Trust Agreement and the Assignment Agreement and to accept the trust as provided therein, and to perform its obligations under the Trust Agreement and the Assignment Agreement;
(B) the Trustee has duly authorized, executed and delivered the Trust Agreement and the Assignment Agreement and by all proper corporate action has authorized the acceptance of the trust of the Trust Agreement;
(C) assuming the due authorization, execution and delivery by the other party to the Trust Agreement and the Assignment Agreement, the Trust Agreement and the Assignment Agreement, constitute legally valid and binding agreements of the Trustee, enforceable against the Trustee in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws or equitable principles relating to or limiting creditors’ rights generally;
EXHIBIT E
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(D) the Certificates have been validly executed by the Trustee; and
(E) to the best of such counsel’s knowledg e, no authorization, approval, consent or order of any governmental agency or any other person or corporation is required for the valid authorization, execution and delivery of the Trust Agreement and the Assignment Agreement by the Trustee or the authentication by the Trustee of the Certificates;
(x) the opinion of Stradling Yocca Carlson & Rauth, as counsel to the Underwriter, dated the Closing Date and addressed to the Underwriter, in form and substance acceptable to the Underwriter.
(xi) a copy of the Official Statement, executed on behalf of the City;
(xii) a copy of the general resolution of the Trustee authorizing the execution and delivery of the Trust Agreement and the Assignment Agreement;
(xiii) copies of all resolutions relating to the Certificates, the Official Statement and the Legal Documents adopted by the Corporation and the City, as applicable, and certified by an authorized official of the Corporation and the City;
(xiv) a tax certifica te by the City in form and substance acceptable to Special Counsel;
(xv) a letter from S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, indicating that the Certificates have been assigned a rating of “___.”
(xvi) evidence of good standing of the Corporation with the State; and
(xvii) such additional legal opinions, certificates, proceedings, instruments or other documents as Special Counsel and counsel to the Underwriter, if any, may reasonably request to evidence compliance by the Corporation and the City with legal requirements, the truth and accuracy, as of the Closing Date, of the representations and warranties of the Corporation and the City contained herein, and the due performance or satisfaction by the Corporation and the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Corporation and the City.
Section 8. Changes in Official Statement. After the Closing, the City will not adopt any amendment of or supplement to the Official Statement to which the Underwriter s hall object in writing. Within 90 days after the Closing or within 25 days following the end of the underwriting period, whichever occurs first, if any event relating to or affecting the Certificates, the Trustee, the Corporation or the City shall occur as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in any material respect in the light of the circumstances existing at the time it is delivered to a purchaser, the City will forthwith prepare and furnish to the Underwriter an amendment or supplement that will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to purchaser, not misleading. The City shall cooperate with the Underwriter in the filing by the Underwriter of such amendment or supplement to the Official Statement with a nationally recognized municipal securities
EXHIBIT E
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repository. For the purposes of this section the Trustee, the Corporation and the City will each furnish such information with respect to itself as the Underwriter may reasonably request from time to time during such period.
Section 9. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the City shall pay from the proceeds of the Certificates or otherwise, all expenses and costs of the City and the Corporation incident to the performance of their obligations in connection with th e authorization, execution, sale and delivery of the Certificates to the Underwriter, including, without limitation, printing costs, rating agency fees and charges, initial fees of the Trustee, including fees and disbursements of its counsel, if any, fees and disbursements of Special Counsel and Disclosure Counsel and other professional advisors employed by the City or the Corporation, the fee of counsel to the Underwriter and costs of preparation, printing, signing, transportation, delivery and safekeeping of the Certificates. The Underwriter shall pay all out - of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Service Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Certificates, shall be paid by the Underwriter.
Section 10. Notices. Any notice or other communicatio n to be given to the City under this Purchase Agreement may be given by delivering the same in writing to the City and the Corporation at the addresses set forth on the first page of this Purchase Agreement, and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to: Stifel, Nicolaus & Company, Incorporated, One Montgomery Street, 35th Floor , San Francisco, CA 94104 , Attention: Ms. Eileen Gallagher, Managing Director.
The approval of the Underwriter when required hereunder or the determination of the Underwriter’s satisfaction as to any document referred to herein shall be in writing signed by the Underwriter and delivered to you.
Section 11. Parties in Interest. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or have any right hereunder or by virtue hereof. All representations, warranties and agreements of the City in this Purchase Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall survive the delivery of and payment of the Certificates.
Section 12. Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
EXHIBIT E
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Section 13. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Underwriter
By
Managing Director
Accepted and Agreed to:
CITY OF MARINA
By
Title
Time of Execution: ___________
EXHIBIT E
124
Exhibit A
EXHIBIT A
MATURITY SCHEDULE
$________
CERTIFICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
MATURITY SCHEDULE
Maturity Date Principal Interest
(May 1) Amount Rate Yield Price
c Priced to the May 1, ____, par call date.
T Term Certificates.
Optional Redemption. The Certificates maturing on and after May 1, ____, are subject to optional redemption in whole or in part on any date on and after May 1, ____, in such order of maturity as shall be designated by the City (or, if the City shall fail to so designate the order of redemption, in pro rata among maturities) and by lot within a maturity, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium, from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement.
Extraordinary Redemption. The Certificates are subject to extraordinary redemption, in whole or in part, on any Interest Payment Date, in an order of maturity determined by the City, from the Net Proceeds of insurance or eminent domain proceedings credited towards the redemption of the Lease Payments pursuant to the Lease Agreement, at a redemption price equal to 100% of the principal amount to be redeemed, together with accrued interest represented thereby to the date fixed for redemption, without premium.
Sinking Fund Redemption . The Certificates maturing on May 1, ____, are subject to mandatory redemption in part on May 1 in each year on and after May 1, ____, to and including May 1, ____, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement wi th respect to each such redemption date (subject to abatement, as set forth in the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows:
EXHIBIT E
125
Exhibit A
Year Principal Amount of
(May 1) Certificates to be Redeemed
†Maturity.
EXHIBIT E
126
Exhibit A
EXHIBIT B
FORM OF ISSUE PRICE CERTIFICATE
$________
CERTIFICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
ISSUE PRICE CERTIFICATE
The undersigned, on behalf of Stifel, Nicolaus & Company, Incorporated (“Stifel”), based on the information available to it, hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Certificates”).
I. General
1. Stifel and the City of Marina (the “Issuer”) have executed a certificate purchase agreement in connection with the Certificates on the Sale Date. Stifel has not modified the certificate purchase agreement since its execution on the Sale Date.
II. Price
1. Stifel offered the Hold -the-Offering-Price Maturities to the Public fo r purchase at the respective initial offering prices listed in Schedule I (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Certificates is attached to this certificate as Schedule II.
2. As set forth in the certificate purchase agreement, Stifel has agreed in writing that, (i) for each Maturity of the Hold -the-Offering-Price Maturities, it would neither offer nor sell any of the Certificates of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold -the-offering-price rule”), and (ii) any selling group agreement would contain the agreement of each dealer who is a member of the sellin g group, and any retail distribution agreement would contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule.
3. No Underwriter (as defined below) has offered or sol d any Maturity of the Hold -the- Offering-Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity during the Holding Period.
III. Defined Terms
1. General Rule Maturities means those Maturities of the Certifi cates not listed in Schedule I hereto as the “Hold-the-Offering-Price Maturities.”
2. Hold-the-Offering-Price Maturities means those Maturities of the Certificates listed in Schedule I hereto as the “Hold-the-Offering-Price Maturities.”
3. Holding Period means, with respect to a Hold- the-Offering-Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which the Underwriter has sold at least 10% of su ch Hold- the-Offering-Price
EXHIBIT E
127
Exhibit A
Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold -the- Offering-Price Maturity.
4. Maturity means Certificates with the same credit and payment terms. Certificates with different maturity dates, or Certificates with the same maturity date but different stated interest rates, are treated as separate maturities.
5. Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter.
6. A person is a “Related Party” to an Underwriter if the Underwriter and the person are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).
7. Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Certificates. The Sale Date of the Certificates is June 2, 2022.
8. Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with Stifel to form an underwriting syndicate) to participate in the initial sale of the Certificates to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly w ith a person described in clause (i) of this paragraph to participate in the initial sale of the Certificates to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the Public).
All terms not defined herein shall have the same meanings as in the Tax Exemption Certificate and Agreement with respect to the Certificates, to which this Certificate is attached. The representations set forth in this certificate a re limited to factual matters only. Nothing in this certificate represents Stifel’ interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The unders igned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in its documents and with respect to compliance with the federal income tax rules affecting the Certificates, and by Quint & Thimmig LLP in connection with rendering its opinion that the interest on the Certificates is excluded from gross income for federal income tax purposes, the preparation of Internal Revenue Service Form 8038-G, and other federal income tax advice it may give to the Issuer from time to time relating to the Certificates.
Dated: June 16 2022
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Underwriter
By
Authorized Officer
EXHIBIT E
128
Exhibit A
SCHEDULE I TO ISSUE PRICE CERTIFICATE
$________
CERTIFICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
Hold-the-
Offering General
Price Rule
Maturities Maturities Maturity Date Principal Interest
(if Marked) (if Marked) (May 1) Amount Rate Price
T Term Certificates
c Priced to the May 1, ____, par call date.
EXHIBIT E
129
Exhibit A
SCHEDULE II TO ISSUE PRICE CERTIFICATE
PRICING WIRE OR EQUIVALENT COMMUNICATION
EXHIBIT E
130
This Preliminary Official Statement and the information contained herein are subject to completion or a mendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is deli vered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or s ale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED MAY 23, 2022
NEW ISSUE—FULL BOOK-ENTRY RATING:
S&P: “___”
(See “RATING” herein)
In
the opinion of Quint & Thimmig LLP, Larkspur, California, Special Counsel, subject to compliance by the City with certain covenants, interest with respect to the Certificates is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals. In addition, in the opinion of Special Counsel, interest with respect to the Certificates is exempt from personal income taxation imposed by the State of California. See “TAX MATTERS” herein. $________*
CERTIFICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California Dated: Date of Delivery Due: May 1, as shown below
The $________* Certificates of Participation (2022 Transportation Infrastructure Financing Project) (the “Certificates”), are being sold to provide funds, together with other available moneys, to (a) finance certain infrastructure projects throughout the geographic boundaries of the City (the “City”), and (b) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates. See “PLAN OF FINANCING” herein.
The Certificates will evidence direct, undivided fractional interests of the owners thereof in Lease Payments (as defined herein) to be made by the City to the Public Property Financing Corporation of California (the “Corporation”) for the use and occupancy of certain existing property of the City under and pursuant to a Lease Agreement, dated as of June 1, 2022, by and between the Corporation and the City (the “Lease Agreement”). The Corporation will assign its right to receive Lease Payments from the City under the Lease Agreement and its right to enforce payment of the Lease Payments when due or otherwise protect its interest in the event of a default by the City thereunder to U.S. Bank Trust Company, National Association, San Francisco, California, as trustee (the “Trustee”), for the benefit of the registered owners of the Certificates.
The Certificates will be executed and delivered in book-entry form only, and will be initially registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (referred to herein as “DTC”). Purchasers of the Certificates (the “Beneficial Owners”) will not receive physical certificates representing their interest in the Certificates. Interest with respect to the Certificates accrues from their date of delivery, and is payable semiannually by check mailed on each May 1 and November 1, commencing November 1, 2022. The Certificates may be executed and delivered in denominations of $5,000 or any integral multiple thereof. Payments of principal and interest with respect to the Certificates will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Certificates. See “THE CERTIFICATES—Book-Entry-Only System.”
A reserve fund will not be funded for the Certificates.
The Certificates are subject to optional and mandatory redemption, as described herein. See “THE CERTIFICATES—Redemption.”
NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A DEBT OR
INDEBTEDNESS OF THE CITY OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMITATIONS OR RESTRICTION OR AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
MATURITY SCHEDULE*
$__________ Serial Certificates
CUSIP Prefix: _______†
Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP (May 1) Amount Rate Yield Suffix† (May 1) Amount Rate Yield Suffix† $_____ _____% Term Certificates maturing May 1, _____; Price: _____% to Yield _____%— CUSIP: _____ _____† The
cover page contains certain information for general reference only. It is not a summary of all the provisions of the Certificates. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See “RISK FACTORS” herein for a discussion of special risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates.
The Certificates will be offered when, as and if delivered and received by the Underwriter subject to approval by Quint & Thimmig LLP, Larkspur, California, as Special Counsel. Certain matters will be passed upon for the City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel, and by the City Attorney, and for the Underwriter by Stradling Yocca Carlson & Rauth, Newport Beach, California. It is anticipated that the Certificates will be available for delivery to DTC in New York, New York, on or about June 16, 2022.
Dated: May __, 2022
*Preliminary, subject to change.
†Copyright 2022 , American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is pr ovided by CUSIP Global Services, operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numb ers have been assigned by an independent company not affiliated with the City and are included solely for the convenie nce of the registered owners of the Certificates. Neither the City nor the Underwriter is responsible for the selection or us es of these CUSIP numbers and no representation is made as to their correctness on the Certificates or as included herein. The CUSIP number for a specific maturity is subject to being changed after the delivery of the Certificates as a result of various su bsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Certificates.
EXHIBIT F
131
EXHIBIT F
132
For purposes of compliance with Rule 15c2- 12 of the United States Securities and Exchange Commission, as amended (“Rule 15c2-12”), this Preliminary Official Statement constitutes an “official statement” of the City with respect to the Certificates that has been deemed “final” by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-
12. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the Certificates by a person in any jurisdiction in which it is unlawful for such person to make an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Certif icates. 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 facts.
The information set forth herein has been obtained from the City and from other sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The information and expressions of opinions herein are subject to change without notice and n either the 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 since the date hereof. This Official Statement is submitted in connection with the sale of the Certificates 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 the Certificates, the Lease Agreement, the Trust Agreement, the Assignment Agreement, the Site and Facility Lease (each as defined herein), or other documents, are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Director of Finance for further information. See “INTRODUCTION—Other Information.”
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER- ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES 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 CERTIFICATES TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS AND OTHERS AT PRICES
LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the City’s forecasts in any way. Neither the City nor the Corporation is obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur or do not occur.
The execution, sale and delivery of the Certificates has not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities.
The City maintains a website. Unless specifically indicated otherwise, the information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Certificates.
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TABLE OF CONTENTS
INTRODUCTION ................................................................................ 1 General ........................................................................................... 1 Source of Payment for the Certificates ........................................... 2 Redemption .................................................................................... 2 The City .......................................................................................... 2 Continuing Disclosure .................................................................... 3 Summaries of Documents ............................................................... 3 Other Information ........................................................................... 3 ESTIMATED SOURCES AND USES OF FUNDS ............................ 4 THE PROJECT ..................................................................................... 4 THE PROPERTY ................................................................................. 5 DEBT SERVICE SCHEDULE ............................................................. 6 THE CERTIFICATES ......................................................................... 7 General ........................................................................................... 7 Redemption .................................................................................... 7 Transfer and Exchange of Certificates .......................................... 10 Book-Entry System ....................................................................... 10 SOURCE OF PAYMENT FOR THE CERTIFICATES ................... 11 General ......................................................................................... 11 Lease Payments; Covenant to Appropriate .................................. 11 Measure X Sales Tax Receipts ...................................................... 11 Risk Factors Related to the City’s Measure X Sales Tax Receipts 14 Insurance ...................................................................................... 16 Abatement .................................................................................... 16 Eminent Domain ........................................................................... 17 No Reserve Fund .......................................................................... 17 Optional Prepayment .................................................................... 17 Prepayment from Net Proceeds of Insurance and Condemnation 18 Substitution of Property ................................................................ 18 Events of Default and Remedies ................................................... 20 Amendment of Lease Agreement ................................................. 21 THE CITY .......................................................................................... 21 CITY FINANCIAL INFORMATION ............................................... 22 Financial Statements and Budgetary Process ................................ 22 General Fund Balance Sheet ......................................................... 23 General Fund Revenues, Expenditures, and Changes in Fund Balances ........................................................................................ 24 General Fund Budget .................................................................... 25 City Financial Management .......................................................... 25 Primary Sources of General Fund Revenues ................................ 26 Property Taxes ............................................................................. 28 Teeter Plan ................................................................................... 29 Assessed Value ............................................................................. 30 Sales and Use Taxes ..................................................................... 36 Transient Occupancy Tax ............................................................ 38 Other Sources of General Fund Revenues .................................... 38 No Material Reliance on State Revenues ...................................... 38 OTHER FINANCIAL INFORMATION ........................................... 39 Labor Relations ............................................................................. 39 Risk Management ......................................................................... 39 Employee Retirement Plans .......................................................... 40 Other Post-Employment Benefits ................................................. 43 Debt Obligations ........................................................................... 44 Overlapping Debt .......................................................................... 44 TH
E CORPORATION ....................................................................... 45 STATE BUDGET INFORMATION ................................................. 46 2021-22 State Budget .................................................................... 47 20922-23 Proposed State Budget .................................................. 49
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES, REVENUES AND APPROPRIATIONS ............................. 53 Article XIIIA of the California Constitution ................................. 53 Article XIIIB of the California Constitution .................................. 55 Articles XIIIC and XIIID (Proposition 218) of the California Constitution .................................................................................. 55 Proposition 1A of 2004 ................................................................ . 58 Proposition 22 ............................................................................... 59 Proposition 26 ............................................................................... 60 Proposition 19 ............................................................................... 61 Future Initiatives .......................................................................... 61 RISK FACTORS ................................................................................. 61 Lease Payments Are Not Debt ...................................................... 61 Valid and Binding Covenant to Budget and Appropriate .............. 62 Additional Obligations of the City ................................................. 62 Cash Management ........................................................................ 62 Abatement ..................................................................................... 63 No Acceleration Upon Default ..................................................... 63 Risk of Uninsured Loss ................................................................ . 63 Eminent Domain ........................................................................... 64 COVID-19 Pandemic .................................................................... 64 Concentration of Revenue Sources ............................................... 64 Natural Calamities ........................................................................ 65 Potential Impact of State Financial Condition on the City ............ 68 Increased Internet Use May Reduce Sales Tax Revenues ............ 68 Pension Benefit Liability ............................................................... 69 Risks Related to Cyber Security .................................................... 69 Bankruptcy .................................................................................... 69 Early Redemption Risk ................................................................ . 70 Limitations on Remedies ............................................................... 70 No Reserve Fund .......................................................................... 71 Secondary Market Risk ................................................................ . 71 Changes in Law ............................................................................. 71 ABSENCE OF LITIGATION ............................................................. 72 CONTINUING DISCLOSURE ......................................................... 72 MUNICIPAL ADVISOR .................................................................... 72 LEGAL MATTERS ............................................................................ 73 TAX MATTERS ................................................................................. 73 UNDERWRITING ............................................................................. 75 RATING .............................................................................................. 76 FINANCIAL STATEMENTS ........................................................... 76 ADDITIONAL INFORMATION ...................................................... 76
APPENDIX A GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY APPENDIX B ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021
APPENDIX C INVESTMENT POLICY OF THE CITY
APPENDIX D FORM OF SPECIAL COUNSEL OPINION
APPENDIX E SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS
APPENDIX F DTC’S BOOK-ENTRY ONLY SYSTEM
APPENDIX G FORM OF CONTINUING DISCLOSURE CERTIFICATE
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CITY OF MARINA
211 Hillcrest Avenue
Marina, CA 93933
(831) 884-1278
https://www.cityofmarina.org
CITY COUNCIL MEMBERS
Bruce Carlos Delgado, Mayor
Lisa Berkley, Councilmember, District 4
Kathy Y. Biala, Councilmember, District 2
David Burnett, Councilmember, District 1
Cristina Medina Dirksen, Councilmember, District 3
CITY OFFICIALS
Layne P. Long, City Manager
Matthew Morgansen, Assistant City Manager
Juan Lopez, Finance Director
Brian McMinn, P.E., P.L.S., Public Works Director/City Engineer Antia Sharp, City Clerk
Karen Tiedemann, Esq., City Attorney
PROFESSIONAL SERVICES
KNN Public Finance, LLC
Berkeley, California
Municipal Advisor
Quint & Thimmig LLP
Larkspur, California
Special Counsel and Disclosure Counsel
U.S. Bank Trust Company, National Association
San Francisco, California
Trustee
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$_________*
CERTIFICATES OF PARTICIPATION
(2022 Transportation Infrastructure Financing Project)
Evidencing the Direct, Undivided Fractional Interests
of the Owners Thereof in Lease Payments to be Made by the
CITY OF MARINA
(Monterey County, California),
As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California
INTRODUCTION
This introduction does not purport to be complete, and reference is made to the body of this Official Statement, appendices and the documents referred to herein for more complete information with respect to matters concerning the captioned Certificates. Potential investors are encouraged to read this entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement and in APPENDIX E— SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—DEFINITIONS.
General
This Official Statement, including the cover page, the inside cover page and appendices hereto, is provided to furnish information in connection with the execution, sale and delivery of $_________* City of Marina Certificates of Participation (2022 Transportation Infrastructure Financing Project) (the “Certificates”). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of June 1, 2022 (the “Trust Agreement”), by and among the C ity of Marina (the “City”), the Public Property Financing Corporation of California (the “Corporation”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The proceeds of the Certificates will provide funds to (a) finance certain transportation infrastructure improvements throughout the geographic boundaries of the City (the “Project”), and (b) pay delivery costs incurred in connection with the execution, de livery and sale of the Certificates. See “THE PROJECT.”
The City will lease certain existing property and the improvements thereon (the “Property”) to the Corporation pursuant to a Site and Facility Lease , dated as of June 1, 2022 (the “Site and Facility Lease”). The Corporation will lease the Property back to the City pursuant to a Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”). The Certificates are payable solely from and secured by the lease payments (the “Lease Payments” ) to be made by the City to the Corporation pursuant to the Lease Agreement. See “SOURCE OF PAYMENT FOR THE CERTIFICATES” and “THE PROPERTY.”
Interest with respect to the Certificates is payable on May 1 and November 1 of each year, commencing November 1, 2022. The Certificates will mature in the amounts and on the dates and be payable at the interest rates shown on the cover of this Official Statement. See “THE CERTIFICATES.”
* Preliminary, subject to change.
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The Certificates will be delivered in fu lly registered form only, in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( “DTC”). DTC will act as the depository for the Certificates and all payments due with respect to the Certificates will be made to Cede & Co., DTC’s nominee. Ownership interests in the Certificates may be purchased only in book -entry form.
See “THE CERTIFICATES—Book-Entry System” and APPENDIX F—DTC’S BOOK-ENTRY ONLY SYSTEM.
