The actual investment return for fiscal year 2020-21 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 7.00%. To the extent the actual investment return for fiscal year 2020-21 differs from 7.00%, the actual contribution requirements for fiscal year 2023-24 will differ from those shown above. For additional details regarding the assumptions and methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This section also contains projected required contributions through fiscal year 2027-28.
Changes from Previous Year’s Valuation
There are no significant changes in actuarial assumptions or policies in your 2020 actuarial valuation. Your annual valuation report is an important tool for monitoring the health of your CalPERS pension plan. Your report contains useful information about future required contributions and ways to control your plan’s funding progress. In addition to your annual actuarial report my office has developed tools for employers to plan, project and protect the retirement benefits of your employees. Pension Outlook is a tool to help plan and budget pension costs into the future with easy to understand results and charts.
You will be able to view the projected funded status and required employer contributions for pension plans in different potential scenarios for up to 30 years into the future — which will make budgeting more predictable. While Pension Outlook can't predict the future, it can provide valuable planning information based on a variety of future scenarios that you select.
Pension Outlook can help you answer specific questions about your plans, including:
• When is my plan’s funded status expected to increase? • What happens to my required contributions in a down market? • How does the discount rate assumption affect my contributions? • What is the impact of making an additional discretionary payment to my plan? To get started, visit our Pension Outlook page at www.calpers.ca.gov/page/employers/actuarial-resources/pensionoutlook-overview and take the steps to register online.
CalPERS will be completing an Asset Liability Management (ALM) review process in November 2021 that will review the capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount rate and other economic assumptions is warranted. In addition, the Actuarial Office will be completing its Experience Study to review the demographic experience within the pension system and make recommendations to modify future assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan. The impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor the effects and where necessary make future adjustments to actuarial assumptions.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A of the Section 2 report, “Actuarial Methods and Assumptions.” Questions
We understand that you might have questions about these results, and your assigned CalPERS actuary whose signature is on the valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary
Page J-1.10
Actuarial Valuation
as of June 30, 2020
for the
Safety Plan
of the
City of Menlo Park
(CalPERS ID: 3956164441)
Required Contributions
for Fiscal Year
July 1, 2022 - June 30, 2023
Page J-1.11
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
Page J-1.12
Section 1
C A L I F O R N I A P U B L I C E M P L O Y E E S ’ R E T I R E M E N T S Y S T E M Plan Specific Information
for the
Safety Plan
of the
City of Menlo Park
(CalPERS ID: 3956164441)
(Rate Plan ID: 199)
Page J-1.13
Rate Plan belonging to the Safety Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Additional Discretionary Employer Contributions 5
Plan’s Funded Status 6
Projected Employer Contributions 6
Other Pooled Safety Risk Pool Rate Plans 7
Cost 8
Changes Since the Prior Year’s Valuation 9
Subsequent Events 9
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 11
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 11 Development of Plan’s Share of Pool’s Market Value of Assets 11 Schedule of Plan’s Amortization Bases 12
Amortization Schedule and Alternatives 14
Employer Contribution History 16
Funding History 16
Risk Analysis
Future Investment Return Scenarios 18
Discount Rate Sensitivity 19
Mortality Rate Sensitivity 19
Maturity Measures 20
Maturity Measures History 21
Hypothetical Termination Liability 22
Participant Data 23
List of Class 1 Benefit Provisions 23
Plan’s Major Benefit Options 24
Page J-1.14
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2020 which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of this report is based on the member and financial data as of June 30, 2020 provided by employers participating in the Safety Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the risk pool containing your Safety Plan has been performed in accordance with generally accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk poolas of the date of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability amortization bases as of June 30, 2020 and employer contribution as of July 1, 2022 have been properly and accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuarie s Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
JULIAN ROBINSON, FSA, EA, MAAA
Senior Pension Actuary, CalPERS
Page J-1.15
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Safety Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
Page J-1.16
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2020 actuarial valuation of the Safety Plan of the City of Menlo Park of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the required employer contributions for fiscal year 2022-23.
Purpose of Section 1
This Section 1 report for the Safety Plan of the City of Menlo Park of CalPERS was prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2020; • Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2022 through June 30, 2023; and
• Provide actuarial information as of June 30, 2020 to the CalPERS Board of Administration and other interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available on the CalPERS website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the eco nomic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations of Actuarial Standards of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure Elements document:
• A “Scenario Test,” projecting future results under different investment income returns. • A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates of 6.0% and 8.0%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality are 10% lower or 10% higher than our current post- retirement mortality assumptions adopted in 2017.
• Pension Plan maturity measures quantifying the risks the employer bears.
Page J-1.17
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2022-23
Employer Normal Cost Rate 23.75%
Plus
Required Payment on Amortization Bases1 $2,504,631
Paid either as
1) Monthly Payment $208,719.25
Or
2) Annual Prepayment Option* $2,421,318
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars). * Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31).
Fiscal Year Fiscal Year
2021-22 2022-23
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 31.47% 31.46%
Surcharge for Class 1 Benefits2
a) FAC 1 1.23% 1.28%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 32.70% 32.74%
Formula's Expected Employee Contribution Rate 8.99% 8.99% Employer Normal Cost Rate 23.71% 23.75%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after April 30, 2021.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit. 3 The normal cost change is phased out over a five-year period in accordance with the CalPERS contribution allocation policy.
Page J-1.18
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for the 2022-23 fiscal year is $2,504,631. CalPERS allows employers to make additional discretionary payments (ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required contributions and can result in significant long-term savings. Employers can also use ADPs to stabilize annual contributions as a fixed dollar amount, percent of payroll or percent of revenue.
Provided below are select ADP options for consideration. Making such an ADP during fiscal year 2022-23 does not require an ADP be made in any future year, nor does it change the remaining amortization period of any portion of unfunded liability. For information on permanent changes to amortization periods, see the “Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2022-23 Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$1,141,831 $2,504,631 $0 $2,504,631 $3,646,462
Alternative Fiscal Year 2022-23 Employer Contributions for Greater UAL Reduction Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $1,141,831 $2,504,631 $380,396 $2,885,027 $4,026,858 15 years $1,141,831 $2,504,631 $851,134 $3,355,765 $4,497,596 10 years $1,141,831 $2,504,631 $1,846,998 $4,351,629 $5,493,460 5 years $1,141,831 $2,504,631 $4,949,649 $7,454,280 $8,596,111 1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal year would have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2022 as determined in the June 30, 2020 actuarial valuation. New unfunded liabilities can emerge in future years due to assumption or method changes, changes in plan provisions and actuarial experience different than assumed.
Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100% funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge significantly from projections over a period of several years.
Page J-1.19
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 6
Plan’s Funded Status
June 30, 2019 June 30, 2020
1. Present Value of Projected Benefits (PVB) $112,629,817 $115,625,993
2. Entry Age Accrued Liability (AL) 100,985,768 105,099,481
3. Plan’s Market Value of Assets (MVA) 71,118,671 73,463,167
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 29,867,097 31,636,314
5. Funded Ratio [(3) / (2)] 70.4% 69.9%
This measure of funded status is an assessment of the need for future employer contributions based on the selected actuarial cost method used to fund the plan. The UAL is the present value of future employer contributions for service that has already been earned and is in addition to future normal cost contributions for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis” section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. Actual contribution rates during this projection period could be significantly higher or lower than the projection shown below.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Rate Plan 199 Results
Normal Cost % 23.75% 23.8% 23.8% 23.8% 23.8% 23.8%
UAL Payment $2,504,631 $2,682,000 $2,859,000 $2,983,000 $3,101,000 $3,177,000 For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the Section 2 Report. This method phases in the impact of the change in UAL over a 5-year period in order to reduce employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are less likely. However, required contributions can change gradually and significantly over the next five years. In years when there is a large increase in UAL, the relatively small amortization payments during the ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment Return Scenarios” in the “Risk Analysis” section.
Our online pension plan modeling and projection tool, Pension Outlook, is available in the Employers section of the CalPERS website. Pension Outlook is a tool to help plan and budget pension costs into the future with results and charts that are easy to understand.