Source of Payment for the Certificates
The Certificates represent direct, undivided interests of the Owners thereof in the Lease Payments to be paid by the City to the Corporation pursuant to the Lease Agreement. The Lease Payments are payable by the City from its general fund for the right to use and possess the Property. The Lease Payments are subject to abatement during any period in which by reason of damage or destruction there is substantial interference with the use and occupancy by the City of the Property or any portion thereof. The City will covenant under the Lease Agreement to take such action as necessary to include the Lease Payments in its annual budget and to make all necessary appropriations therefor (subject to abatement under certain circumstances described in the Lease Agreement). Pursuant to an Assignment Agreement, dated as of June 1, 2022 (the “Assignment Agreement”), by and between the Corporation and the Trustee, the Corporation will assign to the Trustee , for the benefit of the Owne rs of the Certificates, certain of its rights under the Lease Agreement , including its right to receive Lease Payments from the City. See “SOURCE OF PAYMENT FOR THE CERTIFICATES —Lease Payments; Covenant to Appropriate “ —Measure X Sales Tax Receipts,” “— Risk Factors Related to the City’s Measure X Sales Tax Receipts” and “RISK FACTORS.”
A reserve fund will not be funded for the Certificates.
NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE
LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A DEBT OR INDEBTEDNESS OF THE CITY OR THE STATE OF CALIFORNIA (THE “STATE”) OR ANY
POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL
OR STATUTORY DEBT LIMITATIONS OR RESTRICTION OR AN OBLIGATION FOR WHICH
THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Redemption
The Certificates are subject to optional and mandatory redemption. See “THE CERTIFICATES—Redemption.”
The City
The City, located in Monterey County (the “County”), was incorporated on November 13, 1975 as a charter city under the laws of the State. The City is located on California State Route 1 along the central coast of California, 8 miles (13 km) west of the city of Salinas, 8 miles (13 km) north of the city of Monterey, and adjacent to the city of Seaside and unincorporated Monterey County. The City includes an area of approximately 9.6 square miles and has a current population of approximately 22,000 residents.
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The City’s economy is influenced by tourism in the Monterey Bay region generally and by Cal State University Monterey Bay. A major regional shopping center for Monterey Bay region is located in the City.
The City is also home to part of the California State University, Monterey Bay campus, the UC Santa Cruz Monterey Bay Education, Science and Technology Center, and the Veterans Transition Center. The City has significant land assets from the Fort Ord’s closure that will support future housing and commerc ial development.
The City operates under a council -manager form of government. The five -member City Council (the “City Council”) is comprised of a mayor elected on an at large basis by the City’s voters and four other council members elected by district from within the City. Council members serve four-year terms, with two members elected every two years. The Mayor is elected for a four-year term. The City Council appoints the City Manager and the City Attorney. The City Manager is responsible for directing , coordinating and carrying out City Council policies.
The City provides police and fire protection; traffic control; on - and off-street parking; building inspections; licenses and permits; the construction and maintenance of highways, streets, and other infrastructure; recreational and cultural activities; low -income housing; and general aviation services.
Water and sewer services are provided through legally separate entities.
For additional information about the City, see “THE CITY,” “CITY FINANCIAL INFORMATION,” APPENDIX A— GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY and APPENDIX B— ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021.
Continuing Disclosure
The City will covenant in a continuing disclosure certificate to prepare and deliver annual reports to the Municipal Securities Rulemaking Board (the “MSRB”) through the MSRB’s Electronic Municipal Market Access system. See “CONTINUING DISCLOSURE ” and APPENDIX G —FORM OF CONTINUING DISCLOSURE CERTIFICATE.
Summaries of Documents
This Official Statement contains descriptions of the Certificates, the Trust Agreement, the Site and Facility Lease , the Lease Agreement , the Assignment Agreement and various other agreements and documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive and reference is made to each such document for the complete details of all terms and conditions.
All statements herein are qualified in their entirety by reference to each such document and, with respect to certain rights and remedies, to laws and principles of equity relating to or affecting creditors ’ rights generally.
Other Information
This Official Statement speaks only as of its date and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Certificates are available for inspection at the office of the City Clerk, City of Marina, 211 Hillcrest Avenue, Marin a, CA 93933, Telephone: (831) 884-1278. The City may impose a charge for copying, mailing and handling.
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This Official Statement is not to be construed as a contract with the purchasers of the Certificates.
Statements contained in this Official Statement w hich 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 summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive and are qualified in their entireties by reference to each of such documents, statutes and constitutional provisions.
The information set forth herein has been obtained from sources which are believed to be reliable.
The information and expressions of opinions herein are subject to change 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 since the date hereof. This Official Statement is submitted in connection with the sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
ESTIMATED SOURCES AND USES OF FUNDS
The following table shows the estimated sources and uses of the proceeds from the sale of the Certificates and other moneys:
Sources
Par Amount of the Certificates
Plus: Original Issue Premium
Total Sources
Uses
Deposit to the Project Fund (1)
Costs of Issuance (2)
Total Uses
(1) Amounts deposited in the Project Fund will be used to finance a portion of the cost of the Project. See “THE PROJECT.” (4) Costs of Issuance include the Underwriter’s discount, fees and expenses of the municipal advisor, special counsel, disclosure counsel and the Trustee, printing expenses, rating fees, title insurance and other costs.
THE PROJECT
A portion of the proceeds of the Certificates will be deposited into a project fund and applied to finance the Project which includes but is not limited to the construction, rehabilitation, and resurfacing of the City’s street and road systems under the City’s sustainable pavement management program. The City’s sustainable pavement management program prioritizes sustainable construction processes and reuse of existing pavement sections while minimizing traffic disruption, reducing the numbe r of off -haul trucking trips, and reducing costs and carbon footprint of the construction, maintenance and rehabilitation of the City’s street and road systems.
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THE PROPERTY
Pursuant to the Site and Facility Lease, the City will lease the Property to the Corporation. Pursuant to the Lease Agreement, the Corporation will, in turn, lease the Property back to the City. See APPENDIX E—SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS —Site and Facility Lease and APPENDIX E—SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—Lease Agreement.
The Property consists of the Marina Public Library and the site thereof.
The library, an 18,000 square foot, wood framed facility, built in 2007, located at 190 Seaside Circle in the City. The library provides t he following services: (1) books, talking books on CD, DVDs and magazines for all ages, (2) newspapers: Monterey County Herald, Salinas Californian, Korea Times, New York Times, (3) materials in English, Spanish, Korean and Vietnamese, (4) E -Books and E -Audio, (5) public computers with Internet, Microsoft Office, fax, scan, print, and copy, (6) public meeting rooms(s) reservation at the library front desk and online, (7) access to Westlaw, (8) two study rooms, (9) a homework Center, (10) a veterans resource center, (11) free wireless internet, (12) programs and events for children and adults, and (13) a telescope.
The library was financed from the proceeds of the City’s General Obligation Bonds, Election of 2002, Series 2005, refinanced for savings in 2015. The library is operated for the City by the County pursuant to a 50-year agreement executed in 2004.
The current insured value of the library, excluding the land value, is $11,270,920.
For a description of certain terms of the Lease Agreement see “SOURCE OF PAYMENT FOR THE CERTIFICATES ” and APPENDIX E —SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—LEASE AGREEMENT.
Pursuant to the Lease Agreement, the City may substitute the Property, in whole or in part, with other properties, upon the satisfaction of ce rtain conditions. For more information regarding the substitution of property see “SOURCE OF PAYMENT FOR THE CER TIFICATES—Substitution or Removal of Property” and APPENDIX E— SUMMARY OF THE PRINCIPAL L EGAL DOCUMENTS—LEASE AGREEMENT.
The City has not granted any security interest in the Property for the benefit of the Certificates and there is no remedy of foreclosure on the Property upon the occurrence of an Event of Default under the Lease Agreement. For a discussion of remedies upon an Event of Default under the Lease Agreement, see “RISK FACTORS—Limitations on Remedies.”
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DEBT SERVICE SCHEDULE
The following table shows the scheduled annual debt service for the Certificates:
Principal
Payment
Date
(May 1) Principal* (1) Interest (2) Total
Total $_________
*Preliminary, subject to change.
(1) Principal payments with respect to the Certificates on each May 1 are derived from Lease Payments made by the City on the preceding April 15. Includes sinking fund payments.
(2) Interest payments with respect to the Certificates on each May 1 and November 1 are derived from Lease Payments made by the City on the preceding April 15 and October 15, respectively.
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THE CERTIFICATES
General
The Certificates will be executed and delivered in the aggregate principal amount and will mature on the dates and interest with respect thereto will be payable at the rates per annum as set forth on the cover page of this Official Statement. The Certificates will be delivered in the form of fully registered Certificates without coupons in the denomination of $5,000 or any integral multiple thereof. Interest with respect to the Certificates will be calculated on the basis of a 360-day year of twelve 30-day months and will be payable on May 1 and November 1 of each year, commencing November 1, 2022 (each an “Interest Payment Date”), until maturity or earlier redemption thereof. The Certificates will be initially executed, delivered and registered in the name of “Cede & Co. ” as nominee of DTC and wi ll be evidenced by one Certificate maturing on each of the maturity dates in a denomination corresponding to the total principal therein designated to mature on such date. See “THE CERTIFICATES—Book-Entry System” and APPENDIX F—DTC’S BOOK-ENTRY ONLY SYSTEM.
Interest with respect to the Certificates will be payable from the Interest Payment Date next preceding the date of execution thereof, unless: (i) it is executed as of an Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (ii) it is executed after a Record Date (i.e., the close of business on the 15th day of the month preceding each Interest Payment Date, whether or not such 15th day is a Business Day) and before the following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (iii) it is executed on or before March 15, 2022, in which event interest with respect thereto will be payable from its dated date; provided, however, that if, as of the date of execution of any Certificate, interest is in default with respect to any Outstanding Certificates, interest represented by such Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by check mailed to the Owners as of a special record date to be fixed by the Trustee in its sole discretion, notice of which s hall be given to the Owners not less than ten (10) days prior to such special record date.
Payment of interest due with respect to any Certificate on any Interest Payment Date will be made to the person appearing on the Registration Books as the Owner thereof as of the Record Date immediately preceding such Interest Payment Date, such interest t o be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his or her address as it appears on the Registration Books as of such Record Date or, upon written request filed with the Trustee prior to the Record Date by an Own er of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Cert ificates at the Principal Corporate Trust Office.
Redemption
Optional Redemption. The Certificates maturing on or before May 1, ____, are not subject to optional redemption. Certificates maturing on and after May 1, ____, are subject to redemption prior to their respective stated maturity dates, at the option of the City, from the proceeds of optional prepayments of Lease Payments made by the City pursuant to the Lease Agreement, in whole or in part, on any date on
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or after May 1, ____, at a redemption pr ice equal to the principal amount to be redeemed, together with accrued interest to the date fixed for redemption, without a premium, from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement.
Mandatory Sinking Fund Redemption. The Certificates maturing on May 1, ____, are subject to mandatory redemption in part on May 1, ____, and on each May 1 thereafter, to and including May 1, ____, from the principal components of scheduled Lease Payment s required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date (subject to abatement, as set forth in the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows:
Year Principal Amount of
(May 1) Certificates to be Redeemed
†Maturity.
Redemption from Net Proceeds of Insurance and Condemnation . The Certificates are subject to mandatory redemption in whole or in part on any date from the Net Proceeds of an insurance, title insurance, condemnation, or eminent domain award to the extent credited towards the prepayment of the Lease Payments by the City pursuant to the Lease Agreement, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium.
Selection of Certificates for Redemption. Whenever provision is made in the Trust Agreement for the redemption of Certificates and less than all Outstanding Certificates within a maturity are to be redeemed, Certificates of that maturity shall be selected for redemption in accordance with the rules of the Securities Depositories. For the purposes of such selection, Certificates shall be deemed to be composed of $5,000 portions and any such portion may be separately redeemed.
Notice of Redemption. The City shall be required to give the Trustee written notice of its intention to redeem Certificates at least thirty (30) days prior to the date fixed for redemption unless the Trustee otherwise agrees to a shorter period for such notice. Unless waived in writing by any Owner of a Certificate to be redeemed, notice of any such redemption shall be given by the Trustee on behalf and at the expense of the City, by mailing a copy of a redemption notice by first class mail, postage prepaid, at least twenty (20) days and not more than sixty (60) days prior to the date fixed for redemption to such Owner of the Certificate or Certificates to be redeemed at the address shown on the Registration Books maintained by the Trustee or at such other address as is furnish ed in writing by such Owner to the Trustee; provided, however, that neither the failure to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for the redemption of the Certificates.
All notices of redemption shall be dated and shall state: (i) the redemption date; (ii) the redemption price; (iii) if less than all Outstanding Certificates of a maturity are to be redeemed, the Certificate numbers (and, in the case of partial redemption, the respective principal amounts) of the Certificates to be redeemed; (iv) that on the redemption date the redemption price will become due and payable upon each such
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Certificate or portion thereof called for redemption and that interest with respect thereto shall cease to accrue from and after said date; (v) the place where such Certificates are to be surrendered for payment of the redemption price, which place of payment shall be the Designated Corporate Trust Office; (vi) the CUSIP numbers of all Certificates being redeemed; (vii ) the original date of execution and delivery of the Certificates; (viii) the rate of interest payable with respect to each maturity of Certificates being redeemed; (ix) the maturity date of each Certificate being redeemed; and (x) any other descriptive information needed to identify accurately the Certificates being redeemed.
Notwithstanding the foregoing, in the case of any optional redemption of the Certificates, the notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Certificates on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Certificates have not been depos ited with the Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Certificates to be optionally redeemed, such event shall not constitute an Event of Default; the Trustee shall send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Certificates for which notice of optional redemption was given shall remain Outstanding for all purposes of the Trust Agreement.
Notice of redemption having been given as aforesaid and the deposit of the redemption price having been made by the City, the Certificates or portions of Certificates so to be redeemed shall, on t he redemption date, become due and payable at the redemption price therein specified, and from and after such date interest with respect to such Certificates or portions of Certificates shall cease to be payable.
Upon surrender of such Certificates for redemption in accordance with said notice, such Certificates shall be paid by the Trustee at the redemption price. Upon the payment of the redemption price of Certificates being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Certificates being redeemed with the proceeds of such check or other transfer, to the extent possible. Installments of interest due on or prior to the redemption date shall be payable as herein pro vided for payment of interest. All Certificates which have been redeemed shall be canceled by the Trustee, shall not be redelivered and shall be destroyed pursuant to the Trust Agreement.
In addition to the foregoing notice to the Owners, notice shall als o be given by the Trustee, by telecopy or other electronic transmission, registered, certified or overnight mail, to all Securities Depositories and to an Information Service which shall state the information set forth above, but no defect in said notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption.
The Trustee shall have no responsibility for a defect in the CUSIP number that appears on any Certificate or in the redemption notice. The redemption notice may provide that the CUSIP numbers have been assigned by an independent service and are included in the notice solely for the convenience of Certificate Owners and that the Trustee and the City shall not be liable in a ny way for inaccuracies in said numbers.
Partial Redemption of Certificate . Upon surrender of any Certificate redeemed in part only, the Trustee shall execute and deliver to the Owner thereof, at the expense of the City, a new Certificate or Certificates of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Certificate surrendered and of the same interest rate and the same maturity.
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Purchase of Certificates. In lieu of redemption of Certificates, amounts held by the Trustee for such redemption may also be used on any Interest Payment Date, upon receipt by the Trustee at least ninety (90) days prior to the next scheduled Interest Payment Date of the written request of a City Representative, for the purchase of Certificates at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the City may in its discretion direct. Such purchases may be effected through the investment department of the Trustee or of an affiliate of the Trustee. The aggregate principal amount of Certificates of the same maturity purchased in lieu of redemption shall not exceed the aggregate principal amount of Certificates of such maturity which would otherwise be subject to such redemp tion.
Remaining moneys, if any, shall be deposited in the Lease Payment Fund. All Certificates purchased in lieu of redemption shall be canceled by the Trustee.
Transfer and Exchange of Certificates
The registration of any Certificate 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 Certificate for cancellation at the Designated Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for registration of transfer, the Trustee shall execute and deliver a new Ce rtificate or Certificates of the same maturity and aggregate principal amount, in any authorized denominations.
Certificates may be exchanged at the Corporate Trust Office of the Trustee, for a like aggregate principal amount of Certificates of other authorized denominations of the same maturity. The City shall pay any costs of the Trustee incurred in connection with such exchange, except that the Trustee may require the payment by the Certificate Owner requesting such exchange of any tax or other governme ntal charge required to be paid with respect to such exchange.
Book-Entry System
The Certificates will be initially executed, delivered and registered as one fully registered certificate for each maturity, without coupons, in the name of Cede & Co., as n ominee of DTC. DTC will act as securities depository of the Certificates. Individual purchases may be made in book-entry form only, in the principal amount of $5,000 and integral multiples thereof. Purchasers will not receive physical certificates representing their interest in the Certificates purchased. Principal and interest will be paid to DTC which will in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Certificates as described herein. So long as DTC’s book-entry system is in effect with respect to the Certificates, notices to Owners of the Certificates by the City or the Trustee will be sent to DTC.
Notices and communication by DTC to its participants, and then to the beneficial owners of the Certificates, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. See APPENDIX F—DTC’S BOOK-ENTRY ONLY SYSTEM.
In the event that such book-entry system is discontinued with respect to the Certificates, the City will cause the Trustee to execute and deliver replacements in the form of registered certificates and, thereafter, the Certificates will be transferable and exchangeable on the terms and conditions provided in the Trust Agreement.
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SOURCE OF PAYMENT FOR THE CERTIFICATES
General
Each Certificate represents a direct, undivided fractional interest in the Lease Payments. Pursuant to the Lease Agreement, the City will lease the Property from the Corporation and agree to make Lease Payments. See “THE PROPERTY. ” Upon satisfaction of certain conditions set forth in the Lease Agreement, the City may substitute the Property with other properties. See “Substitution or Removal of Property” and “Abatement” below.
As security for the Certificates, the Corporation will assign to the Trustee for the payment of principal and interest with respect to the Certificates, the Corporation’s rights, title and interest in the Lease Agreement (with certain exceptions), including the right to receive Lease Payments to be made by the City under the Lease Agreement. The Lease Payments are designed to be sufficient, in both time and amount, to pay when due, the principal and interest with respect to the Certificates. The Lease Payments are payable by the City from any source of legally available funds.
THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE
AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE
CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE CERTIFICATES
NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE
AGREEMENT CONSTITUTES AN INDEBTEDNESS OF THE CITY OR THE STATE OR ANY OF
ITS POLITICAL SUBDIVISIONS WITHIN THE MEANI NG OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.
Lease Payments; Covenant to Appropriate
Pursuant to the Lease Agreement, the City has agreed to make Lease Payments for the lease of the Property. Lease Payments will be made by the City to the Trustee on April 15 and October 15 in each year, in advance of the corresponding May 1 and November 1 Interest Payment Dates. The City will also pay as additional payments (“Additional Payments”), amounts required for the payment of all costs and expenses incurred by the Corporation to comply with the provisions of the Trust Agreement or in connection with the execution and delivery of the Certificates. The City has covenanted under the Lease Agreement to take such action as may be necessary to include all Lease Payments in its annual budget and to make the necessary annual appropriations for all such payments. Under certain circumstances described under the Lease Agreement, however, Lease Payments are subject to abatement during periods of substantial interference with the City’s use and occupancy of the Property or any portion thereof. See “SOURCE OF PAYMENT FOR THE CERTIFICATES—Abatement.”
Measure X Sales Tax Receipts
While all legally availab le funds of the City, primarily moneys in its general fund, are available to make Lease Payments, assuming the compliance of the Project with the Measure X Ordinance and the Measure X Guidelines (as such terms are defined herein), the City intends to use its Measure X Sales Tax receipts and the fund balance in its Transportation Safety and Investment Fund to make the Lease Payments when due.
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Measure X is a three-eighths of one-percent (3/8%) transactions and use tax (the “Measure X Sales Tax”) imposed on transactions in the County pursuant to Part 1.6 of Division 2 of the California Revenue and Taxation Code and the Measure X Ordinance. The “Measure X Ordinance” is Ordinance No. 2016- 01 of the Board of Directors of the Transportation Agency for Monterey County (“TAMC”), originally adopted on June 24, 2015, approved by 67.7% of the voters in the County voting on such proposition in the November 8, 2016, election, as amended. The M easure X Sales Tax was approved for a 30 -year duration.
Collection of the Measure X Sales Tax commenced on April 1, 2017, and will terminate on April 1, 2047, if not renewed beforehand by the voters of the County. The Certificates mature on May 1, 20____.
The Measure X Sales Tax is generally imposed upon the same transactions and items that are subject to the sales or use tax levied Statewide (the “State Sales Tax”), with generally the same exceptions.
Action by the State Legislature or by voter initiative could change the transactions and items upon which the State Sales Tax and the Measure X Sales Tax are imposed. Such changes or amendments could have either an adverse or beneficial effect on Measure X Revenues.
Measure X Sales Tax collections are divide d and distributed between three categories: 60% of collections are pledged to Local Road Maintenance, Pothole Repairs & Safety, 27% of collections are pledged to Regional Road Safety & Congestion Improvements, and 13% are pledged to Pedestrian & Bike Safety and Mobility Projects, in accordance with the Measure X Ordinance.
All cities within the County and the County itself are eligible to receive a portion of the 60% portion of the Measure X Sales Tax collections dedicated to Local Road Maintenance, Potho le Repairs & Safety (the “Local Pool”) granted that each local jurisdiction enters into a tax sharing agreement with TAMC that mandates that certain requirements are met (the “Local Pool Requirements”).
The Local Pool Requirements in the tax sharing agreements must include, among other things, (1) the submission of an annual compliance report to TAMC, (2) a maintenance of effort (“MOE”) requirement that requires each local jurisdiction to annually expend an amount for streets and highways purposes not less than the annual average of its expenditures for streets and highways purposes from its general fund during the fiscal years 2010, 2011 and 2012 but not less than what was expended in fiscal year 2017 when the Measure X Sales Tax was passed (the baseline amount, as indexed to the Engineering News Record construction index), (3) that each local jurisdiction account for Measure X Sales Tax collections in a separate “Transportation Safety & Investment Plan Account” not to be comingled with other funds, and (4) the development of or participation in a pavement management program to ensure timely repairs of streets and to keep the public informed.
TAMC divides the Local Pool among the eligible cities within the County and the County itself (for the benefit of the unincorporated areas in the County) according to a formula by proportion to 50% population/50% lane miles within each local jurisdiction. Eligible local jurisdiction shares are distributed to each city and the County by the County Auditor -Controller on a quarterly basis. TAMC annually updates the Local Pool distribution formula at the beginning of each fiscal year using up -to-date Department of Finance population figures and Association of Monterey Bay Area Governments (or equivalent) lane mile data. If the number of incorporated cities changes, the Local Pool distribution formula will account for changes in population and lane miles for the new and existing jurisdictions.
Distributions of the Measure X Sales Tax receipts from the Local Pool are restri cted to funding transportation purposes, including critical safety, mobility, and maintenance projects and programs and are subject to full repayment for any misuse in accordance with the Measure X Ordinance. Failure to meet Local
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Pool Requirements or to comply with the Measure X Ordinance will result in the suspension of the distribution of funds from the Local Pool to the deficient local jurisdiction to be held in trust for up to two years for said jurisdiction pending remediation, after which the funds w ill be distributed to the remaining local jurisdictions. For additional discussion, see “Risk Factors Related to the City’s Measure X Sales Tax Receipts.”
The Measure X Ordinance, together with policies and project descriptions approved by TAMC on in 2016 relating to the administration and use of the Measure X Sales Tax (the “Measure X Guidelines”) allow for local agencies, such as the City to expend Measure X Sales Tax receipts for improvements authorized by the Measure X Ordinance.
The City has annually submitted a compliance report to TAMC affirming its satisfaction of the Local Pool Requirements and its compliance with the Measure X Ordinance and Measure X Guidelines.
The City’s compliance reports are available on the TAMC website at:
https://www.tamcmonterey.org/city-and-county-annual-reports-on-measure-x-spending. Such website is not incorporated herein by this reference.
The City first received a share of the Local Pool of Measure X Sales Tax Receipts from TAMC during its 2017- 18 fiscal year. The C ity accounts for its Measure X Sales Tax distributions in its Transportation Safety and Investment Fund. The City transfers amounts from its Transportation Safety and Investment Fund to its Measure X – Capital Projects Fund for reimbursement as expenditures are made for eligible Measure X capital improvement projects.
The following table sets forth a history the audited amount of Measure X Sales Tax Receipts the City has received from TAMC, the amounts transferred from the City’s Transportation Safety and Investment Fund to the City’s Measure X – Capital Projects Fund, the net change in the City’s Transportation Safety and Investment Fund balance, and the end of year fund balances for the Transportation Safety and Investment Fund. No assurance can be provi ded that future Measure X Sales Tax Receipts.
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Table 1
CITY OF MARINA
TRANSPORTATION SAFETY AND INVESTMENT FUND
MEASURE X SALES TAX RECEIPTS AND CHANGES IN FUND BALANCE
Fiscal Year
Ending
June 30,
Measure X
Sales Tax
Receipts (1)
Transfers to
Measure X
Capital Projects
Fund (2)
Net Change
in Fund
Balance (3)
End of Year
Fund Balance
2018 $618,260 $500,000 $118,260 $118,260
2019 886,241 503,500 429,134 547,394
2020 680,105 600,000 80,043 627,437
2021 847,410 600,000 243,772 871,209
2022(4) 954,000
Sources: City of Marina Annual Comprehensive Financial Reports for fiscal years 2018-21. (1) Amount represents the City’s portion of the Measure X Sales Tax Local Pool distributed by TAMC to local jurisdictions within the County on a per capita and per lane mile basis. The City deposits Measure X Sales Tax receipts from TAMC in its Transportation Safety and Investment Fund.
(2) The City transfers amounts from its Transportation Safety and Investment Fund to its Measure X – Capital Projects Fund to reimburse expenditures on eligible transportation projects. (3) Represents Measure X Sales Tax Receipts received, plus revenues from use of money and property, less public works expenditures for staff time and transfers out to the City’s Measure X – Capital Projects Fund. (4) Projected.
The City is permitted to use its Measure X Sales Tax receipts and the fund balances in its Transportation Safety and Investment Fund to make the Lease Payments.
Based upon estimated Measure X Sales Tax Receipts in fiscal year 2022 -23 of $980,000 and estimated Lease Payments of $______, Measure X Sales Tax Receipts will provide a debt service coverage ratio of ____%.
Risk Factors Related to the City’s Measure X Sales Tax Receipts
Non-Compliance with Guidelines. In connection with the Measure X Ordinance, TAMC has adopted the Measure X Guidelines. The Measure X Guidelines include provisions that must be complied with by the City to ensure continued eligibility to receive Measure X Sales Tax distributions. Failure to follow these provisions could result in the suspension of distributions of Measure X Sales Tax, the return of such tax to TAMC or the requirement of the City to replenish its “Measure X Local Re turn” account with available funds other than Measure X Sales Tax. TAMC performs annual audits to monitor compliance with the provisions of the Measure X Guidelines.
Under the Measure X Guidelines, the City is permitted to expend Measure X Sales Tax mon ies only on those transportation purposes identified in the Measure X Guidelines. If the City is found to have expended funds on transportation purposes that do not meet the requirements of the Measure X Guidelines the City will be required to remit the am ount of the unapproved expenditures to TAMC . If TAMC determines that Measure X Sales Tax was expended on projects that do not meet the Guidelines’ definition of transportation purposes, then the City will be required to reimburse its Measure X Sales Tax account in an amount equal to the non -qualifying expenditures plus interest, and could also face a suspension of disbursements of Measure X Sales Tax for a period of three years. If such a suspension were imposed, the
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City would not receive any Measure X Sal es Tax during the term of the suspension, which may have an adverse impact on the City’s ability to pay the Lease Payments on a timely basis.
In addition, the failure of the City to properly verify that all Measure X Sales Tax related revenue, including Measure X Sales Tax allocations to the City , project-generated revenues, and interest income, was properly credited to its Transportation Safety and Investment Fund could result in the suspension of Measure X Sales Tax disbursements until the City has demon strated to TAMC that all such Measure X Sales Tax allocable to the City has been credited to the City’s Transportation Safety and Investment Fund.
If the City fails to properly credit its Measure X Sales Tax related revenue to its Transportation Safety and Investment Fund, TAMC could suspend the distribution of Measure X Sales Tax until the City has demonstrated compliance with the Measure X Ordinance and the Measure X Guidelines. of and interest on the 2019A Bonds on a timely basis.
The Measure X Guidelines also require the local agencies, including the City, to maintain their individual local commitment of funds for transportation projects and services that was expended prior to the receipt of the Measure X Sales Tax (the “MOE”). If the local agency fails to maintain the MOE, then such local agency will be required to reimburse its account with available funds other than Measure X Sales Tax monies.
The Measure X Guidelines additionally require that the City annually submit an expenditure plan and an expenditure report to TAMC to remain legally eligible to receive Measure X Sales Tax. If the City fails to submit these items to TAMC, the City may be determined to be legally ineligible to receive Measure X Sales Tax receipts to which it would otherwise be entitled.
The City has annually submitted compliance reports to TAMC affirming its satisfaction of the Local Pool Requirements and its compliance with the terms of the Measure X Ordinance and the Measure X Guidelines. For additional discussion, see “Measure X Sales Tax Receipts.”
Economic, Political, Social and Environmental Conditions. The collection of Measure X Sales Tax depends on the level of taxable sales transactions within the County, which, in turn, depends on the level of general economic activity in the County and the State generally. Changes in economic, political, social or environmental conditions on a local, State, federal or international level may adversely affect investment risk generally. Such conditional changes may include (but are not limited to) the reduction or elimination of previously available State or federal revenues, fluctuations in business production, consumer prices or financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism environmental damage and natural disasters.
During fiscal year 2019-20 and fiscal year 2020-21, Measure X Sales Tax Receipts were affected by the COVID-19 Pandemic. Reductions in County-wide Measure X Sales Tax collections lead to a reduction of the amounts of Measure X Sales Tax Receipts in the Local Pool for distribution to the City and the other eligible local jurisdiction. While the City expects that Measure X Sales Tax collections will increase as the COVID-19 Pandemic wanes, the City is unable to predict with certainty whether its Measure X Sales Tax receipts will increase or decrease in the future.
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Insurance
The City is required to keep or cause to be kept casualty insurance against loss or damage by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, in an amount at least equal to the lesser of (i) 100% of the replacement cost (without deducting for depreciation) of the Property and (ii) the aggregate principal amount of Certificates at the time outstanding. Such insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance.
To insure against loss of rental income caused by perils mentioned above, the City is required to maintain, or cause to be maintained throughout the term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property as a result of any of the hazards described above in an amount at least equal to the maximum Lease Payments coming due and payable during any two consecutive fiscal years during the remaining term of the Lease Agreement.
Public liability and property damage insurance coverage is required 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 each accident or event, and in a minimum amount of $ 150,000 (subject to a deductible clause of not to exceed $250 ,000, or such higher amount as the City shal l determine, provided that such higher deductible shall be considered a self-insured retention) for damage to property resulting from each accident or event. Such public 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 by the City and may be maintained in the form of insurance maintained through a joint exercise of powers authority created for such purpose or in the form of self -insurance by the City. The net proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid.
The City shall provide, from moneys in the Costs of Issuance Fund or at its own expense, on the Closing Date, a CLTA title insurance policy in the amount of not less than the principal amount of the Certificates, insuring the City’s leasehold estate in the Property, subject only to Permitted Encumbrances.
See APPENDIX E— SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS— LEASE AGREEMENT—Insurance.
Abatement
Pursuant to the Lease Agreement, Lease Payments shall be abated during any period in which, by reason of damage or destruction, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof (other than any modified portions of the Property as described in the Lease Agreement) to the extent to be agreed upon by the City and the Corporation and communicated by a City Representative to the Trustee. The parties agree that the amounts of the Lease Payments under such circumstances shall not be less than the amounts of the unpaid Lease Payments, unless such unpaid amounts are determined to be greater than the fair rental value of the po rtions of the Property not damaged or destroyed), based upon any appropriate method of valuation, in which event the Lease Payments shall be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction as communicated by a City Representative to the Trustee. In the event of any such
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damage or destruction, this Lease Agreement shall continue in full force and effect and the City waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance or (b) amounts in the Insurance and Condemnation Fund and/or the Lease Payment Fund are available to pay Lease Payments which would otherwise be abated, it being hereby declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments. If an abatement event has occurred but remedied, the City shall be required to extend the Term of this Lease Agreement, as described in the Lease Agreement, so that amounts abated are recouped. See “SOURCE OF PAYMENT FOR THE CERTIFICATES—Insurance,” APPENDIX E—SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—Lease Agreement—Insurance and APPENDIX E—SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—Lease Agreement—Abatement of Rental Payments in the Event of Damage or Destruction.
Eminent Domain
Pursuant to the Lease Agreement, if all of the Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Property is taken permanently, or if the Property or any part thereof shall be taken temporarily, under the power of eminent domain, (1) the Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a partial abatement of Lease Payments as a result of the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property.
No Reserve Fund
A reserve fund will not be funded for the Certificates.
Optional Prepayment
Pursuant to the Lease Agreement, the City has an option to prepay the principal components of the Lease Payments in full, by paying the aggregate unpaid principal components of the Lease Payments, in whole or in part, in a prepayment amount equal to the principal amount of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, with a premium as described above for the redemption of Certificates. See “THE CERTIFICATES—Prepayment—Optional Prepayment.”
Said option may be exercised by the City on any date on or after September 15, 2031. In the event of prepayment in part, the partial prepayment will be applied against Lease Payments in such order of payment date as will be selected by the City. Lease Payments due after any such partial prepayment will be in the amounts set forth in a revi sed Lease Payment schedule which will be provided by, or caused to be provided by, the City to the Trustee and which will represent an adjustment to the schedule set forth in the Lease Agreement taking into account said partial prepayment.
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Prepayment from Net Proceeds of Insurance and Condemnation
The City shall be obligated to prepay the Lease Payments for the Property, in whole or in part on any date, from and to the extent of any Net Proceeds of insurance award or condemnation award with respect to th e Property that have been deposited with the Trustee in the Lease Payment Fund for such purpose. Such proceeds shall be applied to the prepayment of the principal component of the Lease Payments and the prepayment of the Certificates. See “THE CERTIFICATES —Prepayment— Prepayment from Net Proceeds of Insurance and Condemnation.”
Substitution of Property
Substitution of Site or Facility. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a “Substitute Site”) and/or a substitute facility (a “Substitute Facility”) for the Site (the “Former Site”), or a portion thereof, and/or the Facility (the “Former Facility”), or a portion thereof, provided that the City shall satisfy all of the following requirements (to the extent applicable) which are hereby declared to be conditions precedent to such substitution:
(i) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amended Exhibit A to the Site and Facility Lease which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;
(ii) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amended Exhibit A to the Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;
(iii) If a substitution of the Facility, the City shall file with the Corporation and the Trustee an amended Exhibit B to the Site and Facility Lease which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility;
(iv) If a substitution of the Facility, the City shall file with the Corporation and the Trustee an amended Exhibit B to the Lease Agreement which adds thereto a description of such Sub stitute Facility and deletes therefrom the description of the Former Facility;
(v) The City shall certify in writing to the Corporation and the Trustee that such Substitute Site and/or Substitute Facility serve the purposes of the City, constitutes proper ty that is unencumbered, subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State;
(vi) The City delivers to the Corporation and the Trustee an Officer’s Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property following such substitution is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee that the indemnification provided pursuant to the Trust Agreement applies with respect to the Substitute Site and/or Substitute Facility;
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(vii) The Substitute Site and/or Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officer’s certificate delivered to the Trustee;
(viii) The City shall obtain an amendment to the title insurance policy required pursuant to the Lease Agreement which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site;
(ix) The City shall provide notice of the sub stitution to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation; and
(x) The City shall furnish the Corporation and the Trustee with a written opinion of Special Counsel, which shall be an Independent Counsel, stating that such substitution does not cause the interest components of the Lease Payments to become subject to federal income taxes or State personal income taxes.
Release of Site. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release:
(i) The City shall file with the Corporation and the Trustee an amended Exhibit A to the Site and Facility Lease which describes the Site, as revised by such release;
(ii) The City shall file with the Corporation and the Trustee an amended Exhibit A to the Lease Agreement which describes the Site, as revised by such release;
(iii) The City delivers to the Corporation and the Trustee an Officer’s Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Site, as revised by such release;
(iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agre ement, as evidenced by an officer’s certificate delivered to the Trustee;
(v) The City shall obtain an amendment to the title insurance policy required pursuant to the Lease Agreement which describes the Site, as revised by such release; and
(vi) The Ci ty shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation.
Release of Facility. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Facility, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release:
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(i) The City shall file with the Corporation and the Trustee an amended Exhibit B to the Site and Facility Lease which describes the Facility, as revised by such release;
(ii) The City shall file with the Corporation and the Trustee an amended Exhibit B to the Lease Agreement which describes the Facility, as revised by such release;
(iii) The City delivers to the Corporation and the Trustee an Officer’s Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Facility, as revised by such release;
(iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officer’s certificate delivered to the Trustee; and
(v) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation.
Events of Default and Remedies
The following shall be “events of default” under the Lease Agreement:
(a) Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein.
(b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Lease Agreement (including failure to request appropriation pursuant thereunder) or under the Trust Agreement, other than as referred to in cl ause (a) above, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trustee or the Owners of not less than five percent (5%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Corporation, the Trustee (as directed by such Owners of not less than 5% in aggregate principal amount of Certificates then Outstanding) and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected.
(c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar acts which may hereafter be enacted.
Whenever any event of default shall have happened and be continuing, it shall be lawful for the Corporation to exercise any and all remedies available pursuant to law or granted pursuant to the Le ase
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Agreement; provided, however, that notwithstanding anything in the Lease Agreement or in the Trust Agreement to the contrary, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable.
Each and every covenant to be kept and performed by the City under the Lease Agreement is expressly made a condition and upon the breach thereof the Corporation may exercise any and all rights of entry and re-entry upon the Property, and also, at its option, with or without such entry, may terminate the Lease Agreement. In the event of such default and notwithstanding any re-entry by the Corporation, the City shall, as expressly provided in the Lease Agreement, continue to remain liable fo r the payment of the Lease Payments and/or damages for breach of the Lease Agreement and the performance of all conditions contained in the Lease Agreement and, in any event, such rent and/or damages shall be payable to the Corporation at the time and in the manner as provided in the Lease Agreement.
Amendment of Lease Agreement
Except as provided below, without the prior written consent of the Trustee, the City will not alter, modify or cancel, or agree or consent to alter, modify or cancel the Lease Agreement, excepting only such alteration or modification as may be permitted by the Trust Agreement.
THE CITY
The City, located in the County, was incorporated on November 13, 1975 as a charter city under the laws of the State. The City is located on California State Route 1 along the central coast of California, 8 miles (13 km) west of the city of Salinas, 8 miles (13 km) north of the city of Monterey, and adjacent to the city of Seaside and unincorporated Monterey County. The City includes an area of approximately 9.6 square miles and has a current population of approximately 22,000 residents. The City is located adjacent to the former Fort Ord, a US Army installation which closed in 1994 during the country’s base closure initiative.
The City operates under a council-manager form of government. The five-member City Council is comprised of a mayor elected on an at large basis by the City’s voters and four other council members elected by district from within the City. Council members serve four-year terms, with two members elected every two years. The Mayor is elected for a four -year term. The City Council appoints the City Manager and the City Attorney. The City Manager is responsible for directing, coordinating and carrying out City Council policies.
The City provides police and fire protection; traffic control; on - and off-street parking; building inspections; licenses and permits; library services; the construction and maintenance of highways, streets, and other infrastructure; recreational and cultural activities; low -income housing; and general aviation services. Water and sewer services are provided through legally separate entities.
The City’s economy is influenced by tourism in the Monterey Bay region generally and Cal State University Monterey Bay. A major regional shopping center for Monterey Bay region is located in the City.
The City is also home to part of the California State University, Monterey Bay campus, the UC Santa Cruz Monterey Bay Education, Science and Technology Center, and the Veterans Transition Center. The City has significant land assets from the Fort Ord’s closure that will support future housing and commercial development.
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Numerous development projects in the City are currently ongoing, which, upon completion, will add thousands of residential units and hundreds of thousands of additional square feet of commercial retail and light industrial property. For additional information about development within the City, see the City’s website at https://www.cityofmarina.org/186/Development-Projects-and-Opportunities. The contents of such website are not included herein by this reference.
See APPENDIX A— GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY for an additional description of the City as well as certain demographic and statistical information.
CITY FINANCIAL INFORMATION
Financial Statements and Budgetary Process
The City’s accounting policies conform to generally accepted accounting principles. The audited financial statements also conform to the principles and standards for public financial reporting established by the Governmental Accounting Standards Board.
Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.
Audited Financial Statements . The City retained Chavan & Associates, LLP, San Jose, California (the “City’s Auditor”), to examine the general- purpose financial statements of the City as of and for the year ended June 30, 2021. The audited financial statements for fiscal year ended June 30, 2021, are included in APPENDIX B —ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021. The City has not requested, and the City’s A uditor has not provided, any review or update of such financial statements in connection with their inclusion in this Official Statement.
Budget Process. The Council adopts a budget for the fiscal year by June 30 preceding the beginning of the fiscal year on July 1. The City has adopted a two -year budget process which includes two discrete single year budgets and is the foundation for the City’s financial planning and control. The City’s budgets are prepared by fund, function (e.g., public safety), and department (e.g., police). The City’s proposed budgets must be balanced, with balanced being defined as the anticipated annual fiscal expenditures not exceeding the annual fiscal revenues less non -recurring fund transfers. Department heads may transfer resources within a department as they see fit. Transfers between departments, however, need special approval from the governing council. The City makes mid- cycle budget adjustments halfway through its two-year budget process.
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Certain of the City’s revenues are collected and dispersed by the State (such as sales tax and motor- vehicle license fees) or allocated in accordance with State law (most importantly, property taxes).
Therefore, State budget decisions can have an impact on City finances. See “STATE BUDGET INFORMATION.”
General Fund Balance Sheet
The following table shows the City’s audited General Fund balance sheets for the five most recent fiscal years.
Table 2
CITY OF MARINA
GENERAL FUND BALANCE SHEET
Fiscal Years 2016-17 through 2020-21
Fiscal Year Ending June 30,
2017 2018 2019 2020 2021
Audited Audited Audited Audited Audited
ASSETS
Cash and investments $ 8,655,971 $12,702,117 $17,090,572 $16,753,056 $26,186,143 Restricted cash and investments 702 1,719 4,065 547,977 235,609 Accounts receivable, net 2,276,226 2,120,618 3,075,664 2,932,187 3,154,752 Receivable from sale of land - - - 6,283,000(1) -
Due from Successor Agency 243,713 137,343 - 703,573 -
Advances to other funds 75,000 1,640,197 - - -
Prepaid expenses 12,000 12,000 12,000 - -
Notes receivable - - 115,651 194,992 183,634
Total Assets 11,263,612 16,613,994 20,297,952 27,414,785 29,760,138
LIABILITIES
Accounts payable 976,885 1,211,100 1,306,196 1,344,377 754,498 Accrued payroll and benefits 408,990 256,119 295,008 499,922 586,599 Deposits and other liabilities 285,441 500,938 585,326 468,521 815,666 Advances from other funds 50,000 1,640,197 - - -
Total Liabilities 1,721,316 3,608,354 2,186,530 2,312,820 2,156,763
DEFERRED INFLOWS
Unavailable revenues 454,248 439,457 687,185 595,729 474,539
FUND BALANCES
Nonspendable 530,713 530,713 12,000 - -
Restricted 211,371 511,371 239,497 595,729 235,609
Committed 7,027,012 7,367,012 9,644,438 10,597,489 11,457,490 Unassigned 1,318,952 4,157,087 7,528,302 13,313,018 15,435,737 Total Fund Balances 9,088,048 12,566,183 17,424,237 24,506,236 27,128,836
Total Liabilities, Deferred Inflows
and Fund Balances
11,263,612 16,613,994 20,297,952 27,414,785 29,760,138
Sources: City of Marina Annual Comprehensive Financial Reports for Fiscal Years 2016-17 through 2021-21.
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(1) During 2020, the Fort Ord Reuse Authority (“FORA”) sold parcels of land known collectively known as “The Dunes Phase 2” for $13,500,000. The City had a 50% interest in the parcels and received its cash share of the sales proceeds of $6,283,000 in July, 2020.
General Fund Revenues, Expenditures, and Changes in Fund Balances
The following tables shows the City’s audited results for General Fund revenues and expenditures for fiscal years 2018-19 through 2020-21 and budgeted projections for fiscal years 2021-22 and 2022-23.