Page J-1.20
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 7
Other Pooled Safety Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown below, correspond to rate plan 199. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated contribution amounts and rates for all of the employer’s rate plans in the Safety Risk Pool are shown below and assume that the payroll for each rate plan will grow according to the overall payroll growth assumption of 2.75% per year for three years.
Fiscal Year Fiscal Year
2021-22 2022-23
Estimated Combined Employer Contributions for all Pooled Safety Rate Plans Projected Payroll for the Contribution Year $6,993,936 $7,706,470 Estimated Employer Normal Cost $1,456,889 $1,535,187
Required Payment on Amortization Bases 2,245,061 2,535,029 Estimated Total Employer Contributions $3,701,950 $4,070,216 Estimated Total Employer Contribution Rate (illustrative only) 52.93% 52.82% Page J-1.21
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 8
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll • Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount For fiscal years prior to 2016-17, the Amortization of UAL component was expressed as a percentage of total active payroll. Starting with fiscal year 2016-17, the Amortization of UAL component was expressed as a dollar amount and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates, disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates) These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings at CalPERS have averaged 5.5% over the 20 years ending June 30, 2020, yet individual fiscal year returns have ranged from -23.6% to +20.7%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2017.
Page J-1.22
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 9
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective , even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B of the Section 2 Report for a summary of the plan provisions used in this valuation.
Actuarial Methods and Assumptions
The are no significant changes to the actuarial methods or assumptions for the 2020 actuarial valuation.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2020. Changes in the value of assets subsequent to that date are not reflected. Investment returns below the assumed rate of return will increase future required contributions while investment returns above the assumed rate of return will decrease future required contributions.
CalPERS will be completing an Asset Liability Management (ALM) process in November 2021 that will review the capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount rate and other economic assumptions is warranted. As part of the ALM process the Actuarial Office will be completing an Experience Study to review the demographic experience of the retirement system and make recommendations to modify future assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan.
The impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor the effects and where necessary make future adjustments to actuarial assumptions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate remains at 7.0% going forward and that the realized rate of return on assets for fiscal year 2020-21 is 7.0%.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through January 2021. Any subsequent changes or actions are not reflected.
Page J-1.23
Assets and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change • Development of Plan’s Share of Pool’s Market Value of Assets • Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
Page J-1.24
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 11
Breakdown of Entry Age Accrued Liability
Active Members $25,571,677
Transferred Members 6,927,087
Terminated Members 692,298
Members and Beneficiaries Receiving Payments 71,908,419 Total $105,099,481
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions.
The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $105,099,481
2. Projected UAL balance at 6/30/2020 29,586,852
3. Pool’s Accrued Liability1 25,304,654,410
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/20201 6,693,257,955
5. Pool’s 2019/20 Investment (Gain)/Loss1 427,980,555
6. Pool’s 2019/20 Non-Investment (Gain)/Loss1 75,360,952
7. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) 1,736,460
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6) 313,002
9. Plan’s New (Gain)/Loss as of 6/30/2020: (7) + (8) 2,049,461 1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
10. Plan’s UAL: (2) + (9) $31,636,314
11. Plan’s Share of Pool’s MVA: (1) - (10) $73,463,167
Page J-1.25
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 12
Schedule of Plan’s Amortization Bases
Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year. • The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2020. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2022-23.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.75% 15 8,090,721 667,604 7,966,497 685,963 7,814,586 704,827 Non-Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 23 (115,125) (7,810) (115,105) (8,024) (114,862) (8,245) Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 23 10,141,176 687,947 10,139,440 706,865 10,118,014 726,304 Non-Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 24 91,196 6,030 91,342 6,196 91,327 6,367 Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 24 (7,329,742) (484,693) (7,341,454) (498,022) (7,340,198) (511,718) Assumption Change 6/30/14 100% Up/Down 2.75% 14 4,749,253 451,603 4,614,559 464,022 4,457,590 476,782 Non-Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 25 (16,381) (857) (16,641) (1,100) (16,668) (1,131) Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 25 4,448,124 232,655 4,518,832 298,816 4,526,053 307,034 Non-Investment (Gain)/Loss 6/30/16 100% Up/Down 2.75% 26 (914,697) (35,946) (941,543) (49,247) (956,510) (63,251) Investment (Gain)/Loss 6/30/16 100% Up/Down 2.75% 26 5,538,179 217,643 5,700,720 298,171 5,791,340 382,963 Assumption Change 6/30/16 100% Up/Down 2.75% 16 1,729,001 94,135 1,752,657 128,965 1,741,941 165,640 Non-Investment (Gain)/Loss 6/30/17 80% Up/Down 2.75% 27 69,892 1,858 72,863 2,863 75,002 3,923 Investment (Gain)/Loss 6/30/17 80% Up/Down 2.75% 27 (2,744,906) (72,964) (2,861,575) (112,456) (2,945,560) (154,065) Assumption Change 6/30/17 80% Up/Down 2.75% 17 2,221,597 81,011 2,293,310 124,859 2,324,687 171,057 Non-Investment (Gain)/Loss 6/30/18 60% Up/Down 2.75% 28 394,438 5,387 416,476 11,071 434,177 17,063 Investment (Gain)/Loss 6/30/18 60% Up/Down 2.75% 28 (821,756) (11,223) (867,670) (23,064) (904,549) (35,548) Assumption Change 6/30/18 60% Up/Down 2.75% 18 2,498,367 253,746 2,410,776 87,910 2,488,596 135,491 Method Change 6/30/18 60% Up/Down 2.75% 18 727,249 13,559 764,131 27,864 788,797 42,946 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 19 455,762 0 487,665 44,501 475,769 44,501 Page J-1.26
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 13
Schedule of Plan’s Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Investment (Gain)/Loss 6/30/19 40% Up Only 0.00% 19 374,504 0 400,719 8,761 419,707 17,523 Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 20 313,002 0 334,912 0 358,356 32,701 Investment (Gain)/Loss 6/30/20 20% Up Only 0.00% 20 1,736,460 0 1,858,012 0 1,988,073 43,467 Total 31,636,314 2,099,685 31,678,923 2,204,914 31,615,668 2,504,631 The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
Page J-1.27
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions require d according to the CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternat ive “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a Fresh Start, please consult with your plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or • When the payment would completely amortize the total unfunded liability in a very short time period, and results in a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
Page J-1.28
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2022 31,615,668 2,504,631 31,615,668 3,355,765 31,615,668 4,351,629 6/30/2023 31,237,954 2,682,092 30,357,534 3,355,765 29,327,405 4,351,629 6/30/2024 30,650,234 2,859,132 29,011,331 3,355,765 26,878,963 4,351,629 6/30/2025 29,838,242 2,983,315 27,570,894 3,355,765 24,259,130 4,351,629 6/30/2026 28,840,955 3,100,713 26,029,626 3,355,765 21,455,909 4,351,629 6/30/2027 27,652,422 3,176,679 24,380,470 3,355,765 18,456,463 4,351,629 6/30/2028 26,302,110 3,254,732 22,615,873 3,355,765 15,247,055 4,351,628 6/30/2029 24,776,537 3,334,933 20,727,754 3,355,765 11,812,990 4,351,628 6/30/2030 23,061,213 3,417,339 18,707,466 3,355,765 8,138,540 4,351,629 6/30/2031 21,140,575 3,502,013 16,545,758 3,355,765 4,206,878 4,351,628 6/30/2032 18,997,903 3,463,939 14,232,731 3,355,765
6/30/2033 16,744,630 3,421,381 11,757,792 3,355,765
6/30/2034 14,377,650 3,328,235 9,109,607 3,355,766
6/30/2035 11,941,332 3,166,798 6,276,048 3,355,765
6/30/2036 9,501,466 2,907,259 3,244,141 3,355,766
6/30/2037 7,159,274 1,715,757
6/30/2038 5,885,632 1,544,691
6/30/2039 4,699,785 1,415,712
6/30/2040 3,564,347 1,348,412
6/30/2041 2,419,043 1,047,424
6/30/2042 1,504,911 746,125
6/30/2043 838,456 583,285
6/30/2044 293,794 294,789
6/30/2045 9,426 9,750
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
Total 55,809,136 50,336,477 43,516,287
Interest Paid 24,193,468 18,720,809 11,900,619
Estimated Savings 5,472,659 12,292,849
Page J-1.29
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 16
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan. The amounts are based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes made during a fiscal year. Additional discretionary payments before July 1, 2019 or after June 30, 2020 are not included.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 19.536% $855,951 N/A
2017 - 18 19.723% 1,059,741 N/A
2018 - 19 20.556% 1,347,451 N/A
2019 - 20 21.927% 1,665,796 692,270
2020 - 21 23.674% 1,905,839
2021 - 22 23.71% 2,218,080
2022 - 23 23.75% 2,504,631
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2011 $62,947,248 $49,676,541 $13,270,707 78.9% $6,138,515 06/30/2012 66,809,343 49,267,378 17,541,965 73.7% 5,926,751 06/30/2013 69,683,668 54,021,373 15,662,295 77.5% 5,684,278 06/30/2014 76,932,839 62,337,080 14,595,759 81.0% 5,507,835 06/30/2015 80,594,610 62,089,996 18,504,614 77.0% 5,453,574 06/30/2016 85,184,544 61,020,512 24,164,032 71.6% 5,320,607 06/30/2017 91,413,749 66,813,601 24,600,148 73.1% 5,277,103 06/30/2018 98,038,952 69,681,566 28,357,386 71.1% 4,672,779 06/30/2019 100,985,768 71,118,671 29,867,097 70.4% 4,525,078 06/30/2020 105,099,481 73,463,167 31,636,314 69.9% 4,431,928 Page J-1.30
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
Page J-1.31
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 18
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2020-21, 2021-22, 2022-23 and 2023-24). The projections also assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur.