Table 3
CITY OF MARINA
GENERAL FUND REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Fiscal Years 2018-19 through 2022-23
Fiscal Year Ending June 30,
2019 2020 2021 2022 2023
Audited Audited Audited Budgeted (1) Budgeted (1)
REVENUES
Taxes and assessments $18,859,358 $19,520,453 $20,988,247 $23,002,770 $23,025,930 Licenses, permits and fees 2,346,192 1,962,170 2,446,456 2,091,500 2,096,390 Fines and forfeitures 102,543 60,958 95,186 63,050 63,063 Intergovernmental 718,985 1,091,046 1,626,524 675,700 385,700 Charges for services 3,313,868 3,858,109 3,802,810 3,534,715 3,536,932 Investment earnings 334,220 522,780 323,971 530,620 530,620 Other revenues 162,455 181,467 466,679 49,440 49,440
Total Revenues 25,837,621 27,226,983 29,749,873 29,947,795 29,688,075
EXPENDITURES
General government 4,662,294 5,310,317 6,689,562 7,602,087 8,644,256 Public safety 10,300,132 11,281,745 12,046,544 12,224,080 11,808,685 Public works 1,356,463 1,611,913 1,687,981 1,952,679 1,970,187 Economic & community development 2,495,050 2,304,699 2,492,190 2,897,240 2,912,253 Recreation & cultural services 964,602 923,961 770,898 1,168,303 1,177,372 Capital outlay 183,192 1,114,823 921,593 70,000 40,000 Debt Service - Principal 145,000 154,692 188,516 186,000 186,000 Debt Service - Interest 7,787 30,656 27,295 - -
Total Expenditures 20,114,520 22,732,806 24,824,579 26,100,389 26,738,753
REVENUES OVER EXPENDITURES 5,723,101 4,494,177 4,925,294 3,847,406 2,949,322
OTHER FINANCING SOURCES
Sale of capital assets - 6,283,000(2) - - -
Proceeds from lease - - 277,704 - -
Transfers in 148,202 343,147 148,102 148,102 148,102
Transfers out (1,013,249) (4,038,325) (2,728,500) (10,142,000) (1,612,000) Total Other Financing Sources (865,047) 2,587,822 (2,302,694) (9,993,898) (1,463,898)
NET CHANGE IN FUND BALANCES 4,858,054 7,081,999 2,622,600 (6,146,492) 1,485,424
FUND BALANCES – BEGINNING OF YEAR 12,566,183 17,424,237 24,506,236 27,128,836 20,982,344 FUND BALANCES – END OF YEAR 17,424,237 24,506,236 27,128,836 20,982,344 22,467,768
Source: City of Marina Annual Comprehensive Financial Report for Fiscal Years 2017 -18 through 2020- 21 data and City of Marina for 2021-22 data.
(1) FY2021-22 and FY2022-23 budgeted data is from the City’s Mid-Cycle Budget Adjustments, as adopted on May 3, 2022. (2) Land donated to the City by FORA was sold as a part of FORA’s dissolution.
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General Fund Budget
The following table shows the City’s General Fund budget figures for fiscal year 2019-20 and 2020- 21, including a comparison of the City’s initial budget, final budget, audited actual for each year.
Table 4
CITY OF MARINA
GENERAL FUND BUDGET COMPARISON
Fiscal Years 2019-20 and 2020-21
Fiscal Year Ending June 30, 2020 Fiscal Year Ending June 30, 2021 Adopted Final Audited Adopted Final Audited
Budget Budget Actuals Budget Budget Actuals
REVENUES
Taxes and assessments $19,939,500 $19,939,500 $19,520,453 $16,392,500 $18,493,317 $20,988,247 Licenses, permits and fees 2,100,000 2,100,000 1,962,170 1,780,000 1,780,000 2,446,456 Fines and forfeitures 63,050 63,050 60,958 163,050 163,050 95,186 Intergovernmental 424,700 424,700 1,091,046 618,700 1,695,891 1,626,524 Charges for services 965,730(1) 965,730(1) 3,858,109(1) 2,956,830 2,958,830 3,802,810 Investment earnings 300,000 300,000 522,780 275,000 275,000 323,971 Other revenues 65,440 65,440 181,467 205,440 210,440 466,679 Total Revenues 23,858,420 23,858,420 27,226,983 22,391,520 25,576,528 29,749,873
EXPENDITURES
General government 5,225,050 5,584,830 5,310,317 4,894,710 6,222,160 6,689,562 Public safety 11,234,190 11,234,190 11,281,745 11,282,100 12,027,006 12,046,544 Public works 2,090,250 2,090,250 1,611,913 1,651,800 1,651,800 1,687,981 Economic & community development 2,488,037 2,488,037 2,304,699 2,000,897 2,014,791 2,492,190 Recreation & cultural services 1,153,260 1,153,260 923,961 823,860 823,860 770,898 Capital outlay 597,300 1,633,533 1,114,823 865,500 865,500 921,593 Debt Service - Principal 185,000 185,000 154,692 185,000 185,000 188,516 Debt Service - Interest - - 30,656 - - 27,295
Total Expenditures 22,973,087 24,369,100 22,732,806 21,703,867 23,790,117 24,824,579
REVENUES OVER EXPENDITURES 885,333 (510,680) 4,494,177 687,653 1,786,411 4,925,294
OTHER FINANCING SOURCES
Sale of capital assets - - 6,283,000 - - -
Proceeds from lease - - - - - 277,704
Transfers in 2,379,247(1) 2,379,247(1) 343,147(1) 148,102 148,102 148,102 Transfers out (3,892,300) (3,983,325) (4,038,325) (2,262,000) (2,728,500) (2,728,500) Total Other Financing Sources (1,513,053) (1,604,078) 2,587,822 (2,113,898) (2,580,398) (2,302,694)
NET CHANGE IN FUND BALANCES (627,720) (2,114,758) 7,081,999 (1,426,245) (793,987) 2,622,600
FUND BALANCES – BEGINNING OF YEAR 17,424,237 24,506,236 FUND BALANCES – END OF YEAR 24,506,236 27,128,836
Source: City of Marina Annual Comprehensive Financial Reports for Fiscal Year 2019-20 and Fiscal Year 2020-21. (1) In FY2019-20 the City accounted for certain amounts related to revenues generated from services provided to the Preston Park and Abrams Park developments as “transfers in” for budgeting purposes but as “charges for services” in its audited actuals.
City Financial Management
The City Council has adopted a comprehensive set of financial management policies to provide for:
(i) establishing targeted General Fund reserves; (ii) the prudent investment of City funds, and (iii) management of debt. The City’s practice is to incur debt only after deliberation over the effect of such debt on the City’s General Fund and other resources of the City, and in those circumstances where the use of debt would be appropriate to the scale and economic life of the asset being financed and the accumulation or availability of reserves to fund the capital requirement.
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General Fund Reserve Policy. The City’s Reserve Policy was most recently updated in 2020 and sets a goal of a 20% of budgeted General Fund revenues. The City achieved its reserve policy target in FY2020- 21 and has budgeted to achieve maintain at reserves of at least 20% of budgeted general fund revenues in FY2021-22 and FY2022-23.
Investment Policy. The investment of funds of the City (except pension and retirement funds) is made in accordance wit h the City’s Investment Policy, most recently approved on October 2, 2018 (the “Investment Policy”), prepared by the City Treasurer as authorized by section 53601 of the Government Code of California. The Investment Policy allows for the purchase of a variety of securities and provides for limitations as to exposure, maturity and rating which vary with each security type. The composition of the portfolio will change over time as old investments mature, or are sold, and as new investments are made.
Invested funds are managed to ensure preservation of capital through high quality investments, maintenance of liquidity and then yield. Further, operating funds may not be invested in any investment with a maturity greater than five years.
Debt Management Policy. In accordance with section 8855(i) of the California Government Code the City adopted a debt management policy on May 1, 2018, to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City’s interest and issuance costs; to maintain the highest possible credit rating; to provide complete financial disclosure and reporting; and to maintain financial flexibility for the City.
Primary Sources of General Fund Revenues
The City relies on several sources to balance its General Fund budget. The most important of these revenue sources (based on percentage of the total revenue budget) are property taxes, which typically account for approximately 25% of the City’s General Fund revenues. The City’s second largest General Fund revenue source is sales and use taxes, which typically account for 25% of the City’s General Fund revenues. Charges for services are the General Fund’s third largest revenue source, typically accounting for approximately 13% of the City’s General Fund Revenues. Transient occupancy taxes, the General Fund’s fourth largest revenue source, typically account for 10% of the City’s General Fund revenues. The City also levies taxes on franchises and cardrooms, which typically account for under 5% of the City’s General Fund revenues. Together these five primary sources of General Fund revenues have constituted approximately 80% of the City’s General Fund revenues in recent years.
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The table below shows the City’s pr imary general fund revenue sources for the three most recent fiscal years and budgeted projections for Fiscal Year s 2021-22 and 2022-23. Following the table is a brief discussion of each of the City’s primary sources of General Fund revenues.
Table 6
CITY OF MARINA
PRIMARY SOURCES OF GENERAL FUND REVENUES
Fiscal Year Ending June 30,
2019 2020 2021 2022 2023
Audited Audited Audited Budgeted(2) Budgeted(2)
Property taxes incl. VLF $ 6,728,679 $ 7,057,401 $ 7,471,843 $ 7,589,500 $ 7,813,290 Sales taxes(1) 6,862,925 7,740,865 8,793,254 9,375,000 9,575,000 Franchise & cardroom taxes 1,259,574 1,249,755 1,221,904 1,237,600 1,240,500 Transient occupancy taxes 4,008,180 3,472,431 3,501,246 4,200,000 4,284,000 Charges for services 3,313,868 3,858,109 3,802,810 3,534,715 3,536,932 Total Primary Sources 22,173,226 23,378,561 24,791,057 25,936,815 26,449,722 All Other General Fund Revenues 3,664,395 3,848,422 4,958,816 4,010,980 3,238,353 Total General Fund Revenues $25,837,621 $27,226,983 $29,749,873 $29,947,795 $29,688,075
Source: City of Marina 2018-20 Annual Comprehensive Financial Report and City of Marina. (1) Amount includes Measure N sales taxes but does not include Measure X Sales Taxes. Measure X Sales Tax Receipts are a restricted revenue source accounted for a separate fund. For additional discussion, see “Sales and Use Taxes” and “SOURCE OF PAYMENTS FOR THE CERTIFICATES—Measure X Sales Taxes.” (2) FY2021-22 and FY2022-23 budgeted data is from the City’s Mid-Cycle Budget Adjustments, as adopted on May 3, 2022.
Property Taxes. Property taxes are one of the General Fund’s two primary revenue source, together with sales and use taxes. The County levies a tax of 1% on the assessed valuation of property within the County. The City receives a share of this 1% levy for property located within the City limits. In Fiscal Year 2019-20, property taxes (including property taxes in -lieu of vehicle license fees) generated a pproximately $7.1 million. In Fiscal Year 2020-21 property taxes (including property taxes in-lieu of vehicle license fees) generated approximately $7.5 million. Property tax revenues are budgeted to generate $7.6 million and $7.8 million in Fiscal Years 2021-22 and 2022-23, respectively (including property taxes in-lieu of vehicle license fees). See “Property Taxes” below for additional information relating to the property taxes and the assessed valuation of property located in the City.
Sales and Use Ta xes. Sales and use taxes are the General Fund’s second primary revenue source.
The City receives a 1% share of all taxable sales generated within its borders from the State. The City also receives sales and use taxes from a voter -approved 1.5% sales tax (“ Measure N”) on all taxable sales generated within its borders. Measure N is a general tax and Measure N collections are available to the City’s General Fund for any lawful purpose. In Fiscal Year 2019-20, sales and use taxes (including Measure N taxes) generated approximately $7.7 million and in Fiscal Year 2020 -21, sales and use taxes (including Measure N taxes) generated approximately $8.8 million. Sales and use taxes are budgeted to generate $9.4 million and $9.6 million in Fiscal Years 2021-22 and 2022-23, respectively. Sales and Use Tax revenues for Fiscal Years 2019- 20 through 2022-23 have been impacted by the COVID -19 Pandemic. For additional discussion of the City’s General Fund sales tax revenues and of Measure N, see “Sales and Use Taxes.”
Charges for Services . The City’s charges for services consist of planning services fees, residential building report fees and miscellaneous fees for the City’s Library, Police, and Public Works. Together, the charges for services comprise the City’s third largest source of General Fund revenues. In Fiscal Year 2019- 20, charges for services generated approximately $3.9 million. In Fiscal Year 2020 -21 charges for services
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generated approximately $3.8 million. Charges for services revenues are budgeted to generate $3.5 million in Fiscal Years 2021-22 and 2022-23. The City’s ability to set fees for services is limited under California law. Generally, a fee may not exceed the estimated reasonable cost of providing the particular service or product for which the fee is charged, plus overhead.
Transient Occupancy Taxes . The City currently imposes a voter- approved general transient occupancy tax upon the occupancy of any hotel room in the City, charged to the transient (or guest) who is entitled to such occupancy. The current rate of the City’s transient occupancy tax is 14% of the rent charged by the hotel operator for the use of the hotel room. The current transient occupancy tax rate was approved by a majority of the voters in the City voting in an election on Nov ember 6, 2018 and became effective January 1, 2019, representing a 2% increase from the 12% prior rate. The City’s transient occupancy tax is a general tax, which means that the transient occupancy tax proceeds are deposited into the City’s general fund and may be used for any and all municipal purposes. In Fiscal Year 2019-20, transient occupancy taxes generated approximately $3.5 million and in Fiscal Year 2020 -21 transient occupancy taxes generated approximately $3.5 million. Transient occupancy taxes ar e budgeted to generate $ 4.2 million and $4.3 million in Fiscal Years 2021-22 and 2022-23, respectively. Transient occupancy tax collections have been significantly impacted by the COVID-19 Pandemic, but are expected to return to historical norms.
Franchise & Cardroom Taxes. Since January 1, 2017 the City has levied a flat 0.2 percent tax on gross receipts for all businesses operating in the City that was approved by a majority of the voters in the City voting in an election on November 8, 2016. In addition, cardrooms operating within the City have been charged a 5% tax on their annual gross operating revenues since the City’s voters approved a cardroom tax at an election on November 5, 2013 which became effective on January 1, 2014. In Fiscal Year 2 019-20, franchise & cardroom taxes generated approximately $1.2 million and in Fiscal Year 2020 -21 franchise & cardroom taxes generated approximately $1.2 million. Franchise & cardroom taxes are budgeted to generate $1.2 million in Fiscal Year s 2021-22 and 2022-23. Franchise & cardroom taxes have been significantly impacted by the COVID-19 Pandemic, but are expected to return to historical norms.
Property Taxes
Under Proposition 13, an amendment to the California Constitution adopted in 1978 that added Article XIIIA of the California Constitution, the county assessor’s valuation of real property is established as shown on the Fiscal Year 1975- 76 tax bill, or, thereafter, as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased annually to reflect inflation at a rate not to exceed 2% per year or reduced to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdictio n or in the event of declining property value caused by substantial damage, destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than that of similar properties more recently sold and may be lower than its own market value. Likewise, changes in ownership of property and reassessment of such property to market value commonly will lead to increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full 2% increase on any property that has not changed ownership.
Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. Real property which changes ownership or is newly constructed is revalued at the time the change in ownership occurs or the new construction is completed.
The current year property tax rate will be applied to the r eassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due.
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Local agencies and schools will share the growth of “base” sources from all tax rate areas in the County. Each year’s growth allocation becomes part of each local agency’s allocation in the following year.
The availability of revenue from growth in the tax bases in such tax rate areas may be affected by the existence of redevelopment agencies (including their successor agencies) which, under certain circumstances, may be entitled to sources resulting from the increase in certain property values. State law exempts $7,000 of the assessed valuation of an owner -occupied principal residence. This exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes that would have been payable on such exempt values is supplemented by the State.
For assessment and tax collection purposes, property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State -assessed property and property (real or personal) for which there is a lien on real property sufficient , in the opinion of the county assessor, to secure payment of the taxes. All other property is “unsecured,” and is assessed on the “unsecured roll.” Secured property assessed by the SBE is commonly identified for taxation purposes as “utility” property.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to any delinquent payment. Pro perty on the secured roll, with respect to which taxes are delinquent, becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of delinquent taxes and the delinquency penalty, plus costs and prepayment penalty of one and one -half percent per month to the time of prepayment. If taxes are unpaid for a period of five years or more, the property is subject to sale by the county treasurer.
Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of one and one-half percent per month attaches to such taxes beginning the second month after the delinquent date, and on the first day of each month until paid. A county has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder ’s office in order to obtain a lien o n certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the delinquent taxpayer.
Teeter Plan
The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. The Teeter Plan guarantees distribution of 100% of the general taxes levied to the taxing entities within the County, with the County retaining all penalties and interest penalties affixed upon delinquent properties and redemptions of subsequent collections. Under the Teeter Plan, the County apportions secur ed property taxes on a cash basis to local political subdivisions, including the City, for which the County acts as the tax -levying or tax- collecting agency. At the conclusion of each fiscal year, the County distributes 100% of any taxes delinquent as of June 30th to the respective taxing entities.
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The County cash position is protected by a special fund, known as the “Tax Loss Reserve Fund,” which accumulates moneys from interest and penalty collections. In each fiscal year, the Tax Loss Reserve Fund is required to be funded to the amount of delinquent taxes plus one percent of that year ’s tax levy.
Amounts exceeding the amount required to be maintained in the tax loss reserve fund may be credited to the County’s general fund. Amounts required to be maintai ned in the tax loss reserve fund may be drawn on to the extent of the amount of uncollected taxes credited to each agency in advance of receipt.
The Teeter Plan is to remain in effect unless the County Board orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the County Board receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the County Board is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The County Board may also, after holding a public hearing on the matter, discontinue the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll in that agency. If the Teeter Plan is discontinued in the future, only those secured property taxes actually collected would be allocated to political subdivisions (including the City) for which the County acts as the tax- levying or tax- collecting agency, but penalties and interest would be credited to the political subdivisions.
The City is not aware of any petitions for the discontinuance of the Teeter Plan in the County.
Assessed Value
The assessed valuation of property in the City is established by the County Assessor, except for public utility property which is assessed by the SBE. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution.
Certain classes of property, such as churches, colleges, not -for-profit hospitals and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions. Property taxes allocated to the City are collected by the County at the same time and on the same t ax rolls as are county and special district taxes. The valuation of secured property by the County Assessor is established as of January 1 and is subsequently equalized in September of each year.
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The table below shows the assessed valuation of taxable property in the City for the ten most recent fiscal years.
Table 7
CITY OF MARINA
HISTORIC ASSESSED VALUATIONS
Fiscal Years 2012-13 to 2021-22
Fiscal Year
Ending Total Assessed %
June 30, Local Secured Utility Unsecured Valuation Change 2013 $1,371,499,660 — $57,668,881 $1,429,168,541 —
2014 1,418,248,413 — 57,344,875 1,475,593,288 3.25%
2015 1,515,813,610 — 58,325,346 1,574,138,956 6.68
2016 1,595,725,043 — 60,055,774 1,655,780,817 5.19
2017 1,747,849,048 — 68,005,667 1,815,854,715 9.67
2018 1,869,199,906 — 68,051,914 1,937,251,820 6.69
2019 2,114,703,321 — 66,708,434 2,181,411,755 12.60
2020 2,327,164,440 — 73,146,560 2,400,311,000 10.03
2021 2,539,791,621 — 74,243,355 2,614,034,976 8.90
2022 2,760,299,944 — 92,871,390 2,853,171,334 9.15
Source: California Municipal Statistics, Inc.
Assessments may be adjusted during the course of the year when real property changes ownership or new construction is completed. Assessments may also be appealed by taxpayers seeking a reduction as a result of economic and other factors beyond the City’s control, such as a general market decline in property values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc. When necessitated by changes in assessed value in the course of a year, taxes are pro-rated for each portion of the tax year.
Appeals of Assessed Valuation; Blanket Reductions of Assessed Values . There are two basic types of property tax assessment appeals provided for under State law. The first type of appeal, commonly referred to as a base year assessment appeal, involves a dispute on the valuation assigned by the assessor immediately subsequent to an instance of a change in ownership or completion of new construction. If the base year value assigned by the assessor is reduced, the valuation of the property cannot increase in subsequent years more than 2% annually unless and until another change in ownership and/or additional new construction activity occurs.
The second type of appeal, commonly referred to as a Proposition 8 appeal (which Proposition 8 was approved by the voters in 1978), can result if factors occur causing a decline in the market value of the property to a level below the property’s then current taxable value (escalated base year value). Pursuant to State law, a property owner may apply for a Proposition 8 reduction of the property tax assessment for such owner’s property by filing a written application, in the form prescribed by the SBE, with the appropriate county board of equalization or assessment appeals board. A property owner desiring a Proposition 8 reduction of the assessed value of such owner ’s property in any one year must a pply to the county assessment appeals board (the “Appeals Board ”). Following a review of the application by the county assessor’s office, the county assessor may offer to the property owner the opportunity to stipulate to a
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reduced assessment or may confirm the assessment. If no stipulation is agreed to, and the applicant elects to pursue the appeal, the matter is brought before the Appeals Board (or, in some cases, a hearing examiner) for a hearing and decision. The Appeals Board generally is required to d etermine the outcome of appeals within two years of each appeal’ s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre -reduction level (escalated to the inflation rate of no more than 2%) following the year for which the reduction application is filed. However, the county assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year and any intervening years as well. In practice, such a reduced assessment may and often does remain in effect beyond the year in which it is granted.
In addition to the above-described taxpayer appeals, county assessors may independently reduce assessed valuations based on changes in the market value of property, or for other factors such as the complete or partial destruction of taxable property caused by natural or man -made disasters such as earthquakes, floods, fire, drought or toxic contamination pursuant to relevant provisions of the State Constitution.
In addition, Article XIIIA of the State Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year or may be reduced to reflect a reduction in the consumer price index or comparable local data. This measure is computed on a calendar year basis.
Risk of Decline in Property Values; Fire; Earthquake Risk. Property values could be reduced by factors beyond the City’ s control, including fire, earthquake and a depressed real estate market due to general economic conditions in the County, the region and the State.
Other possible causes for a reduction in assessed values include the complete or partial destruction of taxable property caused by other natural or manmade disasters, such as flood, fire, drought, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes).
No assurance can be given that property tax appeals and/or blanket reductions of assessed property values will not significantly reduce the assessed valuation of property within the City in the future.
Assembly Bill 102. On June 27, 2017, the Governor of the State (the “Governor”) signed into law Assembly Bill 102 (“AB 102”). AB 102 restructured the functions of the SBE and created two new separate agencies: (i) the California Department of Tax and Fee Administration, and (ii) the Office of Tax Appeals.
Under AB 102, the California Department of Tax and Fee Administration took over programs previously in the SBE Property Tax Department, such as the Tax Area Services Section, which is responsible for maintaining all property tax-rate area maps and for maintaining special revenue district boundaries. Under AB 102, the SBE continues to perform the duties assigned by the State Constitution related to property taxes, however, effective January 1, 2018, the SBE will only hear appeals relate d to the programs that it constitutionally administers and the Office of Tax Appeals will hear appeals on all other taxes and fee matters, such as sales and use tax and other special taxes and fees. AB 102 obligates the Office of Tax Appeals to adopt regulations as necessary to carry out its duties, powers, and responsibilities. No assurances can be given as to the effect of such regulations on the appeals process or on the assessed valuation of property within the City.
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State-Assessed Property . Under the Constitution, the SBE assesses property of State -regulated transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting or selling gas or electricity. The Board of Equalization also is requi red to assess pipelines, flumes, canals and aqueducts lying within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local jurisdictions in the county, including school districts, and taxed by th e local county tax officials in the same manner as for locally assessed property.
Taxes on privately owned railway cars, however, are levied and collected directly by the Board of Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricity-generating property to non-utility companies, as often occurred under electric power deregulation in California, affects how those assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State -assessed property located in the City to non-utility companies will increase the assessed value of property in the City, since the property ’s value will no longer be divided among all taxing jurisdictions in the County. The transfer of property located and taxed in the City to a State-assessed utility will have the opposite effect, generally reducing the assessed value in the City as the value is shared among the other jurisdictions in the County. The City is unable to predict future transfers of State-assessed property in the City and the County, the impact of such transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the State ’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing agencies, including the City.
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Assessed Valuation by Land Use . The following table gives a distribution of taxable real property located in the City by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use.
Table 8
CITY OF MARINA
ASSESSED VALUATION AND PARCELS BY LAND USE
FY2021-22
Assessed
Valuation (1)
% of
Total
No. of
Parcels
% of
Total
Non-Residential:
Commercial/Office $ 312,205,429 11.31% 123 2.21%
Vacant Commercial 46,563,281 1.69 50 0.90
Hotel/Motel 118,515,819 4.29 12 0.22
Industrial 77,738,521 2.82 35 0.63
Vacant Industrial 537,806 0.02 2 0.04
Government/Social/Institutional 4,682,303 0.17 429 7.69 Miscellaneous/Water Company 182,189 0.01 95 1.70
Subtotal Non-Residential $560,425,348 20.30% 746 13.38%
Residential:
Single Family Residence $1,670,071,610 60.50% 3,774 67.68% Condominium/Townhouse 95,800,832 3.47 361 6.47
Mobile Home 8,875,925 0.32 240 4.30
Mobile Home Park 25,592,958 0.93 6 0.11
2-4 Residential Units 42,248,912 1.53 83 1.49
5+ Residential Units/Apartments 222,036,892 8.04 114 2.04 Vacant Residential 135,247,467 4.90 252 4.52
Subtotal Residential $2,199,874,596 79.70% 4,830 86.62%
Total $2,760,299,944 100.00% 5,576 100.00%
Source: California Municipal Statistics, Inc.
(1) Total secured assessed valuation, excluding tax-exempt property.
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Assessed Valuation of Single-Family Homes. The following table focuses on single-family residential properties only, which comprise approximately 60.5% of the assessed value of taxable property in the City.
Table 9
CITY OF MARINA
PER PARCEL - ASSESSED VALUATION OF SINGLE-FAMILY HOMES
Average Median
No. of FY2021-22 Assessed Assessed
Parcels Assessed Valuation Valuation Valuation
Single Family Residential 3,774 $1,670,071,610 $442,520 $429,297
FY2021-22 No. of % of Cumulative Total % of Cumulative
Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total $0 - $49,999 30 0.795% 0.795% $ 854,746 0.051% 0.051% $50,000 - $99,999 383 10.148 10.943 27,628,778 1.654 1.706 $100,000 - $149,999 128 3.392 14.335 15,732,855 0.942 2.648 $150,000 - $199,999 160 4.240 18.574 28,198,945 1.688 4.336 $200,000 - $249,999 264 6.995 25.570 59,896,592 3.586 7.923 $250,000 - $299,999 309 8.188 33.757 85,450,497 5.117 13.039 $300,000 - $349,999 206 5.458 39.216 66,657,491 3.991 17.030 $350,000 - $399,999 266 7.048 46.264 99,921,866 5.983 23.013 $400,000 - $449,999 258 6.836 53.100 109,925,216 6.582 29.596 $450,000 - $499,999 280 7.419 60.519 132,626,874 7.941 37.537 $500,000 - $549,999 232 6.147 66.667 121,516,920 7.276 44.813 $550,000 - $599,999 221 5.856 72.523 126,867,570 7.597 52.410 $600,000 - $649,999 225 5.962 78.484 140,770,406 8.429 60.839 $650,000 - $699,999 199 5.273 83.757 134,235,939 8.038 68.876 $700,000 - $749,999 176 4.663 88.421 126,968,994 7.603 76.479 $750,000 - $799,999 106 2.809 91.229 82,128,616 4.918 81.397 $800,000 - $849,999 80 2.120 93.349 65,903,646 3.946 85.343 $850,000 - $899,999 70 1.855 95.204 61,100,351 3.659 89.001 $900,000 - $949,999 55 1.457 96.661 50,783,886 3.041 92.042 $950,000 - $999,999 47 1.245 97.907 45,657,363 2.734 94.776 $1,000,000 and greater 79 2.093 100.000 87,244,059 5.224 100.000 Total 3,774 100.000% $1,670,071,610 100.000%
Source: California Municipal Statistics, Inc.
(1) Improved single-family residential parcels. Excludes condominiums and parcels with multiple family units.
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Principal Taxpayers. Based on fiscal year 2021-22 locally assessed taxable valuations, the top twenty taxable property owners in the City represent approximately 19.19% of the total fiscal year 2021-22 taxable value.
The following table shows the 20 largest owners of taxable property in the City as determined by secured assessed valuation in fiscal year 2021- 22. The City is not aware of any plans by the top twenty largest local secured taxpayers to leave the City or terminate operations.
Table 10
CITY OF MARINA
LARGEST LOCAL SECURED PROPERTY TAXPAYERS
FY2021-22
Assessed % of
Property Owner Primary Land Use Valuation Total(1)
1. Hamstra-Appleton LLC Medical Buildings $ 53,363,977 1.93%
2. Wathen Castanos Peterson Homes Inc. Residential Development 37,821,432 1.37
3. Pacifc Coast Highway Property LLC Shopping Center 37,275,607 1.35
4. Marina Developers Inc. Residential Development 36,069,996 1.31
5. LV44 LP Apartments 35,682,180 1.29
6. Shea Homes LP Residential Development 34,567,131 1.25
7. HHLP Sanctuary Associates LLC Hotel 31,783,768 1.15
8. MHC Marina Dunes LP RV Park 28,561,623 1.03
9. Wal-Mart Real Estate Business Trust Commercial 26,160,236 0.95
10. Target Corporation Shopping Center 25,284,000 0.92
11. Marina Hotels BW & CI LLC Hotel 23,808,798 0.86
12. Community Hospital Properties Inc. Medical Building 23,583,294 0.85
13. Cemex Inc. Industrial – Mining 21,337,814 0.77
14. Monterey Peninsula Hotels Group LP Hotel 19,781,195 0.72
15. Michael J. Tate Trust Apartments 18,458,827 0.67
16. SPPI Commercial LLC Shopping Center 16,902,438 0.61
17. Marina Community Partners LLC Apartments 16,163,174 0.59
18. Sea Breeze Marina LLC Apartments 14,808,180 0.54
19. WC Marina LLC Residential Development 14,557,667 0.53
20. Valle Del Sol Properties LLC Residential Properties 13,723,669 0.50 Total Top 20 $529,695,006 19.19%
Source: California Municipal Statistics, Inc.
(1) FY2021-22 Local Secured Assessed Valuation: $2,760,299,944.
Sales and Use Taxes
A sales tax is imposed on the privilege of consuming personal property in the State. The State does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide (of which 1% is paid to the City ) (the “State Sales Tax”). In addition, many of the State’s cities, counties, districts and communities have special taxing jurisdiction to impose a transaction (sales) or use tax. These so-called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. While more than one district tax may be in effect for a particular location, counties, municipalities, and districts are allowed to increase the sales tax in specific jurisdictions up to a total of 10.25%.
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Measure N. On November 6, 2018, the voters of the City approved Measure N, which increased an existing sales and use tax on all taxable sales generated within the City from 1.00% to 1.50%. Measure N sales and use taxes will be collected until the expiration date of Measure N on March 31, 2034, if Measure N’s sales tax is not otherwise extended by the voters of t he City beforehand. Revenues from Measure N taxes are available to the City’s general fund for any lawful purpose.
Since the increase of the Measure N sales tax rate to 1.50% became effective, Measure N sales tax revenues have typically comprised approxim ately two- thirds of the City’s total general fund sales tax revenues in each fiscal year.
The State’s Department of Tax and Fee Administration actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis.
The following table shows a breakdown of the composition of the current sales and use tax rate applicable to transactions in the City:
Table 11
CITY OF MARINA
CURRENT SALES AND USE TAX RATES
Component Tax Rate
State General Fund 5.750%
State Local Public Safety Fund 0.500
City General Fund 1.000
Monterey County (1) 0.500
Measure N 1.500
Total 9.250%
Source: City of Marina
(1) Includes the Measure X Sales Tax. For additional discussion, see “SOURCE OF PAYMENT FOR THE CERTIFICATES— Measure X Sales Tax.”
The State’s Department of Tax and Fee Administration actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis.
Many categories of transactions are exempt for the State Sales Tax. The most important of these exemptions are the sales of food products for home consumption, prescription medicine, edible livestock and their feed, seed and fertilizer used in raising food for human consumption, and gas and electricity and water when delivered to consumers through mains, lines and pipes. In addition, occasional sales (i.e., sales of property not held or used by a seller in the course of activities for which he or she is required to hold a seller’s permit) are generally exempt from both the State Sales Tax; however, the occasional sales exemption does not apply to the sale of an entire business and other sales of machinery and equipment used in a business.
Action by the State Legislature or by voter initiative could change the transactions and items upon which the State Sales Tax are imposed. Such changes or amendments could have either an adverse or beneficial effect on revenues produced by sales taxes. The City is not currently aware of any proposed legislative change that would have a material adverse effect on the State Sales Tax.
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Online Purchases. The City’s sales tax collections may be affected by increasing levels of sales of physical products bought online and delivered in the City by businesses located outside of the State. The City believes that many of these transactions may avoid taxation either through error or deliberate non - reporting and this potentially reduces the amounts of the sales taxes collected. See “RISK FACTORS — Increased Internet Use May Reduce Sales Tax Revenues.”
Transient Occupancy Tax
Marina receives tourism spill -over from Monterey Bay, but the City does not primarily rely on tourism for generated revenues. The City levies a 14% tax on hotels and lodging establishments. The 14% transient occupancy tax level became effective on January 1, 2019 following the approval of an increase by a majority of the voters of the City voting in the November 6, 2018 election. Prior to January 1, 2019 the transient occupancy tax rate was 12%. The City’s transient occupancy tax is a general tax and can be used for any governmental purpose.
Effects of COVID-19 Pandemic on Transient Occupancy Tax Revenues. Transient occupancy taxes are the City’s most impacted General Fund revenue source from the result of closures and reduced travel caused by the COVID-19 Pandemic. The City’s collections of transient occupancy tax revenues are dow n substantially in fiscal year fiscal year 2020-21 as compared to historical levels. As the COVID-19 Pandemic subsides, the City expects revenues from transient occupancy taxes to revert towards historical norms.
Other Sources of General Fund Revenues
In addition, the City receives approximately 20% of its annual General Fund revenues from the following sources:
Licenses and Permits. The City charges certain permits, licenses and fees for the cost recovery of providing current planning, building inspection, recreation and other municipal services.
Fines, Forfeitures and Penalties. These revenues include parking citations and other fines for municipal code violations.
Impact of COVID -19 Pandemic on Other Revenue Sources . The City’s other revenue sources have been relatively unimpacted by the COVID-19 Pandemic.
No Material Reliance on State Revenues
The City does not rely on the State for a material amount of revenues. There can be no assurance that future State budget difficulties will not adversely a ffect the City’s revenues or its ability to make the Lease Payments when due. See “STATE BUDGET INFORMATION.”
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OTHER FINANCIAL INFORMATION
Labor Relations
Currently 80 permanent City employees are covered by negotiated agreements as detailed in the table below. The City also employs seven additional employees unrepresented by a collective bargaining unit for a total of 87 employees in total.
Table 12
CITY OF MARINA
NEGOTIATED EMPLOYEE AGREEMENTS
Contract Number of
Bargaining Unit Expiration Date Employees
Marina Employee Association (MEA) 6/30/2020(1) 31
Mid-Management Employee Association (MMEA) 6/30/2023 5
Marina Professional Fire Fighters Association (MPFFA) 6/30/2023 15 Marina Public Safety Officer Association (MPOA) 6/30/2023 26 Marina Public Safety Mid-Management Association (MPSMA) 6/30/2023 3 Total 80
Source: City of Marina
(1) The agreement between the MEA and the City is currently under renegotiation.
Risk Management
General Liability. The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City obtains insurance coverages.
The City purchases liability, property, errors and omissions, and workers’ compensation insurance from the Monterey Bay Area Self Insurance Authority (“MBASIA”), a risk -sharing program. Under this program, coverage is provided for up to a maximum of $29,000,000 for each general liability claim less the City’s deductible of $10,000. Statutory coverage is provided for workers’ compensation claims. The City is assessed a contribution to cover claims, operating costs, and claim settlement expenses based upon an actuarially determined rate for each coverage layer pool Additional cash contributions may be assessed on the basis of adverse loss experience. If the events of the year result in a negative risk position, the members’ annual assessment may be increased in subsequent years. The City is unable to reasona bly estimate the probability of MBASIA ending the year in a negative risk position. Refunds to members may be made if funds are determined to be surplus as a result of an actuarial study.
The City currently reports liability risk management activities in the general fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Workers compensation insurance costs are allocated to various departments proportionate to their total payroll. For the year ended June 30, 2020, the City paid a total of $1,111,994 to MBASIA for insurance coverage; $304,070 and $807,924 for liability and workers compensation insurance, respectively and did not receive a rebate from the pro gram. There were no material unpaid and uninsured claims outstanding at the beginning or end of the last two fiscal years.
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For additional information about the City’s Risk Management, see APPENDIX B —ANNUAL
COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 8.
Employee Retirement Plans
The information set forth below regarding the California Public Employees’ Retirement System (“CalPERS”) program, other than the information provided by the City regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not be construed as a representation by either the City or the Underwriter.
Plan Description. All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost- Sharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees’ Retirement System (CalPERS). The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other.) Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous risk pools.
Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors three miscellaneous rate plans. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 (age 52 for Miscellaneous Plan members if membership date is on or after January 1, 2013) with sta tutorily reduced benefits. All members are eligible for non -duty disability benefits after 5 years of service. The death benefit is one of the following: the Special Death Benefit (Safety only), the Basic Death Benefit, the 1957 Survivor Benefit, or the Op tional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
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The City’s combined contributions to its Miscellaneous and Safety Plans for the most recent is summarized in the following table.
Table 13
CITY OF MARINA
HISTORICAL PENSION CONTRIBUTIONS
Fiscal Year
Ending
June 30,
Total
Combined
Contributions
2017 $2,385,218
2018 2,524,388
2019 2,050,095
2020 2,739,136
Source: City of Marina fiscal year 2019-20 Annual Comprehensive Financial Report.
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions . For the fiscal year ended June 30, 2020, the City recognized pension expense of $4,407,964 for the combined Plans. On June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Table 14
CITY OF MARINA
DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
Fiscal Year 2019-20
Miscellaneous Safety
Deferred
Outflows
Deferred
Inflows
Deferred
Outflows
Deferred
Inflows
of Resources of Resources of Resources of Resources
Contributions subsequent to measurement date $ 952,030 — $1,787,106 — Diff. btw. actual and expected experience 432,618 $ 33,519 950,580 — Changes in assumptions 297,019 105,291 596,753 $116,456 Net diff. btw. projected and actual
earnings on investment
— 108,899 — 200,286
Differences in proportions — 344,362 191,737 248,470
Changes in employer’s portion 239,919 288 535,368 —
Total $1,921,586 $592,359 $4,061,545 $565,211
Source: City of Marina fiscal year 2019-20 Annual Comprehensive Financial Report.
For information concerning the City’s pension obligations, including descriptions of the actuarial methods and assumptions, and an explanation of the discount rate used, please see APPENDIX B —
ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 9.
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Funded Status. The following table sets forth a summary of the funding progress for the City’s combined Plans for the most recent actuarial valuation dates.
Table 15
CITY OF MARINA
HISTORICAL PENSION FUNDING PROGRESS
Fiscal Year
Ended
June 30,
Accrued
Liability
(AL)
Market
Value of
Assets
(MVA)
Unfunded
Accrued
Liability
(UAL)
Funded
Ratio
Covered
Payroll
Miscellaneous Plans
2017 $ 24,293,151 $ 18,792,670 $ 5,500,481 77.36% $ 3,331,625 2018 26,521,260 20,033,155 6,488,105 75.54 3,495,433 2019 27,765,167 20,863,744 6,901,423 75.14 3,674,653 2020 28,796,289 21,176,069 7,620,220 73.54 3,744,822
Safety Plans
2017 $ 51,108,271 $ 38,135,636 $ 12,972,635 74.62% $ 4,306,116 2018 55,945,971 40,824,254 15,121,717 72.97 3,915,595 2019 59,071,779 43,037,883 16,033,896 72.86 4,606,606 2020 62,486,481 44,931,236 17,555,245 71.91 5,258,926
Source: City of Marina CALPERS Annual Valuation Reports.
CalPERS Amortization Period Reform. On February 13, 2018, the CalPERS Board voted to shorten the period over which actuarial gains and losses are amortized from 30 years to 20 years for new pension liabilities. The new 20 -year amortization period begins with new gains or losses accrued starting with the June 30, 2019 actuarial valuations. The first payments on the new 20 -year amortization schedule will take place in 2021.
A shorter amortization period will increase annual Unfunde d Accrued Liability (“UAL”) contributions for cities that participate in CalPERS so long as CalPERS remains underfunded. The shortened amortization period will also lead to reductions of periods of negative amortization of the UAL, interest cost savings, and faster recoveries of funded status after market downturns.
Cities that participate in CalPERS will also see additional volatility in their future UAL contributions due to market performance as gains or losses will be amortized faster under the new amortization period.
The City cannot currently estimate the impact the shorter amortization period will have on its required contributions for its Miscellaneous and Safety Plans. For information concerning the Plans, including descriptions of the actuarial methods and assumptions, please see APPENDIX B— ANNUAL
COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 9.
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Other Post-Employment Benefits
Plan Description . The City administers a single -employer defined benefit post -employment healthcare plan. Employees hired prior to July 1, 2008, have the stipulated years of service, and retire directly from the City, are eligible to receive up to the Kaiser rate (family or single, depending on MOU) and the Medicare eligible rate after reaching the age of 65. This same benefit may continue to a surviving spouse depending on the retirement plan election.
Employees Covered. Membership of the plan consisted of 82 active employees, 23 inactive members entitled to but not yet receiving benefits, and 11 retirees and beneficiaries receiving benefits at June 30, 2020.
Changes In Net OPEB Liability. The following table shows the changes in the City’s net OPEB obligation to the Plan:
Table 16
CITY OF MARINA
CHANGE IN NET OPEB LIABILITY
Fiscal Year 2019-20
Service cost $ 195,708
Interest on OPEB liability 168,281
Dif. btw. actual and expected experience 371,094
Changes in assumptions (14,726)
Employer contributions (76,872)
Net changes 643,485
Net OPEB obligation, beginning of the year 4,190,706
Net OPEB obligation, end of the year $4,834,191
Source: City of Marina fiscal year 2019-20 Annual Comprehensive Financial Report.
The following table shows a three -year history of the City’s outstanding OPEB obligation and covered payroll.
Table 17
CITY OF MARINA
HISTORIC OPEB LIABILITY AND COVERED PAYROLL
Fiscal
Year Ending
June 30,
Net OPEB
Obligation
(UAAL)
Covered
Payroll
Ratio of
UAAL to
Covered
Payroll
2018 $4,093,174 $7,387,760 55.40%
2019 4,190,706 7,635,928 54.88
2020 4,834,191 7,725,967 62.57
Source: City of Marina fiscal year 2019-20 Annual Comprehensive Financial Report.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, investment returns, mortalit y, and the healthcare cost trend. Amounts
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determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.
For information concerning the City’s OPEB obligations, including descriptions of the actuarial methods and assumptions, please see APPENDIX B —ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 10
Debt Obligations
No Short-Term General Fund -Secured Obligations . The City has no outstanding short -term obligations secured by its general fund.
No Long-Term General Fund-Secured Obligations. The City has no outstanding long-term obligations secured by its general fund.
General Obligation Bonds. On May 12, 2015, the City issued its $7,640,000 City of Marina 2015 General Obligation Refunding Bonds (the “2015 GO Bonds”) to refund general obligation bonds issued by the City in 2005 t o finance the construction of the City’s library which is the subject Property under the Lease Agreement. As of May 1, 2022, the 2015 GO Bonds were outstanding in the principal amount of $6,430,000 and mature on August 1, 2035. The 2015 GO Bonds are secure d by ad valorem property tax assessed against taxable property in the City and are not payable from the City’s general fund or Measure X revenues.
Overlapping Debt
Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and effective March 1, 2022. The Debt Report is included for general information purposes only. Neither the City nor the Underwriter has reviewed the Debt Report for completeness or accuracy and neither the City nor the Underwriter makes any representation in connection therewith.
The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a public agency are payable only from the General Fund or other revenues of such public agency.
The contents of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the respective percentage of the assessed valuation of the overlapping public agencies identified in column 1 which is represented by property located in the City; and (3) the third column is an apportionment of the dollar amount of each public agency’s outstanding debt (which amount is not shown in the table) to property in the City, as determined by multiplying the total outstanding debt of each agency by the percentage of the City’s assessed valuation represented in column 2.
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Table 18
CITY OF MARINA
DIRECT AND OVERLAPPING BONDED DEBT
as of March 1, 2022
CITY OF MARINA
2021-22 Assessed Valuation: $2,853,171,334
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/22 Hartnell Joint Community College District .108% $ 271,973 Monterey Peninsula Community College District 6.623 8,707,823 Monterey Peninsula Unified School District 18.268 39,659,080 North Monterey County Unified School District .499 147,230 City of Marina 100.000 6,430,000(1)
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 55,216,106
OVERLAPPING GENERAL FUND DEBT:
Monterey County General Fund Obligations 3.711 4,814,695 Monterey County Board of Education Certificates of Participation 3.711 179,946 North Monterey County Unified School District Certificates of Participation .499 18,862 Monterey County Water Resources Agency General Fund Obligations 3.711 726,614 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT 5,740,117
Less: Monterey County supported obligations (114,302)
TOTAL NET OVERLAPPING GENERAL FUND DEBT 5,625,815
OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): 67.574-100.000% 41,727,164
GROSS COMBINED TOTAL DEBT 102,683,387(2)
NET COMBINED TOTAL DEBT 102,569,085
Ratios to 2021-22 Assessed Valuation:
Direct Debt ($6,430,000) ...................................................... 0.23% Total Direct and Overlapping Tax and Assessment Debt ................. 1.94% Gross Combined Total Debt ............................................................. 3.60% Net Combined Total Debt ................................................................ 3.59%
Ratios to Redevelopment Successor Agency Incremental Valuation ($1,089,620,399):
Total Overlapping Tax Increment Debt .......................................... 3.83%
Source: California Municipal Statistics, Inc.
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
THE CORPORATION
The Corporation is a nonprofit, public benefit corporation duly organized and existing under the laws of the State and is entitled to purchase personal and real property and to sell or lease such property, to contract for construction and improvements and to execute operating agreements regarding such property.
The Corporation was formed for the purpose of providing financial assistance to public entities by acquiring, constructing, developing and refinancing certain facilities for the use and benefit of the public. The Corporation has no liability to the Owners of the Certificates.