For fiscal years 2020-21, 2021-22, 2022-23, and 2023-24, each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are 1.0%, 4.0%, 7.0%, 9.0% and 12.0%.
These alternate investment returns were chosen based on stochastic analysis of possible future investment returns over the four-year period ending June 30, 2024. Using the expected returns and volatility of the asset classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based on the most recently completed Asset Liability Management process. We then selected annual returns that approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4-year outcomes generated in the stochastic analysis, approximately 25% had an average annual return of 4.0% or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 1.0% or greater than 12.0% over this four-year period, the likelihood of a single investment return less than 1.0% or greater than 12.0% in any given year is much greater.
Assumed Annual Return From
2020-21 through 2023-24
Projected Employer Contributions
2023-24 2024-25 2025-26 2026-27
1.0%
Normal Cost 23.8% 23.8% 23.8% 23.8%
UAL Contribution $2,792,000 $3,189,000 $3,644,000 $4,202,000
4.0%
Normal Cost 23.8% 23.8% 23.8% 23.8%
UAL Contribution $2,737,000 $3,026,000 $3,320,000 $3,668,000
7.0%
Normal Cost 23.8% 23.8% 23.8% 23.8%
UAL Contribution $2,682,000 $2,859,000 $2,983,000 $3,101,000
9.0%
Normal Cost 24.2% 24.6% 25.0% 25.5%
UAL Contribution $2,652,000 $2,776,000 $2,822,000 $2,831,000
12.0%
Normal Cost 24.2% 24.6% 25.0% 25.5%
UAL Contribution $2,598,000 $2,606,000 $2,467,000 $2,215,000 Page J-1.32
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 19
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed annual price inflation, currently 4.50% and 2.50%, respectively. Changing either the price inflation assumption or the real rate of return assumption will change the discount rate. The sensitivity of the valuation results to the discount rate assumption depends on which component of the discount rate is changed. Shown below are various valuation results as of June 30, 2020 assuming alternate discount rates by changing the two components independently. Results are shown using the current discount rate of 7.0% as well as alternate discount rates of
6.0% and 8.0%. The rates of 6.0% and 8.0% were selected since they illustrate the impact of a 1.0% increase or decrease to the 7.0% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2020 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 41.29% 32.74% 26.24%
b) Accrued Liability $118,939,116 $105,099,481 $93,683,716 c) Market Value of Assets $73,463,167 $73,463,167 $73,463,167 d) Unfunded Liability/(Surplus) [(b) - (c)] $45,475,949 $31,636,314 $20,220,549 e) Funded Status 61.8% 69.9% 78.4%
Sensitivity to the Price Inflation Assumption
As of June 30, 2020 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 35.03% 32.74% 30.19%
b) Accrued Liability $110,877,089 $105,099,481 $98,111,925 c) Market Value of Assets $73,463,167 $73,463,167 $73,463,167 d) Unfunded Liability/(Surplus) [(b) - (c)] $37,413,922 $31,636,314 $24,648,758 e) Funded Status 66.3% 69.9% 74.9%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2020 plan costs and funded status under two different longevity scenarios, namely assuming post-retirement rates of mortality are 10% lower or 10% higher than our current mortality assumptions adopted in 2017. This type of analysis highlights the impact on the plan of improving or worsening mortality over the long-term.
As of June 30, 2020 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 33.17% 32.74% 32.34%
b) Accrued Liability $106,982,509 $105,099,481 $103,356,652 c) Market Value of Assets $73,463,167 $73,463,167 $73,463,167 d) Unfunded Liability/(Surplus) [(b) - (c)] $33,519,342 $31,636,314 $29,893,485 e) Funded Status 68.7% 69.9% 71.1%
Page J-1.33
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 20
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is impacted by investment return volatility, other economic variables and changes in longevity or other demographic assumptions. Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level considering all rate plans. The following measures are for one rate plan only.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2019 June 30, 2020
1. Retired Accrued Liability 69,552,781 71,908,419
2. Total Accrued Liability 100,985,768 105,099,481
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.69 0.68 Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also called the Support Ratio. A pension plan in its infancy will have a very high ratio of active to retired members.
As the plan matures, and members retire, the ratio starts declining. A mature plan will often have a ratio near or below one. The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2019 June 30, 2020
1. Number of Actives 29 26
2. Number of Retirees 116 119
3. Support Ratio [(1) / (2)] 0.25 0.22
Page J-1.34
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 21
Maturity Measures (Continued)
The actuarial calculations supplied in this communication are based on various assumptions about long-term demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized e ach year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset-to-payroll ratio of 4. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR)
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with LVR ratio of 8 is expected to have twice the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term potential for contribution volatility. The AVR, described above, will tend to move closer to the LVR as a plan matures.
Contribution Volatility June 30, 2019 June 30, 2020
1. Market Value of Assets $71,118,671 $73,463,167
2. Payroll 4,525,078 4,431,928
3. Asset Volatility Ratio (AVR) [(1) / (2)] 15.7 16.6
4. Accrued Liability $100,985,768 $105,099,481
5. Liability Volatility Ratio (LVR) [(4) / (2)] 22.3 23.7 Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.68 0.31 12.7 17.3
06/30/2018 0.69 0.26 14.9 21.0
06/30/2019 0.69 0.25 15.7 22.3
06/30/2020 0.68 0.22 16.6 23.7
Page J-1.35
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 22
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2020. The plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit security for members is increased while limiting the funding risk. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 19 -month period from 12 months before the valuation date to 7 months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 0.75%
Funded
Status
Unfunded
Termination
Liability
at 0.75%
Hypothetical
Termination
Liability1,2
at 2.50%
Funded
Status
Unfunded
Termination
Liability
at 2.50%
$73,463,167 $245,230,210 30.0% $171,767,043 $184,387,450 39.8% $110,924,283 1 The hypothetical liabilities calculated above include a 5% mortality contingency load in accordance with Board policy. Other actuarial assumptions can be found in Appendix A of the Section 2 report. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 1.18% on June 30, 2020, and was 1.68% on January 31, 2021.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with the plan actuary before beginning this process.
Page J-1.36
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 23
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2019 June 30, 2020
Active Members
Counts 29 26
Average Attained Age N/A 44.4
Average Entry Age to Rate Plan N/A 29.9
Average Years of Credited Service N/A 14.9
Average Annual Covered Pay $156,037 $170,459
Annual Covered Payroll $4,525,078 $4,431,928
Projected Annual Payroll for Contribution Year $4,908,757 $4,807,709 Present Value of Future Payroll $34,834,746 $31,643,198 Transferred Members 21 20
Separated Members 8 9
Retired Members and Beneficiaries
Counts* 116 119
Average Annual Benefits* N/A $44,426
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• One Year Final Compensation (FAC 1)
Page J-1.37
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 24
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in Section 2.