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STATE BUDGET INFORMATION
Information regarding the State Budget is regularly available at various State-maintained websites. The fiscal year 2021-22 State Budget and the 2022 -23 State Budget further described below can each be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” Additionally, an impartial analysis of the State’s Budgets is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City, and neither the City nor the Underwriter takes responsibility for the continued accuracy of the internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.
State Budget Process. Through the State budget process, the State enacts legislation that significantly impacts the source, amount and timing of the receipt of revenues by local agencies, including the City. As in recent years, State budget deficits can result in legislation that adversely impacts local agency budgets.
The State’s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the “Governor’s Budget”). Under State law, the annual proposed Governor’s Budget cannot provide for projected expenditures more than projected revenues and balances available from prior fiscal years. Following the submission of the Governor’s Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governo r. The Budget Act must be approved by a two - thirds majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (except for K-14 education) must be approved by a two-thirds majority vote in each House of the Legislature and be signed by the Governor. Bills containing K -14 education appropriations only require a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution.
Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
Recent State Budgets. Certain information about the State budgeting process and the State Budget is available through several State sources. A convenient source of information is the State’s website, where recent official statements for State bonds are posted. The references to internet websites shown below are shown for reference and convenience only; the information contained within the websites has not been reviewed by the City and is not incorporated herein by reference.
The State Treasurer’s Internet home page at www.treasurer.ca.gov, under the heading “Financial Information,” posts the State’s audited financial statements. In addition, the “Financial Information” section includes the State’s Rule 15c2-12 filings for State bond issues. The “Financial Information” section also includes the “Overview of the State Economy and Government, State Finances, State Indebtedness,
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Litigation” from the State’s most current Official Statement, which discusses the State budget and the state budget process in greater detail.
The State Legislative Analyst’s Office (“LAO”) prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the Legislative Analyst’s Internet home page at www.lao.ca.gov under the heading “Products.”
2021-22 State Budget
On July 12, 2021, Governor Gavin Newsom signed SB 129, legislation that reflects the majority of the State’s budget for Fiscal Year 2021 -22 (the “2021-22 Budget”). While the Governor’s initial budget projections in January 2021 projected a budget surplus of $6.0 billion, the 2021-22 Budget projects an even larger surplus of $7.2 billion caused primarily by a better -than-expected economic recovery from the COVID-19 Pandemic, two major federal relief bills, and continued stock market appreciation. In addition to amounts received already under the CARES Act, the State’s general fund will receive over $43 billion in combined recovery funds from the American Rescue Plan Act of 2021 to cover costs incurred between March 3, 2021 and December 31, 2024.
The 2021-22 Budget notes that actual general fund revenues for fiscal year 2020- 21 were $183.8 billion. Relative to the projections contained in the State’s 2020 -21 Budget, actual 2020 -21 general fund revenues reflect an increase of $53.9 billion or 41.5% over the projected totals. The 2021-22 Budget projects general fund revenues to decrease slightly from fiscal year 2020 -21 levels to $178.8 (a decrease of $5.0 billion) due in part to projected decreases of in personal income tax and corporation tax collections.
The 2021-22 Budget includes a major increase in general fund expenditures from $166.1 billion in fiscal year 2020 -21 to $196.4 billion in fiscal year 2021 -22 (an increase of $30.4 billion). The largest increases are projected to occurring in expenditures for health a nd human services and government operations. The increases in expenditures are made possible by the larger than expected budget surplus in fiscal year 2020-21. The improved revenue forecast also allows for the elimination of $2 billion in program suspensions enacted in prior budgets and allows the State to completely pay off Proposition 98 deferrals implemented in the 2020-21.
The 2021-22 Budget includes substantial contributions to the State’s reserves. The 2021-22 Budget anticipates contributions of $3.4 billion in fiscal year 2021- 22 to grow the State’s budget stabilization account/rainy day fund from $12.3 billion to $15.8 billion. The 2021-22 Budget also includes a $2.6 billion contribution to the State’s public school system stabilization account and a $450 million contribution to the State’s safety net reserve.
Due to the one- time nature of the 2020- 21 surplus, the 2021- 22 Budget prioritizes one -time spending over ongoing, allocating 85 percent of discretionary funds to one -time spending. Major new expenditures in the 2021-22 Budget include:
Golden State Stimulus and COVID -19 Pandemic Relief . The January 2021 -22 Budget included a comprehensive package of budget actions was enacted to speed needed relief to individuals, families and businesses suffering the most significant economic hardships due to the pandemic. The January 2021 -22 Budget established the Golden State Stimulus program, which provided $600 one-time payments to millions of low-income Californians; added $2.075 billion (on top of a $500 million investment) to California’s Small Business COVID-19 Relief Grant Program;
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provided certain small businesses impacted by the pandemic license renewal fee waivers; provided additional resources for critical child care services; and provided emergency financial aid for community college students, among other investments. The 2021 -22 Budget includes a major expansion to the Golden State Stimulus, providing tax refunds to middle -class families with an adjusted gross income of $75,000 or less. In total, two-thirds of Californians will benefit from $600 payments. Qualified families with dependents, regardless of immigration status, will also be eligible for an additional $500 payment.
The 2021-22 Budget also expands relief to small businesses by adding $1.5 billion to the State’s earlier $2.5 billion investment in the Small Business COVID-19 Relief Grant Program that has helped approximately 210,000 businesses stay open and keep Californians employed. In addition to $6.4 billion in state administered and direct local federal rent relief, the 2021-22 Budget also includes $2 billion to pay down unpaid utility debt, which accumulated during the pandemic.
Homelessness and Housing Affordability . The 2021- 22 Budget includes approximately $12 billion over two years to combat homelessness. Project Roomkey, first deployed during the pandemic, has helped to house homeless individuals and families, and the 2021-22 Budget includes $150 million to support transitions to permanent housing. Since the fall of 2020, Homekey has acquired and rehabilitated 6,000 units of permanent housing. Total proposed funding of $5.8 billion for Homekey will further expand the portfolio of housing, including behavioral health continuum infrastructure and housing for low -income seniors. The 2021- 22 Budget also includes $2 billion over multiple years to support local actions to address homelessness. This funding is connected to accountability metrics, such as increasing transitions of individuals to permanent supportive housing.
Health Care Equity . The 2021- 22 Budget expands Medi -Cal coverage to undocumented adults aged 50 years and older, beginning in May 2022. This proposal is designed to increase health care access and is another milestone on the path toward universal health coverage. Other equity investments in the 2021-22 Budget include Medi-Cal eligibility for postpartum individual s, doula services as a covered benefit in Medi-Cal, and subsidized zero-dollar premium plans. The 2021-22 Budget also eliminates the Medi-Cal asset limit for older adults and persons with disabilities.
Wildfire Prevention. An early action package enacted in April 2021 included $536 million ($411 million General Fund and $125 million Cap and Trade) for a broad set of investments that are currently supporting forest health and fire prevention activities. The 2021-22 Budget authorizes an additional $958 milli on ($758 million General Fund and $200 million Cap and Trade) for expenditure in the 2021 -22 fiscal year to advance wildfire prevention and forest resilience investments. This includes $500 million in general fund authorizations to accelerate into the budget year.
The 2021-22 Budget includes ongoing general fund support for 30 additional fire crews, enabling the California Department of Forestry and Fire Protection to respond to larger and more damaging wildfires throughout the fire season and complete pri ority fuel reduction projects to reduce wildfire risk in fire -threatened areas. The 2021 -22 Budget also includes significant investments in new Black Hawk helicopters and large air tankers transferred from the federal government.
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Water Resilience and Drou ght. The 2021 -22 Budget commits approximately $5.1 billion over four years to the State’s water resilience and drought preparedness and response, including investments that support safe drinking water, wastewater, and water conveyance infrastructure; water recycling and groundwater cleanup; Sustainable Groundwater Management Act grants; financial assistance to small and urban water suppliers; and water resilience multi-benefit projects.
Of this amount, $2.1 billion from the general fund over three years is set aside for water resilience investments that will be negotiated subsequent to the adoption of the 2021-22 Budget.
Zero Emissions Vehicles. The 2021- 22 Budget includes $2.7 billion in 2021 -22 and $3.9 billion ($2.98 billion general fund, $565 million Cap and Trade, and $394 million other funds) over three years for zero-emission vehicle (“ZEV”) and infrastructure investments. This will scale the zero-emission vehicle market and accelerate the state toward meeting climate and transportation goals established in the Governor’s ZEV Executive Order N-79-20 and consistent with California’s Zero Emission Vehicle Market Development Strategy.
Broadband. The 2021-22 Budget reflects a plan to increase equitable access to high -speed broadband Internet service through a $6 billion investment to expand broadband infrastructure and enhance access by constructing an open access middle mile and by funding construction of last mile projects that connect unserved households in remote areas to the middle mile.
For the additional information and the complete text of the State’s 2021-22 Budget, please see the Department of Finance website at ebudget.ca.gov and the LAO’s website at lao.ca.gov. The City can take no responsibility for the continued accuracy of the above- referenced internet address as for the or for the accuracy, completeness, or timeliness of information posted therein, and such information is not incorporated herein by reference.
20922-23 Proposed State Budget
On January 10, 2022, Governor Gavin Newsom released his proposed budget for the State’s 2022- 23 fiscal year (the “Proposed 2022-23 Budget”). The State’s economic outlook and revenue forecasts have remained strong since the adoption of the State’s 2021 -22 Budget on June 28, 2021. The Proposed 202 2- 23 Budget projects general fund revenues comparable to 2021-22 levels (a total of $197.3 billion in 2022-23 compared to $201.7 billion in 2021-22), while expenditures are projected to increase slightly by $3.1 billion over 2021-22 levels to a total of $213.1 billion.
The largest areas of general fund expenditure increases in the Proposed 2022-23 Budget over 2021- 22 expenditure levels include health and human services (an increase of $8.3 billion) and labor and workforce development (an increase of $1.2 billion). K -12 education expenditures, the single largest category of expenditures in the Proposed 2022 -23 Budget, will increase by $0.9 billion over the prior year to a total of $70.4 billion. Under the Proposed 2022-23 Budget, the State is projected to have approximately $37.7 billion in budget resiliency, comprised of budgetary reserves and surplus including $20.9 billion in the Proposition 2 Budget Stabilization Account (the Rainy Day Fund) for fiscal emergencies; $900 million in the Safety Net Reserve, $9.7 billion in the Public School System Stabilization Account, and an estimated $6.2 billion in the State’s operating reserves.
Analysis prepared by the Legislative Analysts’ Office (“LAO”), a nonpartisan office that provides fiscal and policy information and advice to the State Legislature, published on the LAO’s website on January 13, 2022, estimates that the Governor had approximately a $29 billion surplus to allocate in the Proposed
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2022-23 Budget. The LAO analysis views approximately 60 percent of that discretionary surplus, or $17.3 billion, being spent on a one-time or temporary basis for a variety of programmatic expansions, $6.2 billion to reduce revenues (such as terminating temporary limits on the ability of businesses to use net operating loss (NOL) deductions and tax credits), and $2 billion for ongoing spending increases. In addition, the LAO’s analysis notes nearly $13 billion in discretionary spending for schools and community colleges (which are constitutionally required).
The following is a summary of certain of the major discretionary spending proposals identified by the LAO analysis of the Proposed 2022-23 Budget:
Lifting Temporary Limits on Business Tax Provisions. The Proposed 2022-23 Budget proposes to end, one year early, temporary limits on the ability of businesses to use NOL deductions and tax credits to reduce their tax payments. These limits were put in place for three years at the onset of the pandemic as a solution to an anticipated $54 billion budget problem. Lifting the NOL deduction and credit limits will reduce tax revenues by an estimated $5.5 billion in 2022-23 and then, over following years, increase revenues by several hundred million dollars per year.
Workforce Training Programs. The Proposed 2022 -23 Budget allocates over $2 billion in discretionary General Fund (plus additional funding under Proposition 98) for more than 20 new, one-time workforce training proposals. These include proposals for several new training programs in clean energy fields, as well as new and expanded training programs to recruit and train teachers, social workers, nurses, community health workers, and behavioral health workers, among others. The broad aim of these proposals is to recruit and train more workers in fields that are growing or in demand. Many of the proposals also would seek to increase diversity within existing occupations.
Climate Change -Related Proposals. The Proposed 2022 -23 Budget includes numerous proposals related to climate change, some of which are presented as packages. This is in addition to full inclusion of 2022-23 funding that was agreed to by the Legislature and the Governor as part of the 2021 -22 Budget for different packages of proposals related to climate resilience, zero- emission vehicles (ZEVs), and drought.
For example, the proposed budget includes $2.1 billion that was part of a Climate Resilience package. Some of the key new climate-change proposals and packages include:
ZEV Package. The Proposed 2022 -23 Budget proposes a total of $6.1 billion over five years—$2.7 billion in 2022-23 and $3.4 billion in subsequent years—in additional funding for ZEV- related programs. This total includes $3.5 billion from the General Fund (non-Proposition 98), $1.5 billion in Proposition 98 General Fund, $676 million from the Gr eenhouse Gas Reduction Fund (GGRF), and $383 million in federal funds.
Energy Package. The Proposed 2022-23 Budget proposes a total of roughly $2 billion over two years ($938 million in 2022-23 and $1.1 billion in 2023-24), almost entirely from the General Fund, for various proposals related to clean energy and building decarbonization.
Wildfire Resilience Package. The Proposed 2022-23 Budget proposes $800 million from the General Fund over two years—$400 million in 2022-23 and 2023-24—to implement various efforts to improve forest health and make communities more resilient to future wildfires.
Drought Package. The Proposed 2022-23 Budget proposes $750 million one- time General Fund for a variety of activities to respond to current drought conditions and build the state’s
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resilience to weather future dry years. This amount includes (1) $180 million for water conservation programs, (2) $145 million to address communities experiencing water supply shortages, (3) $250 million to set aside as unspecified “contingency” funding the Governor would propose for specific drought response allocations later in the budget process, and (4) $175 million for various other drought-related activities.
Wildfire Suppression Proposals. The Governor’s budget provides augmentations for various proposals related to fire suppression. Some of the major fire protection -related proposals include:
(1) $400 million ongoing General Fund to improve the health and wellness of California Department of Forestry and Fire Protection (CalFire) firefighters; (2) $190 million General Fund in 2022-23, along with some outyear funding, for equipment such as helicop ters and fire engines; (3) $175 million in 2022-23 ($120 million in General Fund and $55 million in lease revenue bonds) for CalFire capital outlay projects, and (4) $69 million General Fund in 2022-23, increasing to $81 million ongoing, to increase the availability of year-round fire crews.
Infrastructure. The Proposed 2022-23 Budget’s major infrastructure proposals include:
Transportation. The Proposed 2022 -23 Budget proposes a total of $4.9 billion from the General Fund—$3.3 billion in 2021-22 and $1.6 billion in 2022-23—to support various transportation projects, including transit and intercity rail, active transportation, and climate adaptation. In addition, the Proposed 2022 -23 Budget includes $1.8 billion in 2021-22 and $1.9 billion 2022 -23 in new f ederal transportation funds that the state is expected to receive through formula-based transportation programs as part of the Federal Infrastructure Investment and Jobs Act (IIJA) that was enacted in November 2021.
Port Infrastructure and Goods Movement . The Proposed 2022 -23 Budget proposes $1.2 billion from the General Fund—$600 million in 2022-23 and 2023-24—for projects that improve the movement of goods on rail and roadways that serve ports, including railyard expansions and new bridges.
Health Care Access and Affordability. The two largest proposals in the Proposed 2022-23 Budget are to expand comprehensive Medi-Cal Coverage to all income-eligible undocumented immigrants and commit to addressing the affordability of health care through Covered Califo rnia programs. In addition, the Proposed 2022-23 Budget reintroduces a proposal to establish an Office of Health Care Affordability and proposes efforts to lower the cost of insulin.
Homelessness. The Proposed 2022- 23 Budget proposes $2 billion in one -time General Fund over two years intended to address near-term homelessness needs while previously authorized funding for long- term housing solutions are implemented. Specifically, the budget proposes $1.5 billion to the Department of Health Care Services’ Be havioral Health Continuum Infrastructure Program for housing support for people with behavioral health needs. Additionally, the Proposed 2022-23 Budget proposes $500 million for the Encampment Resolution Grants Program in 2022 -23 administered by the California Interagency Council on Homelessness to provide targeted grants to local governments to rehouse individuals living in encampments.
Housing Development. The Proposed 2022-23 Budget proposes $1 billion in one-time General Fund over two years to expand housing development. Specifically, the budget proposes $500 million for infill housing development, $300 million for the Affordable Housing and Sustainable Communities Program,
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$100 million to build housing on excess state sites, and $100 million to repurp ose existing commercial buildings for housing.
Affordable Housing. The Proposed 2022 -23 Budget proposes $1 billion in one -time General Fund over two years for affordable housing development. The Proposed 2022-23 Budget largely expands existing state programs related to affordable housing, including $500 million for tax credits to builders of rental housing affordable to low- income households, $200 million for mixed -income housing, $200 million to preserve affordable housing units, and $100 million to preserve affordable mobile homes.
K-14 Education. Under Proposition 98, the Proposed 2022- 23 Budget includes $102 billion in spending for K-14 education, $73.1 billion from state General Fund and $28.9 billion from local property tax revenue. As described below, the Proposed 2022-23 Budget includes a significant portion of additional funding to pay deferrals implemented in 2021 -22, return students to in -person instruction, and provide a
5.33% cost-of-living adjustment to the Local Control Funding Formula.
The LAO estimates that under the Proposed 2022 -23 Budget, the State has approximately $17.7 billion available for new spending on K- 14 programs as compared to prior years. All of the major ongoing increases for K-12 schools relate to previous commitments or i nvolve additional funding for longstanding programs.
The LAO identified spending increases allocated to the following main priorities:
$5.3 Billion Ongoing for Previous Commitments . The Proposed 2022 -23 Budget provides funding to implement several program expansions agreed upon in the 2021 -22 Budget, including $3.4 billion to accelerate the implementation of the Expanded Learning Opportunities Program, which funds summer and before/after school programs and $1.9 billion to expand Transitional Kindergarten, provide school meals for all students, reduce staffing ratios in Transitional Kindergarten classrooms, implement State Preschool rate increases, and cover community college financial aid expansions.
$4.1 Billion Ongoing for COLAs and Attendance Ch anges. The Proposed 2022 -23 Budget funds a 5.33 percent COLA for the primary K -14 funding formulas and several categorical programs. For schools, the budget anticipates a 2.19 percent decline in funded attendance but proposes to offset this decline with a new funding adjustment for districts with declining attendance. This adjustment would credit districts with their average attendance over the previous three years if it exceeds their current- and prior-year attendance.
$2.3 Billion One Time for Infrastru cture. The Proposed 2022- 23 Budget proposes $1.5 billion to replace diesel school buses with electric buses. It also provides $450 million to upgrade school kitchen infrastructure and $388 million for deferred maintenance and instructional equipment at the community colleges. Separate from these allocations, the budget also proposes to provide $2.2 billion in non-Proposition 98 General Fund for the School Facilities Aid Program ($1.3 billion in 2022-23 and $925 million in 2023-24).
$1.5 Billion One Time fo r College and Career Pathways . The Proposed 2022 -23 Budget proposes $1.5 billion to develop college and career pathways for high school students interested in technology, health care, education, and climate -related fields. The funds would be available over
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four years to support local partnerships involving schools, colleges, universities, employers, and other community organizations.
Significant Deposits Into the Proposition 98 Reserve . Proposition 2 (2014) established the Proposition 98 Reserve and set forth rules requiring deposits and withdrawals under certain conditions. Generally, the State is required to deposit Proposition 98 funding into the account when revenue from capital gains is relatively strong and the minimum guarantee is growing faster than per capita personal income. The State is required to withdraw mandatory deposits from the Proposition 98 Reserve if the minimum guarantee is not growing quickly enough to support the prior-year funding level, as adjusted for student attendance and inflati on. Under the Proposed 2022-23 Budget, by 2022-23 the cumulative balance of the Proposition 98 Reserve would be more than $9.7 billion —nearly 10 percent of the total Proposition 98 funding allocated to schools and community colleges that year. Once the balance reaches 10 percent, additional deposits are no longer required.
For additional information regarding the Proposed 2022-23 Budget, please see the Department of Finance website at ebudget.ca.gov and the LAO’s website at lao.ca.gov. The City takes no responsibility for the continued accuracy of the above -referenced internet addresses as for the or for the accuracy, completeness, or timeliness of information posted therein, and such information is not incorporated herein by reference.
Future State Budget s. The City receives a portion of its funding from the State. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the City and other cities in the State.
In addition, the City cannot predict the outcome of current and future State budget negotiations, the impact that such budgets will have on its finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures.
Current and future State budgets will be affected by national and State economic conditions and other factors over which the City has no control. See also “RISK FACTORS—Dependence on State for Certain Revenues.”
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND
APPROPRIATIONS
The constitutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.
Article XIIIA of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13 and the Jarvis -Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to the California Constitution, among other things affects the valuation of real property for the purpose of taxation in that it defines the full cash property 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 newly constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to ex ceed 2% per year, or a
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reduction in the consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage, destruction or other factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two -thirds of the votes cast by the voters voting on the proposition.
Legislation enacted by the California Legislature to implement Article XIIIA prov ides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of assessed value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness and pension liability are also applied to 100% of assessed value.
The voters of the State subsequently approved various measures which further amended Article XIIIA. One such amendment generally provides that the purchase or transfer of (i) real property between spouses or (ii) the principal residence and the first $1,000,000 of the Full Cash Value of other real property between parents and children, do not const itute a “purchase” or “change of ownership” triggering reappraisal under Article XIIIA. Other amendments permitted the State Legislature to allow persons over the age of 55 who meet certain criteria or “severely disabled homeowners” who sell their residence and buy or build another of equal or lesser value within two years in the same county, to transfer the old residence’s assessed value to the new residence. Other amendments permit the State Legislature to allow persons who are either 55 years of age or older, or who are “severely disabled,” to transfer the old residence’s assessed value to their new residence located in either the same or a different county and acquired or newly constructed within two years of the sale of their old residence.
In the November 1990 election, the voters approved an amendment of Article XIIIA to permit the State Legislature to exclude from the definition of “new construction” certain additions and improvements, including seismic retrofitting improvements and improvements utilizing earthquake hazard mitigation technologies constructed or installed in existing buildings after November 6, 1990.
Article XIIIA has also been amended to provide that there would be no increase in the Full Cash Value base in the event of reconstruction of the property damaged or destroyed in a disaster.
Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restoration of value of the damaged property.
Section 4 of Article XIIIA also provides that cities, counties and special districts cannot, without a two-thirds vote of the qualified electors, impose special taxes, which has been interpreted to include special fees in excess of the cost of providing the services or facility for which the fee is charged, or fees levied for general revenue purposes.
Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.
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Article XIIIB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the voters through their approval of Proposition 111. Article XIIIB of the California Constitution limits the annu al appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and ser vices rendered by the governmental entity. The “base year” for establishing such appropriation limit is Fiscal Year 1978 -79. Increases in appropriations by a governmental entity are also permitted (1) if financial responsibility for providing services is transferred to the governmental entity, or (2) for emergencies so long as the appropriations limits for the three years following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing services is transferred from the government entity.