Benefit Group
Member Category Police Police Police Police Police Police Demographics
Actives Yes No No No No No
Transfers/Separated Yes No No No No No
Receiving Yes Yes Yes Yes Yes Yes
Benefit Group Key 103255 201390 201392 201393 201394 201395 Benefit Provision
Benefit Formula 3% @ 50
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 9.00%
Final Average Compensation Period One Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 3
Special Yes
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No
COLA 2% 2% 2% 2% 2% 2%
Page J-1.38
CALPERS ACTUARIAL VALUATION - June 30, 2020
Safety Plan of the City of Menlo Park
CalPERS ID: 3956164441
Rate Plan belonging to the Safety Risk Pool Page 25
Section 2
C A L I F O R N I A P U B L I C E M P L O Y E E S ’ R E T I R E M E N T S Y S T E M Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(calpers.ca.gov) in the Forms and
Publications section
Page J-1.39
LOCAL GOVERNMENT 101
1400 K Street, Suite 205 • Sacramento, CA 95814 • 916.658.8208 F 916.444.7535 • www.ca-ilg.org The Institute is grateful to Dr. Rhonda Albey for preparing this piece. Dr. Albey has worked in labor relations for Los Angeles County since 1990.
Additional Resources
The Institute has two glossaries to assist
local officials as they engage with
constituents, bargaining representatives
and each other about labor relations and
public pension issues:
• Labor Relations Terminology:
http://www.ca-ilg.org/post/laborrelations-terminology
• Public Pension Terminology:
http://www.ca-ilg.org/post/publicpension-terminology
Understanding the Labor Negotiations Process
August 17, 2012
Under California law,1 when county or city employees
are represented by a union, the agency must negotiate
with that union regarding their pay and benefits,
working hours, and working conditions. This paper
explains the key elements of that process.
Roles
Elected officials determine the agency’s bargaining
position and consult with staff throughout the
negotiation process. Agency staff report back to
decision-makers about the face-to-face negotiations’
progress and any impediments to reaching agreement.
Before Bargaining
Prior to meeting with the union, the agency’s negotiators will meet with elected officials to discuss how to proceed. Having this meeting well in advance of negotiations gives elected officials time to consider relevant issues and develop a set of questions.
Early conversations also give staff time to compile necessary information for decisionmakers. Examples of such information may include:
• Anticipated increases in current employee expenditures • Money available for salaries and benefits
• Cost of salary and benefit enhancements
• What comparable employers are paying
• Turnover statistics
Just as elected officials need time and information to make well-informed decisions, staff will need time to prepare and provide accurate information. As with any issue, limited staff resources may make it advisable to prioritize information requests.
Conversations about the agency’s initial bargaining position typically take place in closed session.
2 The agency’s negotiators will share their understanding of what it will take to ATTACHMENT G Page J-1.40
Understanding the Labor Negotiations Process 2012
Institute for Local Government www.ca-ilg.org 2
Expect to be Misquoted
People tend to hear what they
want to hear.
Someone may say something like
“I’ll speak to the negotiating
team,” and mean exactly that –
they’ll speak to them.
The employees may hear “He/she
will speak to the negotiating team
and tell them to give us what we
want.”
Some strategies for minimizing
miscommunication are to take
notes during the discussion and
not to meet with union
representatives alone.
The Process Can Be
Rough
During the negotiations process,
the union may organize
demonstrations and/or phone and
e-mail campaigns. Discourse may
become bullying and emotional.
Don’t take it personally – it’s all
part of the process. Both sides
may need to show they are doing
their job. Union negotiators need
to show their members that they
are fighting for them and elected
officials need to show they are
working hard for the community.
reach agreement with the union. The agency’s governing body will then give negotiators an initial bargaining position.
During Bargaining
No matter how reasonable the agency’s initial bargaining position is, it is unlikely that the union will immediately accept it.
The negotiation process is unpredictable. The
agency’s negotiators may have misread the union’s
priorities and goals. Union representatives may
have misread the employees’ mood. New issues
may arise. There may be internal divisions within
the union. These challenges may make it impossible
to get agreement within the original parameters
authorized.
Working with the Agency’s Negotiators. As
challenges arise, the agency’s negotiators may ask
for modifications in the bargaining position. This is
normal in the course of any type of negotiation, as
each party learns more about the interests of the
other. Multiple meetings with the negotiating team
may be necessary.
Modifications may not involve increases in total
expense. An example is moving money from benefits
to salaries (or vice-versa). Another example is if
decision-makers have authorized higher increases for
some position classifications than others, employee
representatives may ask to even increases out.
Meeting with Union Officials. As negotiations
continue, the union may seek meetings with individual
elected official(s) to discuss the agency’s bargaining
position. As with any group of constituents, an elected official can choose to meet with them or not. If an
elected official does meet with union officials, the
official should be clear that the official is not speaking on behalf of the governing body.
A word of caution about meeting with employees
without their union representative during labor
Page J-1.41
Understanding the Labor Negotiations Process 2012
Institute for Local Government www.ca-ilg.org 3
An Expired Contract
is not the Same as
No Contract
If the contract has expired
and agreement has not been
reached on a new one, the
agency must maintain the
status quo until there is a
new agreement.
negotiations: such meetings can lead to an unfair labor practice accusation of “direct dealing.”3 Avoid any action that makes it appear that the agency is interfering in the union’s relationship with the employees it represents.
If the elected official meets with union representatives, it is helpful to share the conversation with the agency’s bargaining representatives. The conversation may provide insights that will help the agency’s negotiators move the process forward.
If Agreement Is Reached
The agreement still has to be ratified by the rank and file. The union may feel it needs to sell the agreement as a victory for its members. The union may post flyers or e-mails trumpeting their win over management.
For their part, elected officials may hear concerns from constituents that the agency is spending too much on employee salaries and benefits. Agency officials are well-advised to be moderate in their public discourse relating to the agreement. Anything that might be construed as bragging about the agency’s victory in the bargaining process may jeopardize the agreement. The employees won’t ratify the agreement if they think it is a bad deal or their representatives weren’t
sufficiently aggressive on their behalf.
A helpful practice can be a public statement that
does not validate either extreme, but says
something to the effect that “We reached a deal to
provide adequate public services at reasonable
cost.”
If Agreement Cannot Be Reached
What happens if the agency can’t reach an agreement? There are procedures under state law for resolving impasse. A local labor relations resolution may provide further guidance on procedures.
Mediation
A mediator may be brought in to try and resolve differences between the agency and the union. Mediators have no authority to impose a settlement, but can be useful in helping the parties look at the problem from a new perspective and to move past personal differences. The state Division of Mediation and Conciliation can provide a mediator.
Fact-finding. Whether or not mediation occurs, the union may request fact-finding as a next step. With the assistance of the Post Agreement Issues
While the agency will not have to
negotiate during the term of the
agreement, issues may arise
between negotiations that may
require changes.
Page J-1.42
Understanding the Labor Negotiations Process 2012
Institute for Local Government www.ca-ilg.org 4
This resource is a service of the Institute for Local Government (ILG) whose mission is to promote good government at the local level with practical, impartial, and easy-to-use resources for California communities. ILG is the nonprofit 501(c)(3) research and education affiliate of the League of California Cities and the California State Association of Counties. For more information and to access the Institute’s resources on Local Government 101 go to http://www.ca-ilg.org/localgovt101.
The Institute thanks the following individuals for their review and input into this resource:
• Holly Brock-Cohn, Human Resources Director, City of Alameda • Casey Echarte, Assistant Human Resources Director, City of San Mateo • Eraina Ortega, Legislative Representative, Employee Relations & Human Resources, California State Association of Counties
• Delores Turner, Assistant City Manager, Administrative Services Department, City of Emeryville The Institute welcomes feedback on this resource:
• Email: [email protected] Subject: Understanding the Labor Negotiations Process • Fax: 916.444.7535
• Mail: 1400 K Street, Suite 205 ▪ Sacramento, CA ▪ 95814 Public Employee Relations Board (PERB), a fact-finding panel is appointed which reviews both parties’ proposals, holds hearings and ultimately recommends a settlement.
Unilateral implementation. After exhausting the impasse procedure and holding a public hearing, the agency may impose its final financial offer upon the employees.
Management cannot force the union to accept a whole new contract.
Unilateral implementation cannot be used to impose work rule or operational changes and can only be implemented for one year. After that year, or during the year, if the union indicates it has a significant change in its position, the agency must bargain again with the union to try and reach a mutual agreement.
Page J-1.43
Understanding the Labor Negotiations Process 2012
Institute for Local Government www.ca-ilg.org 5
References and Resources
1 California Government Code 3500, known as the Meyers-Milias-Brown Act, (MMB) requires negotiation in good faith with the recognized employee representative on specified subjects. It also permits local agencies to adopt their own rules and regulations for the governance of labor relations. 2 See Cal. Gov’t Code § 54957.6, which provides:
54957.6. (a) Notwithstanding any other provision of law, a legislative body of a local agency may hold closed sessions with the local agency's designated representatives regarding the salaries, salary schedules, or compensation paid in the form of fringe benefits of its represented and unrepresented employees, and, for represented employees, any other matter within the statutorily provided scope of representation.
However, prior to the closed session, the legislative body of the local agency shall hold an open and public session in which it identifies its designated representatives.
Closed sessions of a legislative body of a local agency, as permitted in this section, shall be for the purpose of reviewing its position and instructing the local agency's designated representatives.
Closed sessions, as permitted in this section, may take place prior to and during consultations and discussions with representatives of employee organizations and unrepresented employees.
Closed sessions with the local agency's designated representative regarding the salaries, salary schedules, or compensation paid in the form of fringe benefits may include discussion of an agency's available funds and funding priorities, but only insofar as these discussions relate to providing instructions to the local agency's designated representative.
Closed sessions held pursuant to this section shall not include final action on the proposed compensation of one or more unrepresented employees.
For the purposes enumerated in this section, a legislative body of a local agency may also meet with a state conciliator who has intervened in the proceedings. (b) For the purposes of this section, the term "employee" shall include an officer or an independent contractor who functions as an officer or an employee, but shall not include any elected official, member of a legislative body, or other independent contractors. 3 See Cal. Lab. Code § 1156; Ruline Nursery Co. v. Agricultural Labor Relations Bd., 169 Cal. App. 3d 247, 266, 216 Cal. Rptr. 162, 172 (1985)
G:\INSTITUTE\Gov 101\Human Resources\Labor Relations Basics \Understanding the Labor Negotiations Process_August 2012.docx Page J-1.44
Administrative Services
City of Menlo Park 701 Laurel St., Menlo Park, CA 94025 tel 650-330-6600 www.menlopark.org
STAFF REPORT
City Council
Meeting Date: 4/12/2022
Staff Report Number: 22-067-CC
Regular Business: Adopt resolutions authorizing the issuance of 2022 General Obligation Refunding Bonds and 2022
General Obligation Bonds for the purpose of
renovating and expanding the City’s parks and
recreation facilities and approving related
documents
Recommendation
Adopt (i) a resolution (Attachment A) authorizing the issuance of 2022 General Obligation Refunding Bonds and related documents and actions for the purpose of refinancing the City’s 2012 General Obligation Refunding Bonds in order to realize debt service savings for taxpayers in the City and (ii) a resolution (Attachment D) authorizing the issuance of 2022 General Obligation Bonds and related documents and actions for the purpose of renovating and expanding the City’s parks and recreation facilities, as approved by City voters in 2001.
Policy Issues
Issuance of the City of Menlo Park 2022 General Obligation Refunding Bonds (2001 Election) (the “2022 General Obligation Refunding Bonds”) will result in debt service savings and lower property tax payments in the City related to the 2012 General Obligation Refunding Bonds.
Issuance of the City of Menlo Park 2022 General Obligation Bonds (2001 Election) (the “2022 New Money General Obligation Bonds”) will provide funds to finance parks and recreation facilities in furtherance of the voter authorization given to the City November 6, 2001.
Background
At an election held November 6, 2001, the City submitted the following Measure T to the registered voters of the City, and at least two-thirds of those voting on the proposition were in favor:
“To renovate and expand the City's parks and recreation facilities, shall the City of Menlo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?” Under the Measure T bonding authority, the City has issued the following bonds:
• 2002 Bonds; 2012 Bonds. The initial Measure T bonds were the $13,245,000 General Obligation Bonds, Series 2002. In 2012, the City refunded the 2002 bonds for debt service savings with proceeds of the City’s $9,830,000 Refunding General Obligation Bonds.
AGENDA ITEM J-2 Page J-2.1
Staff Report #: 22-067-CC
City of Menlo Park 701 Laurel St., Menlo Park, CA 94025 tel 650-330-6600 www.menlopark.org • 2009 General Obligation Bonds; 2019 General Obligation Refunding Bonds. In 2009, the City issued two series of Measure T bonds (the “2009 General Obligation Bonds”) in an aggregate principal amount of $10,440,000. In 2019, the City issued General Obligation Refunding Bonds to refund the 2009 General Obligation Bonds.
The City has $14,315,000 of remaining “new money” bonding capacity under Measure T.
Refunding bonds do not count against the remaining bonding capacity.
Analysis
2022 General Obligation Refunding Bonds
Capital One Public Funding, LLC (“Capital One”), the owner of the 2012 Bonds, has agreed to an accelerated refunding of the 2012 Bonds April 14, 2022, and has offered to purchase the 2022 General Obligation Refunding Bonds April 14, 2022, at a coupon of 2.715 percent and a yield of 2.500 percent, which will result in approximately $390,000 in debt service savings and approximately $358,000 in net present value savings, or 6 percent of refunded par. City staff, based on input from the City’s municipal advisor, has concluded that the proposed transaction is in the best interests of the City, particularly in light of the volatile nature of the financial markets and expectation of a continued rise in interest rates.
The 2022 General Obligation Refunding Bonds will require the following documents:
A. Resolution. This document memorializes City Council’s intent to refund the 2012 Bonds B. Paying agent agreement. This document, between the City and The Bank of New York Mellon Trust Company (“BNY”), as paying agent, will establish the terms of the 2022 General Obligation Refunding Bonds.
C. Irrevocable refunding instructions. This document will be signed by the City and direct BNY, as paying agent for the 2012 Bonds, to apply proceeds of the 2022 General Obligation Refunding Bonds to redeem the 2012 General Obligation Bonds.
2022 New Money General Obligation Bonds
City staff is recommending that the City issue its remaining “new money” 2001 election bonding capacity ($14,315,000) to finance the construction, acquisition, and improvement of parks and recreation facilities, including, but not limited to, improvements at the Menlo Park Community Campus, improvements to Willow Oaks Park and improvements to Burgess Park.
The resolution establishes certain bond parameters: (i) the principal amount of the Bonds may not exceed $14,315,000, (ii) the true interest cost may not exceed 6.0 percent, (iii) the Underwriter's discount on the Bonds (without regard to an original issue discount, if any) may not exceed 0.60 percent of the original par amount and (iv) the City will receive confirmation from its municipal advisor that, in accordance with the November 6, 2001 authorization, the Bonds shall not be issued unless the City determines that the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation.
Given the longer-term of the 2022 New Money General Obligation Bonds, under current market conditions, the City’s municipal advisor estimates that a public offering will achieve a lower borrowing rate than a private placement. Because of the volatile nature of the financial markets, staff is recommending a negotiated (rather than competitive) sale of the 2022 New Money General Obligation Bonds. Negotiated sales allow greater flexibility with respect to the timing and terms of the sale of bonds. The City’s municipal advisor distributed underwriter RFPs to 6 underwriting firms (BofA Securities, Piper Sandler, Raymond Page J-2.2
Staff Report #: 22-067-CC
City of Menlo Park 701 Laurel St., Menlo Park, CA 94025 tel 650-330-6600 www.menlopark.org James, Stifel, UBS and Citi.) All firms responded except Citi. After review and evaluation of the responses as well as follow up conversations with two of the underwriting firms, the municipal advisor recommended BofA Securities, Inc., as the underwriting firm that would serve the City best based on their top national ranking, experience with general obligation bonds (including those issued by cities), significant retail distribution, structuring and marketing ideas, and demonstrated pricing performance in the currently challenging market. BofA Securities’ fee proposal is $4.92/bond.