Appropriations subject to Article XIIIB include generally any authorization to expend during the fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not include debt service on indebtedness existing or legally authorized as of January 1, 1979, on bonded indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an election for such purpose, appropriations required to comply with mandates of courts or the Federal government, appropriations for qualified outlay projects, and appropriations by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to any entity of government from (1) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (2) the investment of tax revenues and (3) certain State subventions received by local governments. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate “proceeds of taxes” received by the City over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years.
As amended in June 1990, the appropriations limit for the City in each year is based on the limit for the prior year, adjusted annually for changes in the costs of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is, at the City’s option, either (1) the percentage change in California per capita personal income, or (2) the percentage change in the local asse ssment roll for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in population is a blended average of statewide overall population growth and change in attendance at local school and community college (“K-14”) districts.
Article XIIIB permits any government entity to change the appropriations limit by vote of the electorate in conformity with statutory and Constitutional voting requirements, but any such voter - approved change can only be effective for a maximum of four years.
Articles XIIIC and XIIID (Proposition 218) of the California Constitution
On November 5, 1996, the voters of the State approved Proposition 218, a constitutional initiative, entitled the “Right to Vote on Taxes Act” (“Proposition 218”). Proposition 218 added Articles XIIIC and
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XIIID to the California Constitution and contained a number of interrelated provisions affecting the ability of local governments, including the City, to levy and collect both existing and future taxes and assessments, fees and charges.
Section 2 of Article XIIIC requires majority voter approval for the imposition, extension or increase of general taxes and requires two thirds voter approval for the imposition, extension or increase of special taxes. These voter approval requirements of Article XIIIC reduce the flexibility of the City to raise revenues by the levy of general or special taxes and, given such voter approval requirements, no assurance can be given that the City will be able to enact, impose, extend or increase any such taxes in the future to meet increased expenditure requirements.
Although a portion of the City’s General Fund revenues are derived from general taxes purported to be governed by Proposition 218, all of such taxes were either imposed, extended or increased prior to the effective date of Proposition 218 or 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, such as the TOT, Proposition 172 revenues, or storm water fees which support the City’s General Fund. TOT and other local taxes, assessments, fees and charges, could be subject to reduction or repeal by initiative under Proposition 218.
Section 3 of Article XIIIC expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed. Section 3 expands the initiative power to include reducing or repealing assessments, fees and charges that had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Article XIIIC to fees imposed after November 6, 1996, the effective date of Proposition 218, and absent other legal authority could result in the reduction in any existing taxes, assessments or fees an d charges imposed prior to November 6, 1996.
“Fees” and “charges” are not expressly defined in Article XIIIC or in SB 919, the Proposition 218 Omnibus Implementation Act enacted in 1997 to prescribe specific procedures and parameters for local jurisdictions in complying with Article XIIIC and Article XIIID (“SB 919”). However, on July 24, 2006, the California Supreme Court ruled in Bighorn-Desert View Water Agency v. Virjil (Kelley) (the “Bighorn Decision”) that charges for ongoing water delivery are fees and charges within the meaning Section 3 of Article XIIIC. The California Supreme Court held that such water service charges may, therefore, be reduced or repealed through a local voter initiative pursuant to Section 3 of Article XIIIC. The Bighorn Decision has been interpreted to mean that ongoing water delivery charges are also property -related fees and charges within the meaning of Article XIIID.
In the Bighorn Decision, the Supreme Court stated that nothing in Section 3 of Article XIIIC authorizes init iative measures that impose voter -approval requirements for future increases in fees or charges for water delivery. The Supreme Court stated that water providers may determine rates and charges upon proper action of the governing body and that the governing body may increase a charge which was not affected by a prior initiative or impose an entirely new charge.
The Supreme Court further stated in the Bighorn Decision that it was not holding that the initiative power is free of all limitations and was not determining whether the initiative power is subject to the statutory provision requiring that water and wastewater service charges be set at a level that will pay debt service on bonded debt and operating expenses. Such initiative power could be subject to the limitations
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imposed on the impairment of contracts under the contract clause of the United States Constitution.
Additionally, SB 919 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.
Article XIIIC also removes many of the limitations on the initiative power in matters of reducing or repealing any local tax, assessment, fee or charge. 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. “Assessments,” “fees” and “charges” are not defined in Article XIIIC, and it is unclear whether these terms are intended to have the same meanings for purposes of Article XIIIC as for Article XIIID described below. If not, the scope of the initiative power under Article XIIIC potentially could include any General Fund local tax, asse ssment, or fee not received from or imposed by the federal or State government or derived from investment income.
If the City is unable to continue to collect assessment revenues for a particular program, the program might have to be curtailed and/or funded by the City’s General Fund. Given the approval requirements imposed by Article XIIID, the City is unable to predict whether it will be able to continue to collect assessment revenues for these programs. If the City chose to fund any such programs from t he General Fund instead, the General Fund budget would be affected.
Article XIIID defines a “fee” or “charge” as any levy other than an ad valorem tax, special tax, or assessment imposed by an agency upon a parcel or upon a person as an incident of proper ty ownership, including a user fee or charge for a property-related service. A “property-related service” is defined as “a public service having a direct relationship to a property ownership” herein. Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership.
In the Bighorn Decision, the Supreme Court stated that ongoing water del ivery charges are also property- related fees and charges within the meaning of Article XIIID.
Article XIIID requires that any agency imposing or increasing any property -related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, if and to the extent that a fee or charge imposed by a local government for water service is ultimately determined to be a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fee or charge may be limited by a majority protest.
In addition, Article XIIID also includes a number of limitations applicable to existing fees and charges including provisions to the effect that (i) revenues derived from the fee or charge shall not exceed the funds required to provide the property -related service; (ii) such revenues shall not be used for any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property - related fees or charges based on potential or future use of a service are not permitted.
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Depending on the interpretation of what constitutes a “property-related fee” under Article XIIID, there could be future restrictions on the ability of the City’s General Fund to charge its enterprise funds for various services provided. In the event that fees and charges of enterprise funds cannot be appropriately increased or are reduced pursuant to exercise of the initiative power, the City may have t o decide whether to supplement any deficiencies in these enterprise funds with moneys from the General Fund or to curtail service, or both.
The interpretation and application of Proposition 218 will ultimately be determined by the courts or through implementing legislation with respect to a number of the matters described above, and it is not possible at this time to predict with certainty the outcome of such determination or the nature or scope of any such legislation.
Both Articles XIIIA and XIIIB, as well as Articles XIIIC and XIIID described above, were adopted as measures that qualified for the ballot pursuant to California’s constitutional initiative process. From time- to-time other initiative measures could be adopted, affecting the ability of the City to increase revenues and to increase appropriations.
Proposition 1A of 2004
The California Constitution and existing statutes give the legislature authority over property taxes, sales taxes and the VLF. The legislature has authority to change tax rates, the items subject to taxation and the distribution of tax revenues among local governments, schools, and community college districts. The State has used this authority for many purposes, including increasing funding for local services, reducing State costs, reducing taxation, addressing concerns regarding funding for particular local governments, and restructuring local finance.
The California Constitution generally requires the State to reimburse the local governments when the State “mandates” a new local program or higher level of service. Due to the ongoing financial difficulties of the State, it has not provided in recent years reimbursements for many mandated costs. In other cases, the State has “suspended” mandates, eliminating both responsibilit y of the local governments for complying with the mandate and the need for State reimbursements.
The 2004 Budget Act, related legislation and the enactment of Proposition 1A of 2004 (described below) dramatically changed the State-local fiscal relationship. These constitutional and statutory changes implemented an agreement negotiated between the Governor and local government officials (the “State - local agreement”) in connection with the 2004 Budget Act.
One change related to the reduction of the VLF rat e from 2% to 0.65% of the market value of the vehicle. In order to protect local governments, which had previously received all VLF revenues, the 1.35 percent reduction in VLF revenue to cities and counties from this rate change was backfilled by an increase in the amount of property tax revenues they receive. This worked to the benefit of local governments, because the backfill amount annually increases in proportion to the growth in secured roll property tax revenues, which has historically grown at a higher rate than VLF revenues. Proposition 1A of 2004 requires the State to provide local governments with equal replacement revenues.
On November 3, 2004, the voters of the State approved Proposition 1A (“Proposition 1A of 2004”). Proposition 1A of 2004 am ended the State Constitution to, among other things, reduce the Legislature’s authority over local government revenue sources by placing restrictions on the State’s access
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to local governments’ property tax, sales tax, and VLF revenues as of November 3, 20 04. Pursuant to Proposition 1A of 2004, the State is able to borrow up to 8% of local property tax revenues but only if the Governor proclaims such action is necessary due to a severe State fiscal hardship and two -thirds of both houses of the State Legislature approve the borrowing. Any amounts borrowed are required to be repaid within three years. Proposition 1A of 2004 also permits the State to borrow from local property tax revenues for no more than two fiscal years within a period of 10 fiscal years, an d only if previous borrowings have been repaid. In addition, the State cannot reduce the local sales tax rate or restrict the authority of the local governments to impose or change the distribution of the statewide local sales tax. Proposition 1A of 2004 generally prohibits the State from mandating activities on cities, counties, or special districts without providing the funding needed to comply with the mandates, and if the State does not provide funding for the activity that has been determined to be mandated, the requirement on cities, counties, or special districts to abide by the mandate is suspended. Proposition 1A of 2004 also expanded the definition of what constitutes a mandate to encompass State action that transfers to cities, counties, and special districts financial responsibility for a required program for which the State previously had partial or complete responsibility. The State mandate provisions of Proposition 1A of 2004 do not apply to schools or community colleges or to mandates relating to employee rights.
Pursuant to statutory changes made in conjunction with amendments to the fiscal year 2008 -09 State Budget Act, the Fiscal Year 2009 -10 State Budget Act and related budget legislation adopted by the State Legislature and signed by the Governor in February 2012 (collectively, the “February 2012 Budget Package”), the VLF rate increased from 0.65% to 1.15% effective May 19, 2012. Of this 0.50% increase,
0.35% will flow to the State General Fund, and 0.15% will support various law enforcem ent programs previously funded by the State General Fund.
Proposition 22
Proposition 22 (“Proposition 22”), which was approved by California voters in November 2010, prohibits the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services and prohibits fuel tax revenues from being loaned for cash -flow or budget balancing purposes to the State General Fund or any other State fund. Due to the prohibition with respect to State’s ability to take, reallocate, and borrow money raised by local governments for local purposes, Proposition 22 supersedes certain provisions of Proposition 1A of 2004. See “ – Proposition 1 A of 2004” her ein. In addition, Proposition 22 generally eliminates the State’s authority to temporarily shift property taxes from cities, counties, and special districts to schools, temporarily increase schools’ and community college districts’ share of property tax re venues, prohibits the State from borrowing or redirecting redevelopment property tax revenues or requiring increased pass -through payments thereof, and prohibits the State from reallocating vehicle license fee revenues to pay for State imposed mandates. In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with cities and counties. The LAO states that Proposition 22 will prohibit the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies.
Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehicle fuels or changing the allocations of those taxes among local government except pursuant to specified procedures involving public notices and hearings. In addition, Proposition 22 requires that the State apply the formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula in effect on June 30, 2009. The LAO anticipated that Proposition 22 would require the State to adopt alternative actions to
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address its fiscal and policy objectives, particularly with respect to short-term cash flow need. The City does not believe that Proposition 22 will have a significant impact on its revenues and expenditures.
Proposition 26
Proposition 26 (“Proposition 26”), which was approved by California voters on November 2, 2010, revises the California Constitution to expand the definition of “taxes.” Proposition 26 re-categorizes many State and local fees as taxes and specifies a requirement of two-thirds voter approval for taxes levied by local governments.
Proposition 26 requires the State obtain the approval of two -thirds of both houses of the State Legislature for any proposed change in State statutes, which would result in any taxpayer paying a higher tax. Proposition 26 eliminates the previous practice whereby a tax increase coupled with a tax reduction that resulted in an overall neutral fiscal effect was subject only to a majority vote in the State Legislature.
Furthermore, pursuant to Proposition 26, any increase in a fee above the amount needed to provide the specific service or benefit is deemed to b e a tax and the approval thereof will require such two -thirds vote of approval to be effective. In addition, for State imposed fees and charges, any fee or charge adopted after January 1, 2010 with a majority vote of approval of the State Legislature which would have required a two- thirds vote of approval of the State Legislature if Proposition 26 were effective at the time of such adoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote.
Proposition 26 amends Article XIII C of the State Constitution to state that a “tax” means a levy, charge or exaction of any kind imposed by a local government, except (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provid ed to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, pe rforming investigations, inspections and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property or the purchase rental or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (6) a charge imposed as a condition of property development; or (7) assessments and property related fees imposed in accordance with the provisions of Proposition 218.
Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by local government on or after November 3, 2010, unless exempted, as stated above. Accordingly, fees adopted prior to that date are not subject to the measure until they are increased or extended or if it is determined that an exemption applies. As of the date hereof, none of the City’s fees or charges has been challenged in a court of law in connection with the requirements of Proposition 26.
If the local government specifies how the funds from a proposed local tax are to be used, the approval will be subject to a two-thirds voter requirement. If the local government does not specify how the funds from a proposed local tax are to be used, the approval will be subject to a fifty percent voter requirement. Proposed local government fees that are not subject to Proposition 26 generally are subject to the approval of a majority of the governing body. In general, proposed property charges will be subject to a
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majority vote of approval by the governing body although certain proposed property charges will also require approval by a majority of the affected property owners.
Proposition 19
On November 3, 2020, State voters approved a constitutional amendment entitled Property Tax Transfers, Exemptions and Revenue for Wildfire Agencies and Counties Amendment (“Proposition 19”), which will: (i) expand special rules that give property tax savings to homeowners that are over the age of 55, severely disabled, or whose property has been impacted by a natural disaster or contamination, when they buy a different home; (ii) narrow existing special rules for inherited properties; and (iii) broaden the scope of legal entity ownership changes that trigger reassessment of properties. The City cannot make any assurance as to what effect the implementation of Proposition 19 will have on assessed valuation of real property in the City.
Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID, Propositions 1A, 22, 26 and 19 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, which may place fu rther limitations on the ability of the State, the City or local districts to increase revenues or to increase appropriations which may affect the City’s revenues or its ability to expend its revenues.
RISK FACTORS
This section provides a general overview of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in evaluating an investment in the Certificates. This section is not meant to be a comprehensive or definitive discussion of the risks associated with an investment in the Certificates, and the order in which this information is presented does not necessarily reflect the relative importance of various risks. Potential investors in the Certificates are advised to consider the following factors, among others, and to review this entire Official Statement to obtain information essential to the making of an informed investment decision. Any one or more of the risk factors discussed below, among others, could lead to a decrease in the market value and/or in the marketability of the Certificates. There can be no assurance that other risk factors not discussed herein will not become material in the future.
Lease Payments Are Not Debt
The obligation of the City to make the Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to make Lease Payments does not constitute a debt of the City, the State or an y political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction.
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 Lease Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that, for so long as the Property is available for its use, it will make the necessary annual appropriations within its bu dget for the Lease Payments. The City is currently liable and may become liable on other obligations payable from general
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revenues, some of which may have a priority over the Lease Payments, or which the City, in its discretion, may determine to pay prior to the Lease Payments.
The City has the capacity to enter into other obligations payable from the City ’s general fund, without the consent of or prior notice to the Owners of the Certificates . To the extent that additional obligations are incurred by the City, the funds available to make Lease 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 municipal services before making Lease Payments. The same result could occur if, because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. The City’s appropriations, however, have never exceeded the limitations on appropriations under Article XIIIB of the California Constitution. For information on the City ’s current limitations on appropriations, see “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS–Article XIIIB of the California Constitution.”
Valid and Binding Covenant to Budget and Appropriate
Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to include Lease Payments due in its annual budgets and to make necessary appropriations for all such payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials 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 such covenants. A court, however, in its discretion may decline to enforce such covenants. Upon delivery of the Certificates, Special Counsel will render its opinion (substantially in the form of APPENDIX D–FORM OF SPECIAL COUNSEL OPINION) to the effect that, subject to the limitations and qualifications described therein, the Lease Agreement constitutes a valid and binding obligation of the City.
Additional Obligations of the City
The Lease Agreement does not prohibit the City from incu rring additional lease and other obligations payable from the City ’s General Fund. In that regard, the City may, from time to time, incur general fund obligations to finance public improvements (see “OTHER CITY FINANCIAL INFORMATION—Long-Term General Fund -Secured Obligations ”), which may also include lease obligations payable from its general fund.
Cash Management
The City has numerous internal or external means to manage its cash flow, including but not limited to interfund borrowing, intrafund borrowing and tax and revenue anticipation notes which may be employed to the extent the City Council is required to make budget adjustments in order to maintain a balanced budget. If the City does not take required actions and the budget remains out of ba lance, the cash requirements of the City may exceed available cash flow. The ability of the City to borrow on an interim basis to meet any cash shortfalls also may be limited if the budget remains out of balance for a sustained period of time. The City has the legal authority to issue “warrants” in place of cash to meet various types of expenditures or appropriations as an additional means to manage its cash flow. See “CITY FINANCIAL INFORMATION.”
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Abatement
In the event of loss or substantial interference in the use and possession by the City of all or any portion of the Property caused by material damage, title defect, destruction to or condemnation of the Property, Lease Payments will be subject to abatement. In the event that such component of the Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the City ’s rental interruption insurance will be available in lieu of Lease Payments, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such component of the Property or prepayment of the Certificates, there could be insufficient funds to make payments to Owners in full. Reduction in Lease Payments due to abatement as provided in the Lease Agreement does not constitute a default thereunder.
It is not possible to predict the circumstances under which such an 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 Certificates. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the Certificates.
No Acceleration Upon Default
In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease Agreement and the Trustee is not empowered to foreclose or sell a fee simple interest in the Property and use the proceeds of such sale to prepay the Certificates or pay debt service thereon. Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest as described below. See “—Limitations on Remedies.”
Risk of Uninsured Loss
The City covenants under the Lease Agreement to maintain certain insurance policies on the Property. See “SOURCE OF PAYMENT FOR THE CERTIFICATES—Insurance.” These insurance policies do not cover all types of risk, and the City need not obtain insurance except as available on the open market from reputable insurers. The City does not insure its facilities against the risk of earthquake.
Additionally, the Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Lease Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s casualty and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Property will be sufficient to prepay the Certificates.
Under the Lease Agreement the City may obtain casualty insurance which provides for a deductible up to $250,000. Should the City be required to meet such deductible expenses, the availabi lity of general fund revenues to make Lease Payments may be correspondingly affected.
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Eminent Domain
If the Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease Agreement will cease as of the day possession is taken. If less than all of the Property is taken permanently, or if the Property or any part thereof is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect and will not be terminated by virtue of such taking, and (b) there will be a partial abatement of Lease Payments as a result of the application of net proceeds of any eminent domain award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property. The City covenants in the Lease Agreement to contest any eminent domain award which is insufficient to either: (i) prepay the Lease Payments in whole, if all the Property is condemned; or (ii) prepay a pro rata share of Lease Payments, in the event that less than all of the Property is condemned.
COVID-19 Pandemic
The COVID-19 Pandemic has affected travel, commerce, investment values, and financial markets globally, and is widely expected to continue to affect economic output worldwide and within the City, the County, and the State. While federal and state governments (including California) have enacted legislation and taken executive actions seeking to mitigate the negative public health and economic impacts of the Pandemic, no assurances can be given that these interventions will have the intended effects.
Negative economic impacts resulting from the COVID -19 Pandemic may or may not reduce or otherwise negatively affect revenues to the City’s General Fund including declines in transient occupancy taxes as discussed under “CITY FINANCIAL INFORMATION.” The ultimate impact of the COVID-19 Pandemic on the City’s operations and finances is unknown. The City has developed what it believes to be reasonable budgeted projections of the magnitude of these impacts on its revenues and on its expenditures, but the COVID-19 Pandemic is ongoing, and the City cannot predict how and when it will be resolved.
As of the date of this Official Statement, the City does not believe that the impacts of the COVID- 19 Pandemic will prevent the City from making the Lease Payments when due.
Additional information about the State’s and the County’s current status can be found at the State’s website, www.covid19.ca.gov and at the County’s website www.co.monterey.ca.us for up- to-date information regarding COVID -19 restrictions in place in the State and in the County. Reference to the State’s and the County’s website is included in this Official Statement for general information only and information on such website is not included in this Official Statement by reference to such website.
Concentration of Revenue Sources
The City relies on, among other things, a 1.5% voter -approved sales tax known as Measure N .
Measure N was approved by the voters of the City voting in an election in November 6, 2018. The business license tax is a major revenue source for the City and has historically accounted for approximately 10-15% of the City’s total General Fund revenues in recent years. Measure N sales and use taxes will sunset on March 31, 2034 if Measure N’s sales tax is not otherwis e extended by the voters of the City beforehand.
Failure to extend Measure N beyond 2034 could materially and adversely impact the City’s revenues and could affect the City’s ability to make the Lease Payments when due. Such a result could be affected by
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events entirely outside of the City’s control. For additional discussion of sales and use taxes and of Measure N, see “CITY FINANCIAL INFORMATION –Primary Sources of General Fund Revenues and –Sales and Use Taxes.”
Hazardous Substances
One of the most serious risks in terms of the potential reduction in the value or use of a parcel of property is a claim with regard to a hazardous substance. In general, the owners, lessors and/or lessees of a parcel of real property may be required by law to remedy cond itions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well -known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in application. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has contributed to or caused contamination with the hazardous substances. The effect, therefore, should property in the City be affected by a hazardous substance, is to reduce both marketability and the value of property by the costs of remedying the condition. While the City is not currently aware of any such condition, it is possible that such hazardous substance conditions do currently exist and that the City has not been made aware of their existence.
Natural Calamities
General. From time to time, the City has been and could be subject to natural calamities, including, but not limited to, earthquake, flood or wildfire, that may adversely affect economic activity in the City, and which could have a negative impact on City finances. There can be no assurance that the occurrence of any natural calamity would not cause substantial damage to persons, property and structures in the City and could have a substantial negative effect on the City’s General Fund.
Flood. Like most of the State, the City is subject to unpredictable seasonal rainfall, with periods of intense and sustained precipitation occurring every few years. Certain of the areas in the City adjacent to water features are classified by FEMA as being in the AE flood zone and the A flood zone, flood insurance rate zone that correspond to the 1% annual chance floodplain and 1% annual chance shallow floodplain, respectively. Property owners in AE and A flood risk zones who have federally backed mortgages are required to purchase flood insurance as a condition of that loan. Additionally, areas adjacent to the Salinas River, which runs to the north of the City, are also at risk of damage from flood conditions. FEMA flood maps can be viewed at the FEMA Flood Map Service Center at https://msc.fema.gov/portal/home. Such website is not incorporated herein by this reference.