In order to minimize the overall interest cost of the 2022 New Money General Obligation Bonds, staff is recommending a final maturity in 2039 (or 17 years) and a level debt service structure. Under current market conditions, the City’s municipal advisor estimates that this structure yields a true interest cost of 3.35 percent and a total payment amount through maturity of $22.15 million.
Should market conditions change, the resolution also authorizes a private placement transaction in place of a public offering if the City concludes, based on advice from the City’s municipal advisor that it would be in the best interests of the City.
The 2022 New Money General Obligation Bonds will require the following documents:
D. Resolution. This document memorializes City Council’s intent to issue the 2022 Bonds E. Preliminary official statement. The attached preliminary Official Statement has been reviewed and approved for transmittal to the City Council by the City’s financing team, including consultants and City staff. The document has a number of blanks that will be completed upon its Official release known after the sale is finalized. The distribution of the preliminary Official Statement and the final Official Statement by the City is subject to the federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the preliminary Official Statement to include all facts that would be material to an investor in the 2022 New Money General Obligation Bonds. Material information exists where there is a substantial likelihood that the information would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell securities. If the City Council concludes that the preliminary Official Statement includes all facts that would be material to an investor in the 2022 New Money General Obligation Bonds, it must adopt a resolution that authorizes Staff to execute a certificate to the effect that the preliminary Official Statement has been “deemed final.”
The Official Statement contains information concerning the City and the 2022 New Money General Obligation Bonds, including estimated sources and uses of funds, the purposes for which the 2022 New Money General Obligation Bonds are being issued, the terms of the 2022 New Money General Obligation Bonds (sources of security, interest rates, redemption terms, etc.), and City financial information. The Official Statement will be used by underwriting firms to prepare their bids and to provide information about the 2022 New Money General Obligation Bonds to prospective and actual investors.
The Securities and Exchange Commission (SEC), the agency with regulatory authority over compliance with the federal securities laws, has indicated that if a member of a legislative body, like the City Council, has knowledge of any facts or circumstances that an investor would want to know before investing in securities, like the 2022 New Money General Obligation Bonds, whether relating to their repayment, taxexempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the preliminary Official Statement. The steps that a member of the City Council could take to fulfill this obligation include becoming familiar with the preliminary Official Statement and questioning Staff and other members of the financing team about the disclosure of such facts.
Page J-2.3
Staff Report #: 22-067-CC
City of Menlo Park 701 Laurel St., Menlo Park, CA 94025 tel 650-330-6600 www.menlopark.org Continuing disclosure certificate. SEC Rule 15c2-12 requires the underwriter of an issue of municipal securities to obtain a commitment by the issuer of the securities to provide ongoing disclosure. The Continuing Disclosure Certificate under Rule 15c2-12 requires the City, as the issuer of the 2022 New Money General Obligation Bonds, to provide two types of ongoing disclosure – an annual report each year, and timely notices of certain types of events that are likely to be material to investors, if and when any occur. The annual report is required to contain annual financial information and operating data for the City, similar to the type of information contained in the Official Statement. The annual report is also required to contain the City’s most recent financial statements.
F. Paying agent agreement. This document, between BNY, as paying agent, appoints BNY to act as paying agent.
G. Costs of issuance custody agreement. This document, between the City and BNY, provides for BNY to pay the costs of issuing the 2022 New Money General Obligation Bonds.
H. Project fund custody agreement. This document, between the City and BNY, provides for BNY to hold the bond proceeds that will be used to pay for authorized project costs. Staff believes that working with BNY in this capacity is a best practice from the perspective of a transparent requisition process and record keeping.
I. Bond purchase agreement. This document, between the City and the underwriter, BofA Securities, provides the terms and conditions pursuant to which the underwriter agrees to purchase all of the 2022 New Money General Obligation Bonds.
J. Use of bond proceeds. This document lists the uses of the proceeds by project and amount. Per City Council direction August 17, 2021, the list of projects includes Menlo Park Community Campus and three projects currently in the design stage, to meet the delivery timelines for expending the bond proceeds. A tentative project has been identified for the balance of the funds, but funds will not be programmed for this or other projects until the City Council provides further direction on the projects to be completed using Measure T bond proceeds.
Impact on City Resources
Neither the 2022 New Money General Obligation Bonds nor the 2022 General Obligation Refunding Bonds are payable from the City’s General Fund; they are paid from an ad valorem tax on all taxable property within the City. This ad valorem tax is in addition to the 1 percent general property tax and was approved by voters in 2001.
The proposed refunding will result in lower debt service costs for the benefit of the owners of taxable property in the City.
In accordance with the November 6, 2001 authorization, the highest tax rate required to service all bonds authorized by the 2001 bond measure and issued shall not be in excess of $14 per $100,000 in assessed valuation.
The costs of the financing consultants, including the City’s municipal advisor (Urban Futures, Inc.), the underwriter of the 2022 New Money General Obligation Bonds and bond/disclosure counsel (Jones Hall) will be paid from bond proceeds.
Environmental Review
This action is not a project within the meaning of the California Environmental Quality Act (CEQA) Guidelines § § 15378 and 15061(b) (3) as it will not result in any direct or indirect physical change in the environment. Projects pursue through the use of bond proceeds will be subject to environmental review.
Page J-2.4
Staff Report #: 22-067-CC
City of Menlo Park 701 Laurel St., Menlo Park, CA 94025 tel 650-330-6600 www.menlopark.org Public Notice
Public notification was achieved by posting the agenda, with the agenda items being listed, at least 72 hours prior to the meeting.
Attachments
2022 General Obligation Refunding Bonds
A. Resolution
B. Paying agent agreement
C. Irrevocable refunding instructions
2022 New Money General Obligation Refunding Bonds
D. Resolution
E. Preliminary official statement (incl. Continuing Disclosure Certificate) F. Paying agent agreement
G. Costs of issuance custody agreement
H. Project fund custody agreement
I. Bond purchase agreement
J. Use of bond proceeds
Report prepared by:
Chris Lynch, Jones Hall, Bond Counsel
Wing-See Fox, Municipal Advisor
Marvin Davis, Interim Finance Director
Mary Morris-Mayorga, Administrative Services Director – Extra Help Retired Annuitant Page J-2.5
RESOLUTION NO. XXXX
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MENLO PARK
AUTHORIZING THE ISSUANCE AND SALE OF ITS GENERAL OBLIGATION REFUNDING BONDS (2001 ELECTION), AUTHORIZING AND DIRECTING
THE EXECUTION OF A PAYING AGENT AGREEMENT AND CERTAIN
OTHER RELATED DOCUMENTS, AND AUTHORIZING ACTIONS RELATED
THERETO
WHEREAS, at an election held on November 6, 2001, the City of Menlo Park (the “City”) submitted the following proposition to the registered voters of the City:
To renovate and expand the City's parks and recreation facilities, shall the City of MenIo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided, that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?"; and
WHEREAS, at least two-thirds of the votes cast on the proposition at the election were in favor; and
WHEREAS, pursuant to such authorization and Resolution No. 6044 (the “2012 Bond Resolution”), the City has previously issued the 2012 General Obligation Refunding Bonds (the “2012 Bonds”); and
WHEREAS, the 2012 Bonds were issued under a Paying Agent Agreement, dated as of January 18, 2012 (the “2012 Paying Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A. (the “2012 Paying Agent”); and WHEREAS, the 2012 Bonds are owned by Capital One Public Funding, LLC (“Capital One”); and
WHEREAS, in order to realize debt service savings for the benefit of the taxpayers of the City, the City Council wishes at this time to authorize the issuance and sale of its City of Menlo Park 2022 General Obligation Refunding Bonds (2001 Election) (the “Refunding Bonds”) for the purpose of refinancing the 2012 Bonds; and
WHEREAS, the City Council is authorized to provide for the issuance and sale of the Refunding Bonds under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53550 of said Code (the “Bond Law”); and
WHEREAS, Capital One and the City have agreed that the City may redeem the 2012 Bonds on April 14, 2022, or such later date agreed by the City and Capital One; and WHEREAS, Capital One has offered to purchase the Refunding Bonds at a price that City staff has concluded, with input from the City’s municipal advisor, is in the best interests of the City; and
ATTACHMENT A Page J-2.6
WHEREAS, in order to comply with Government Code Section 5852.1, certain information relating to the Refunding Bonds is set forth in Exhibit A attached to this Resolution, and such information is hereby disclosed and made public; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Menlo Park, as follows:
Section 1. Approval of Paying Agent Agreement. The proposed form of paying agent agreement, by and between the City and The Bank of New York Mellon Trust Company, N.A. (the “Paying Agent”), which is on file with the City Clerk (the “Paying Agent Agreement”), is hereby approved, and the Mayor and the City Manager, each acting alone (an “Authorized Officer”), is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Paying Agent Agreement in substantially said form, with such additions thereto (including the insertion of the maturity dates, principal amounts, interest rates, place or places for payment of principal and interest, form and costs of issuing the Refunding Bonds) and changes therein as an Authorized Officer may approve, such approval to be conclusively evidenced by the execution and delivery thereof by an Authorized Officer. The City Council hereby authorizes the performance by the City of its obligations under the Paying Agent Agreement. The selection of The Bank of New York Mellon Trust Company, N.A., as Paying Agent is hereby approved and ratified.
Section 2. Approval of Form of Refunding Bonds. The form of Refunding Bonds set forth in the form of Exhibit A to the Paying Agent Agreement is hereby approved, and the Mayor is hereby authorized and directed to execute the Refunding Bonds, and the City Clerk is hereby authorized to countersign in the name and on behalf of the City and to cause the delivery thereof as provided for below.
Section 3. Sale and Issuance of Refunding Bonds. The negotiated sale of the Refunding Bonds to Capital One is hereby approved, provided that the condition set forth in the second paragraph of this Section 3 is satisfied and the final maturity date of the Refunding Bonds shall not be later than August 1, 2032.
As provided in Section 53552 of the Bond Law, the Refunding Bonds shall not be issued unless the total net interest cost to maturity on the Refunding Bonds plus the principal amount of the Refunding Bonds is less than the total net interest cost to maturity on the 2012 Bonds to be refunded plus the principal amount of the 2012 Bonds to be refunded. Before issuing the Refunding Bonds, the City shall receive confirmation from its municipal advisor that the requirements of Section 53552 of the Bond Law have been satisfied.
In connection with the negotiated sale of the Refunding Bonds to Capital One, the City Council hereby directs the City Manager, the Administrative Services Director or the Finance Director to send the notice required by Section 53583(c)(2(B) of the Bond Law.
In the event that the sale to Capital One is not accomplished as described in this Resolution, the City Manager is hereby authorized to sell the Refunding Bonds by competitive sale or by negotiated sale if the City Manager concludes, based on information provided by the City’s municipal advisor, is in the best interests of the City and provided that (a) the final maturity date of the Refunding Bonds shall not be later than August 1, 2032 and (b) the condition set forth in the second paragraph of this Section 3 is satisfied. If the City Manager decides the Refunding Bonds should be sold in a public offering, the Refunding Bonds shall be described in the Official Page J-2.7
Statement approved by the City Council in Resolution No. XXXX adopted on the date hereof and may be included in the Bond Purchase Agreement approved by the City Council pursuant to such resolution.
Section 4. Refunding of 2012 Bonds; Approval of Irrevocable Refunding Instructions. The 2012 Bonds shall be refunded in accordance with irrevocable refunding instructions given to the 2012 Paying Agent by the City (“Irrevocable Refunding Instructions”). The City Council hereby approves the Irrevocable Refunding Instructions in substantially the form on file with the City Clerk, together with any changes therein or modifications thereof which are approved by an Authorized Officer, and the execution thereof by an Authorized Officer will be conclusive evidence of the approval of any such changes or modifications. An Authorized Officer is directed to authenticate and execute the final form of the Irrevocable Refunding Instructions on behalf of the City, and to deliver the executed Irrevocable Refunding Instructions. The sufficiency of the amounts deposited with the 2012 Paying Agent to redeem the 2012 Bonds shall be certified by a certified public accountant to the extent required by law, the 2012 Paying Agent Agreement and Capital One.
Section 5. Delegation of Authority to Authorized Officers. The Authorized Officers are hereby authorized and directed to execute, sign and deliver any and all approvals, certificates, statements, requests, requisitions and orders of the City in connection with the sale and issuance of the Refunding Bonds, the purchase of the Refunding Bonds and the other transactions described herein. The Authorized Officers may authorize such other officers of the City as they deem appropriate to undertake any of the actions which he is authorized or directed to undertake pursuant hereto
Section 6. General Authority. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the transactions described herein or to otherwise effectuate the purposes of this resolution. Any such actions previously taken by such officers are hereby ratified and confirmed.
Section 7. Approval of Professional Services. The City Council hereby appoints the firm of Urban Futures, Inc. as municipal advisor to the City in connection with the issuance of the Refunding Bonds and the Authorized Officers are authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. The City Council hereby appoints the firm of Jones Hall, A Professional Law Corporation, as bond counsel and disclosure counsel to the City in connection with the issuance of the Refunding Bonds, and an Authorized Officer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk.
Section 8. Severability. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect any remaining provisions hereof.
Section 9. Effective Date. This resolution shall take effect from and after the date of its passage and adoption.
//
//
Page J-2.8
I, Judi A. Herren, City Clerk of Menlo Park, do hereby certify that the above and foregoing City Council Resolution was duly and regularly passed and adopted at a meeting by said City Council on the twelfth day of April, 2022, by the following votes:
AYES:
NOES:
ABSENT:
ABSTAIN:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of said City on this __ day of April, 2022.
Judi A. Herren, City Clerk
Exhibits
A. Government Code Section 5852.1 Disclosure
Page J-2.9
Government Code Section 5852.1 Disclosure
The following information consists of estimates that have been provided in good faith by the City’s Municipal Advisor, based on an estimated principal amount of $5,890,000:
(A) True Interest Cost of the Refunding Bonds: 2.50%
(B) Finance Charge of the Refunding Bonds (Sum of all fees/charges paid to third parties): $20,145
(C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $5,934,789
(D) Total Payment Amount Through Maturity: $6,795,063
The foregoing estimates constitute good faith estimates only. The principal amount of the Refunding Bonds, the true interest cost of the Refunding Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Refunding Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Refunding Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Refunding Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors.
The actual date of sale of the Refunding Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Refunding Bonds and other factors. The actual interest rates borne by the Refunding Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Refunding Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.
EXHIBIT A Page J-2.10
PAYING AGENT AGREEMENT
By and Between
CITY OF MENLO PARK
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Paying Agent
Dated as of April 1, 2022
Relating to
$____________
City of Menlo Park
2022 General Obligation Refunding Bonds
(2001 Election)
ATTACHMENT B Page J-2.11
i
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; AUTHORITY
Section 1.01. Definitions................................................................................................................................3 Section 1.02. Authority for this Agreement................................................................................................5
ARTICLE II
THE BONDS
Section 2.01. Authorization...........................................................................................................................6 Section 2.02. Terms of Bonds........................................................................................................................6 Section 2.03. Redemption. .............................................................................................................................7 Section 2.04. Form of Bonds. ........................................................................................................................8 Section 2.05. Execution of Bonds. ................................................................................................................8 Section 2.06. Transfer of Bonds. ...................................................................................................................8 Section 2.07. Exchange of Bonds..................................................................................................................8 Section 2.08. Bond Register...........................................................................................................................9 Section 2.09. Temporary Bonds....................................................................................................................9 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen........................................................................9 Section 2.11. Book-Entry; Limited Obligation of City..........................Error! Bookmark not defined.
Section 2.12. Representation Letter.........................................................Error! Bookmark not defined.
Section 2.13. Transfers Outside Book-Entry System. ...........................Error! Bookmark not defined.