Drought. The State is currently experiencing drought conditions. The Governor of the State has issued targeted emergency drought proclamations to nearly all counties across the State, including the County. The emergency drought proclamations allow f or the set -aside of certain state regulatory requirements until the subsistence of drought conditions. The City and the County are presently experiencing drought conditions and are likely to continue to be effected by drought conditions in the future.
Seismic. Like most regions in California, the City is in an area of significant seismic activity. Soils in lowland areas away from major faults may also be unable to support buildings during major earthquakes.
Landslides are likely on hillsides during major earthquakes. Damage resulting from such an event could have a material adverse effect on the City’s financial condition as well, through unexpected recovery costs and reduced tax and other revenues.
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Wildfire. In recent years, wildfires have caused extensive damage to cities throughout the State. In some instances, entire neighborhoods have been destroyed. Areas effected by wildfires may be more prone to flooding and mudslides. In addition to the direct impact of wildfires on health and safety and property damage, the smoke from wildfires has negatively impacted the quality of life in the City and may have short- term and future impacts on residential and commercial activity in the City.
As the devastating Soberanes Fire in 2016 and Basin Complex fire of 2008 attest, wildfire is a serious hazard in Monterey County and for the City of Marina. The historical average return interval between large wildfires (>10,000 acers) in Monterey County is 7.3 years, with a minimum return interval as short as 1 year, and a maximum as long as 16 years. The greatest potential wildfire risk to the City of Marina is from the Bureau of Land Management’s Fort Ord National Monument, which is in close proximity to the southern end of the city. Severe weather conditions could make this landscape consisting of fuel-rich maritime chaparral and oak woodlands highly susceptible to wildfire outbreak. Several studies have indicated that the risk of wildfire will increase with climate change. While the models differ, there is a general pattern for wildfires in California to start earlier in the season, continue later in the year, and occur with increasing frequency.
While the City believes the possibility of wildfire damage within the City is low, there can be no assurances that wildfires will not occur within the City or the County or that the City will not be negatively impacted by sustained smoky conditions caused by wildfires. Damage resulting from such an event could have a material adverse effect on the City’s financial condition as well, through unexpected recovery costs and reduced tax and other revenues.
Climate Change/Sea Level Rise. Climate change caused by human activities may have adverse effects on the City and its finances. Climate change can also result in more variable w eather patterns throughout the State, rising ocean water levels, increased risk of flooding, changes in salinity and tidal patterns, coastal erosion, drought, water restrictions and vegetation changes. Portions of the City are located adjacent to Monterey Bay and are likely to be negatively impacted by these and other results of climate change. The City considers the potential effects of climate change in its planning.
The City’s coastline has one of the highest rates of erosion in California. The high rates of erosion have largely been caused by a long standing coastal sand mine. In 2017, a monumental settlement agreement between the City, the California Coastal Commission (“CCC”), the California State Lands Commission (“CSLC”), and CEMEX, the owner of the sand mine laid out the phased end and remediation to nearly a century of sand mining activities. In accordance with the terms of the settlement agreement, CEMEX ceased all operations at the sand mine in December, 2021.
As the City’s coastline has a most ly unique dune topography, the large distances to inland development mean that most developed property in the City faces minimal exposure to coastal hazards and sea level rise. Coastal dune erosion hazards, as described above, are the biggest threat to the City. The primary impact from this erosion will be to open space, recreation, and dune habitats along Marina State Beach. Infrastructure projected to be eroded and damaged by sea level rise along the coast include certain Marina Coast Water District facilities, some portions of the City’s wastewater conveyance system, and the Sanctuary Beach Resort. With ~5 feet of sea level rise, coastal wave flooding could begin to cause temporary flood impacts inland of Highway 1 during high tides and a rare 1% annual chance (aka 100 year) storm wave events.
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MAP OF THE CITY OF MARINA AND ITS COSTAL AREAS
Source: 2019 City of Marina Existing Conditions and Sea Level Rise Issues Report.
City of Marina Local Costal Program (LCP). The California Coastal Act requires local governments in the State’s Coastal Zone to create and implement Local Coastal Programs (“LCPs”). Each LCP consists of a Coastal Land Use Plan and an Implementation Plan. Using the California Coastal Act, the Cali fornia Coastal Commission (“CCC”) and local governments manage coastal development, including addressing the challenges presented by coastal hazards like storms, flooding, and erosion. Sea level rise and the changing climate present new management challenges with the potential to significantly threaten many coastal resources, including both natural and public access.
In order to address sea level rise and associated hazards in the City’s LCP project, the City and its consultant team prepared a 2019 City of Marina Existing Conditions and Sea Level Rise Issues Report (the “SLR Report”). The purpose of the SLR Report was to provide technical analysis using climatic modeling to support the City’s effort to incorporate a range of coastal and climate change hazards into the City’s planning and regulatory processes to assist the City in making informed decisions regarding land use and development standards from the project level to the plan level. The SLR Report considered potential impacts from coastal hazards exacerbated by various elevations of sea level rise (9 inches, 28 inches, and 63 inches) to a range of infrastructure and natural resource sectors. The SLR Report also lays out a framework over the next few decades for when office buildings, a sewer pump, and an aging water treatment facility should consider moving away from the sea.
The City’s SLR Report and Local Cost al Plan can be viewed on the City’s website at:
https://www.cityofmarina.org/888/Local-Coastal-Program-Update. Such website is not incorporated herein by this reference.
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Projections of the impacts of global climate change on the City are complex and depen d on many factors that are outside the City’s control. The various scientific studies that forecast the amount and timing of adverse impacts of climate change are based on assumptions contained in such studies, but actual events may vary materially. Also, the scientific understanding of climate change and its effects continues to evolve.
Accordingly, the City is unable to forecast with certainty when and where the adverse impacts of climate change will occur or the extent of such impacts. While the impacts of climate change may be mitigated by the City’s past and future investment in adaptation strategies, the City can give no assurance about the net effects of those strategies and whether the City will be required to take additional adaptive mitigation measures.
Potential Impact of State Financial Condition on the City
During the 2008-09 recession, the State faced a structural deficit that resulted in substantial annual deficits and reductions in expenditures. Although the State has had a budget surplus in the more recent fiscal years, according to the State there remain a number of major risks and pressures that threaten the State’s financial condition, including the threat of recession, potential changes to federal fiscal policies and unfunded long- term liabilities of more than $200 billion related to pensions and other post -retirement benefits. These risks and financial pressures could result in future reductions or deferrals in amounts payable to the City. The State’s financial condition and budget policies affect local public agencies throughout California. To the extent that the State budget process results in reduced revenues to the City, the City will be required to adjust its budget. State budget policies can also impact conditions in the local economy and could have an adverse effect on the local economy and the City’s major revenue sources.
No prediction can be made by the City as to whether the State will encounter budgetary problems in future fiscal years, and if it were to do so, it is not clea r what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors over which the City has no control (see “STATE BUDGET INFORMATION”). The ability of the state to divert fu nds from the City has been limited by Proposition 1A and Proposition 22, which are discussed herein. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS.”
Increased Internet Use May Reduce Sales Tax Revenues
The increasing use of the Internet to conduct electronic commerce may affect the levels of the sales tax revenues collected by the City and the County. Online sales of physical products by businesses located in the State, and online sales of physical products delivered to the State by businesses located outside of the State are generally subject to the sales taxes. However, the City believes that many of these transactions may avoid taxation either through error or deliberate non-reporting and this potentially reduces the amounts of the sales tax revenues collected. As a result, the more that the Internet is used to conduct electronic commerce, along with the failure to collect sales taxes on such online purchases, the more that the City may experience reductions sales tax collections. On September 23, 2011, Governor Jerry Brown signed into law a settlement with Amazon.com Inc., one of the largest internet retailers in the State. As a result, beginning
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in September 2012, Amazon started collecting taxes from its online sale s in the State, to remit to the California Department of Tax and Fee Administration (“CDTFA”). On June 21, 2018, in the case of South Dakota v. Wayfair, the Supreme Court of the United States ruled that state and local governments have the authority to require out-of-state vendors with no local physical presence in a state to collect and remit sales taxes to state and local governments. As of April 1, 2019, retailers located outside of the State are required to register with CDTFA, collect the California use tax and pay the tax to CDTFA based on the amount of their sales into California, even if they do not have a physical presence in the state, with exceptions for retailers with California sales below certain volume and dollar thresholds. The City and the County cannot predict the degree that the collection of the California use tax on such retailers will affect the collection of sales taxes on a going forward basis.
Pension Benefit Liability
Many factors influence the amount of the City’s pension benefit liabilities, including, without limitation, inflationary factors, changes in statutory provisions of CalPERS retirement system laws, changes in the level of benefits provided or in the contribution rates of the City, increases or decreases in the number of covered employees, changes in actuarial assumptions or methods (including but not limited to the assumed rate of return), mortality rates, and differences between actual and anticipated inves tment experience of CalPERS. Any of these factors could give rise to additional liability of the City to its pension plans as a result of which the City would be obligated to make additional payments to its pension plans in order to fully fund the City’s obligations to its pension plans.
Risks Related to Cyber Security
The City relies on computers and technology to conduct its operations. The City and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, mal ware and other forms of technology attacks. The City owns and operates its own enterprise class data network serving the municipal city government and its operations. The City has retained information technology professionals to support, maintain and protect these operations locally in a purpose -built and physically secure environment. This network and its operations are governed by and in compliance with all applicable governmental regulations as well as the City’s own administrative regulations. Within the City’s operations and guidance is an active cyber- security program designed to protect from, and to quickly identify and mitigate, a multitude of complex security threats. While no network is completely immune from all possible compromise, the City exercises its due diligence in protecting the data it possesses and the systems it operates. To date, there have been no significant cyber-attacks on the City’s computers and technologies.
[DISCUSS. ANY CYBER POLICY OR INSURANCE?]
While the City routinely mai ntains its technology systems and continuously implements new information security controls, no assurances can be given that the City’s security and operational control measures will be successful in guarding against all cyber threats and attacks. The results of any attack on the City’s computer and technology could negatively impact the City’s operations, and the costs related to such attacks could be substantial.
Bankruptcy
The City is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the “Bankruptcy Code”). However, pursuant to Chapter 9 of the
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Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. A City bankruptcy petition could have a material adverse effect on the payment of the Certificates.
The following paragraphs present a discussion of certain potential consequences surrounding a potential City bankruptcy. It is not intended to be an exhaustive discussion of all pote ntial adverse consequences or potential outcomes.
In the event the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding.
Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court -approved secured debt which may have a priority of payment superior to that of Owners of Certificates; and (iv) the possibility of the adoption of a plan for the adjustment of the City ’s debt (a “Plan”) without the consent of the Trustee or all of the Owners of Certificates, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable.
In addition, the City could either reject the Lease Agreement or assume the Lease Agreement despite any provision of the Lease Agreement which makes the bankruptcy or insolvency of the City an event of default thereunder. In the event the City rejects the Lease Agreement, the Trustee, on behalf of the Owners of the Certificates, would have a pre -petition claim that may be limited under the Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of the Certificates.
Moreover, such reje ction would terminate the Lease Agreement and the City’s obligations to make payments thereunder.
Early Redemption Risk
Early redemption of the Certificates may occur in whole or in part without premium, on any date if the Property or a portion thereof is lost, destroyed or damaged beyond repair or taken by eminent domain or from the proceeds of title insurance (see “THE CERTIFICATES—Redemption”).
Limitations on Remedies
The enforcement of any remedies provided in the Lease Agreement and the Trust Agreement could prove both expensive and time consuming. Although the Lease Agreement provides that if the City defaults the Trustee may enter the Property and re-let the Property, portions of the Property may not be easily recoverable, and even if recovered, could be of little value to others because of the Property’s specialized nature. Additionally, the Trustee may have limited ability to re-let the Property to provide a source of rental payments sufficient to pay the principal of and interest with respect to the Certificates so as to preserve the tax-exempt nature of interest with respect to the Certificates. Furthermore, due to the governmental nature of the Property, it is not certain whether a court would permit the exercise of the remedy of re-letting with respect thereto.
Alternatively, the Trustee may terminate the Lease Agreement and proceed against the City to recover damages pursuant to the Lease Agreement. Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest.
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The rights of the Owners of the Certificates are subject to certain limitations on legal remedies against cities, redevelopment agencies and other governmental entities in the State, including but not limited to a limitation on enforcement against funds that are otherwise needed to serve the public welfare and interest. Additionally, the rights of the Owners of the Certificates may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, or similar laws limiting or otherwise affecting the enforcement of creditors’ rights generally (as such laws are now or hereafter may be in effect), (ii) equity principles (including but not limited to concepts of materiality, reasonableness, good faith and fair dealing) and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or law, (iii) the exercise by the United States of America of the powers delegated to it by the Constitution, and (iv) the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs bankruptcy proceedings for public agencies, there are no involuntary petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners, the Trustee and the Corporation could be prohibited or severely restricted from taking any steps to enforce their rights under the Lease Agreement and from taking any steps to collect amounts due from the City under the Lease Agreement.
Special Counsel has limited its opinion as to the enforceability of the Lease Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditor ’s rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Certificates are not subject to acceleration in the event of the breach of any covenant or duty under the Lease Agreement. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.
No Reserve Fund
No debt service reserve fund has been established with respect to the Certificates.
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or sale of the Certificates, and from time to time there may be no market for them, depending upon prevailing market conditions, the financial condition or market position of firms who may make the secondary market and the financial condition of the City.
Changes in Law
There can be no assurance that the electorate of the State will not at some future time adopt additional initiatives or that the Legislature will not enact legislation that will amend the laws or the Constitution of the State resulting in a reduction of the general fund revenues of the City and consequently, having an adverse effect on the security for the Certificates.
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ABSENCE OF LITIGATION
At the time of delivery of and payment for the Certificates, the City and the Corporation will certify that there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court or regulatory agency, public board, or body pending or threatened against the City or the Corporation affecting their existence or the titles of their respective officers or seeking to restrain or to enjoin the issuance, sale, or delivery of the Certificates, or the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, any agreement entered into between the City and any purchaser of the Certificates, the Lease Agreement, the Trust Agre ement, the Assignment Agreement, the Site and Facility Lease or any other applicable agreements or any action of the City or the Corporation contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official State ment or any amendment or supplement thereto, or contesting the powers of the City or the Corporation or their authority with respect to the Certificates or any action of the City or the Corporation contemplated by any of said documents, nor, to the knowledge of the City or the Corporation, is there any basis therefor. There is no litigation pending or threatened against the City that could affect the City’s ability to make the Lease Payments.
CONTINUING DISCLOSURE
Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”), the City has agreed, for the benefit of holders of the Certificates, to provide certain financial information and operating data relating to the City relating to the Certificates (the “Annual Reports”) and its audited financial statements, by not later than March 31 of each year commencing with the report for the 2020-21 fiscal year (the “Annual Information ”), and to provide notices of the occurrence of certain events. The Annual Reports, audited financial statements and notices of events will be filed by the City with the Municipal Securities Rulemaking Board (the “MSRB”), via its Electronic Municipal Market Access ( “EMMA”) system. The nature of the information to be provided in the Annual Reports and the notices of events is set forth in APPENDIX G—FORM OF CONTINUING DISCLOSURE CERTIFICATE.
During the last five years, all Annual Reports were filed on time. The City’s 2018 audited financial statements were filed late on August 21, 2019, its 2020 audited financial statements were filed late on July 2, 2021, and its 2021 audited financial statements were file late on _______, 2022, although unaudited financial statements for those years were filed on time. All other audited financial statements during the last five years were filed on time.
MUNICIPAL ADVISOR
KNN Public Finance, LLC, Berkeley, California (the “Municipal Advisor”), is an independent financial advisory firm registered as a “Municipal Advisor” with the Securities Exchange Commission and Municipal Securities Rulemaking Board. The Municipal Advisor does not underwrite, trade or distribute municipal or other public securities. The Municipal Advisor has assisted the District in connection with the planning, structuring, sal e, and delivery of the Certificates. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification of or to assume responsibilities for the accuracy, completeness, or fairness of the information contained in this Official Statement not provided by the Municipal Advisor. The fees of the Municipal Advisor in respect to the Certificates are contingent upon their sale and delivery.
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LEGAL MATTERS
All legal matters in connection with the execution and delivery of the Certificates are subject to the approval of Quint & Thimmig LLP, Larkspur, California, Special Counsel. Special Counsel’s opinion with respect to the Certificates will be substantially in the form set forth in APPENDIX D— FORM OF SPECIAL COUNSEL OPINION. Certain legal matters will also be passed on for the City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel, and by the City Attorney. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, Newport Beach, California.
The fees and expenses of Special Counsel, Disclosure Counsel and Underwriter’s Counsel are contingent upon the delivery of the Certificates.
TAX MATTERS
Federal tax law contains a number of requirements and restrictions which apply to the Certificates, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters.
The City has covenanted to comply with all requirements that must be satisfied in order for the interest with respect to the Certificates to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest with respect to the Certificates to become includible in gross income for federal income tax purposes retroactively to the date of delivery of the Certificates.
Subject to the City’s compliance with the above -referenced covenants, under present law, in the opinion of Special Counsel, interest with respect to the Certificates is excludable from the gross income of the owners thereof for federal income tax purposes and is not i ncluded as an item of tax preference in computing the federal alternative minimum tax under the Internal Revenue Code of 1986, as amended (the “Code”).
In rendering its opinion, Special Counsel will rely upon certifications of the City with respect to certain material facts within the City’s knowledge. Special Counsel’s opinion represents its legal judgment based upon its review of the law and the facts t hat it deems relevant to render such opinion and is not a guarantee of a result.
Ownership of the Certificates may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax -exempt obligations. Prospective purchasers of the Certificates should consult their tax advisors as to applicability of any such collateral consequences.
The issue price for original issue discount (as further discussed below) and market dis count purposes (the “OID Issue Price”) for each maturity of the Certificates is the price at which a substantial amount of such maturity of the Certificates is first sold to the public (excluding bond houses and brokers and similar persons or organizations acting in the capacity of underwriters, placement agents or
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wholesalers). The OID Issue Price of a maturity of the Certificates may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page hereof.
If the OID Issue Price of a maturity of the Certificates is less than the principal amount payable at maturity, the difference between the OID Issue Price of each such maturity, if any, of the Certificates (the “OID Certificates”) and the principal amount payable at maturity is original issue discount.
For an investor who purchases an OID Certificate in the initial public offering at the OID Issue Price for such maturity and who holds such OID Certificate to its stated maturity, subject to the conditi on that the City complies with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID Certificate constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID Certificate at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum t ax for individuals under the Code; and (d) the accretion of original issue discount in each year may result in certain collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Owners of OID Certificates should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID Certificates.
Owners of Certificates who dispose of Certificates prior to the stated maturity (w hether by sale, redemption or otherwise), purchase Certificates in the initial public offering, but at a price different from the OID Issue Price or purchase Certificates subsequent to the initial public offering should consult their own tax advisors.
If a Certificate is purchased at any time for a price that is less than the Certificate’s stated redemption price at maturity or, in the case of an OID Certificate, its OID Issue Price plus accreted original issue discount reduced by payments of interest included in the computation of original issue discount and previously paid (the “Revised Issue Price”), the purchaser will be treated as having purchased a Certificate with market discount subject to the market discount rules of the Code (unless a statutory d e minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Certificate is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser’s election, as it accrues. Such treatment would apply to any purchaser who purchases an OID Certificate for a price that is less than its Revised Issue Price even if the purchase price exceeds par. The applicability of the market discount rules may adversely affect the liquidity or s econdary market price of such Certificate.
Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Certificates.
An investor may purchase a Certificate at a price in excess of its stat ed principal amount. Such excess is characterized for federal income tax purposes as “bond premium” and must be amortized by an investor on a constant yield basis over the remaining term of the Certificate in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax -exempt bond. The amortized bond premium is treated as a reduction in the tax -exempt interest received. As bond premium is amortized, it reduces the investor’s basis in the Certificate. Investors who purchase a Certificate at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Certificate’s basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Certificate.
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There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the f ederal tax matters referred to above or affect the market value of the Certificates. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to Certificates delivered prior to enactment. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal tax legislation. Special Counsel expresses no opinion regarding any pending or proposed federal tax legislation.
The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax -exempt obligations to determine whether, in the view of the Service, interest on such tax -exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Certificates. If an audit is commenced, under current procedures the Service may treat the City as a taxpayer and the Owners may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Certificates until the audit is concluded, regardless of the ultimate outcome.
Payments of interest on, and proceeds of the sale, redem ption or maturity of, tax- exempt obligations, including the Certificates, are in certain cases required to be reported to the Service.
Additionally, backup withholding may apply to any such payments to any Certificate owner who fails to provide an accurate Form W -9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Certificate owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income ta x returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes.
In the further opinion of Special Counsel, interest with respect to the Certificates is exempt from California personal income taxes.
Ownership of the Certificates may result in other state and local tax consequences to certain taxpayers. Special Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Certifi cates. Prospective purchasers of the Certificates should consult their tax advisors regarding the applicability of any such state and local taxes.
The complete text of the final opinion that Special Counsel expects to deliver upon the delivery of the Certificates is set forth in APPENDIX D—FORM OF OPINION OF SPECIAL COUNSEL.
UNDERWRITING
The Certificates are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) at a price of $_________ (being $__________ aggregate principal am ount of the Certificates, plus a net original premium of $__________, and less $________ of Underwriter’s discount). The Underwriter will purchase all of the Certificates if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase agreement for the Certificates, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell Certificates to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.
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RATING
S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”) has assigned the rating of “___” to the Certificates. Such rating reflects only the view of S&P and any desired explanation of the significance of such rating should be obtained from S&P at the following address: 55 Water Street, New York, NY 10041, (212) 208-8000. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. Th ere is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price for the Certificates.
FINANCIAL STATEMENTS
The City’s financial statements for the Fiscal Year ended June 30, 2021, included in APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, have been audited by the City’s Auditor, as stated in its reports appearing in such appendix. The City’s Auditor has not undertaken to update its reports or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the City’s Auditor with respect to any event subsequent to its report.
ADDITIONAL INFORMATION
All of the preceding summaries of the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site and Facility Lease, and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.
This Official Statement does not constitute a contract with the purchasers of the Certificates.
Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.
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.
The City will furnish a certificate dated the date of delivery of the Certificates, from an appropriate officer of the City, to the effect that to the best of such officer’s knowledge and belief, and after reasonable investigation, (i) neither the Official Statement or any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (ii) since the date of the
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Official Statement, no event has occurred which should have been set forth in an amendment or supplement to the Official Statement which has not been set forth in such an amendment or supplement, and the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site and Facility Lease, and other applicable agreements conform as to form and tenor to the descriptions thereof contained in the Official Statement; and (iii) the City has complied with all the agreements and has satisfied all the conditions on its part to be performed or satisfied under the Trust Agreement at and prior to the date of the issuance of the Certificates.
The execution and delivery of the Official Statement by the City have been duly authorized by the City Council on behalf of the City.
CITY OF MARINA
By
City Manager
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Appendix A