Section 2.14. Payments and Notices to the Nominee...........................Error! Bookmark not defined.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF BOND PROCEEDS;
SECURITY FOR THE BONDS
Section 3.01. Issuance and Delivery of Bonds..........................................................................................10 Section 3.02. Application of Proceeds of Sale of Bonds. .........................................................................10 Section 3.03. Validity of Bonds...................................................................................................................10 Section 3.04. Security for the Bonds. .........................................................................................................10
ARTICLE IV
FUNDS AND ACCOUNTS
Section 4.01. Project Fund. ..........................................................................................................................12 Section 4.02. Debt Service Fund.................................................................................................................12 Section 4.03. Administration and Disbursements From Debt Service Fund .......................................12 Section 4.04. Debt Service Fund.................................................................................................................12 Section 4.05. Investment of Moneys ..........................................................................................................13
ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. ................................................................................................................14 Section 5.02. Extension of Time for Payment...........................................................................................14 Section 5.03. Payment of Claims................................................................................................................14 Section 5.04. Books and Accounts..............................................................................................................14 Section 5.05. Protection of Security and Rights of Bondowners............................................................14 Section 5.06. Continuing Disclosure..........................................................................................................14 Section 5.07. Further Assurances. ..............................................................................................................14 Section 5.08. No Arbitrage..........................................................................................................................15 Page J-2.12
ii
Section 5.09. Federal Guarantee Prohibition. ...........................................................................................15 Section 5.10. Private Activity Bond Limitation........................................................................................15 Section 5.11. Maintenance of Tax-Exemption ..........................................................................................15 Section 5.12. Rebate Requirement..............................................................................................................15 Section 5.13. Information Report. ..............................................................................................................15
ARTICLE VI
THE PAYING AGENT
Section 6.01. Appointment of Paying Agent. ...........................................................................................16 Section 6.02. Paying Agent May Hold Bonds. .........................................................................................16 Section 6.03. Liability of Agents.................................................................................................................16 Section 6.04. Notice to Agents....................................................................................................................17 Section 6.05. Compensation, Indemnification..........................................................................................17 Section 6.06. Funds and Accounts. ............................................................................................................18
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 7.01. Events of Default...................................................................................................................19 Section 7.02. Application of Funds. ...........................................................................................................20 Section 7.03. Other Remedies of Bondowners. ........................................................................................20 Section 7.04. Non-Waiver. ..........................................................................................................................20 Section 7.05. Remedies Not Exclusive.......................................................................................................21
ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
Section 8.01. Amendments Permitted. ......................................................................................................22 Section 8.02. Owners’ Meetings. ................................................................................................................22 Section 8.03. Procedure for Amendment with Written Consent of Owners........................................23 Section 8.04. Disqualified Bonds................................................................................................................23 Section 8.05. Effect of Supplemental Agreement.....................................................................................23 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. ............................24 Section 8.07. Amendatory Endorsement of Bonds..................................................................................24
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties..........................................................................25 Section 9.02. Successor is Deemed Included in All References to Predecessor. ..................................25 Section 9.03. Discharge of Agreement.......................................................................................................25 Section 9.04. Execution of Documents and Proof of Ownership by Owners.......................................26 Section 9.05. Waiver of Personal Liability. ...............................................................................................26 Section 9.06. Notices to and Demands on City and Paying Agent. ......................................................26 Section 9.07. Partial Invalidity....................................................................................................................27 Section 9.08. Unclaimed Moneys. ..............................................................................................................27 Section 9.09. Applicable Law......................................................................................................................27 Section 9.10. Conflict with Act. ..................................................................................................................27 Section 9.11. Conclusive Evidence of Regularity.....................................................................................27 Section 9.12. Payment on Business Day....................................................................................................27 Section 9.13. Counterparts. .........................................................................................................................28
EXHIBIT A FORM OF BOND
Page J-2.13
PAYING AGENT AGREEMENT
This Paying Agent Agreement (the “Agreement”) is made and entered into as of April 1, 2022, by and between the City of Menlo Park, a general law city organized and existing under the laws of the State of California (the “City”) and The Bank of New York Mellon Trust Company, N.A., a national banking association duly organized and existing under the laws of the United States, as Paying Agent (the “Paying Agent”) W I T N E S S ET H:
WHEREAS, at an election held on November 6, 2001, the City of Menlo Park (the “City”) submitted the following proposition to the registered voters of the City:
To renovate and expand the City's parks and recreation facilities, shall the City of MenIo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided, that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?"; and
WHEREAS, at least two-thirds of the votes cast on the proposition at the election were in favor; and
WHEREAS, pursuant to such authorization and Resolution No. 6044 (the “2012 Bond Resolution”), the City has previously issued the 2012 General Obligation Refunding Bonds (the “2012 Bonds”); and
WHEREAS, the 2012 Bonds were issued under a Paying Agent Agreement, dated as of January 18, 2012 (the “2012 Paying Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A. (the “2012 Paying Agent”); and WHEREAS, the 2012 Bonds are owned by Capital One Public Funding, LLC (“Capital One”); and
WHEREAS, in order to realize debt service savings for the benefit of the taxpayers of the City, the City wishes to issue its City of Menlo Park 2022 General Obligation Refunding Bonds (2001 Election) (the “Bonds”) for the purpose of refinancing the 2012 Bonds; and WHEREAS, the City Council is authorized to provide for the issuance and sale of the Bonds under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53550 of said Code (the “Bond Law”); and
Page J-2.14
2 WHEREAS, Capital One and the City have agreed that the City may redeem the 2012 Bonds on April 14, 2022; and
WHEREAS, Capital One has offered to purchase the Bonds at a price that City staff has concluded, with input from the City’s municipal advisor, is in the best interests of the City, and the City and the Paying Agent wish to enter into this Agreement to specify the terms of the Bonds; and
WHEREAS, the City Council of the City authorized the issuance of the Bonds and the execution and delivery of this Agreement pursuant to Resolution No. _____, adopted on April 12, 2022 (the “City Resolution”);
NOW THEREFORE, the City and the Paying Agent agree as follows:
Page J-2.15
3 ARTICLE I
DEFINITIONS; AUTHORITY
Section 1.01. Definitions. The terms defined in this Section 1.01, as used and capitalized herein, shall, for all purposes of this Agreement, have the meanings ascribed to them below, unless the context clearly requires some other meaning. “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof.
“Authorized Denomination” means the outstanding principal amount of the Bonds. “Bond Counsel” means any attorney or firm of attorneys nationally recognized for expertise in rendering opinions as to the legality and tax exempt status of securities issued by public entities.
“Bond Law” means Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, commencing with Section 53550 of said Code, as amended from time to time.
“Bond Service Fund” means the Bond Service Fund established pursuant to Section 4.04 hereof.
“Bonds” means the City of Menlo Park 2022 General Obligation Refunding Bonds, (2001 Election), Outstanding pursuant to this Agreement.
“Business Day” means a day which is not a Saturday or Sunday or a day on which banks in San Francisco and Los Angeles, California, and New York, New York, are not required or permitted to be closed.
“City Representative” means the City Manager, the Administrative Services Director, the Finance and Budget Manager or any other person authorized by resolution of the City Council of the City or by the City Manager or the Administrative Services Director to act on behalf of the City with respect to this Agreement.
“City Resolution” has the meaning given to said term in the recitals hereto. “City Treasurer” means the City Treasurer or any other person authorized by resolution of the City Council to act on behalf of the City with respect to this Agreement. “Closing Date” means the date upon which there is an exchange of Bonds for the proceeds representing the purchase price of the Bonds by the Purchaser. “Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on Page J-2.16
4 the Closing Date, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under said Code. “Costs of Issuance Fund” means the Costs of Issuance Fund established pursuant to Section 4.01 hereof.
“Debt Service” means the scheduled amount of interest and principal, including principal paid pursuant to mandatory sinking fund redemption, payable on the Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. “Debt Service Fund” means the Debt Service Fund (2022 General Obligation Refunding Bonds) established pursuant to Section 4.02 hereof.
“Fair Market Value” means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten percent (10%) beneficial interest if the return paid by the fund is without regard to the source of investment. “Federal Securities” means Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States governmentsponsored enterprises. “Institutional Accredited Investor” means an “accredited investor” as defined in subsections (a)(1), (2), (3) and (7) of Securities and Exchange Commission Rule 501 promulgated under the Securities Act of 1933,
“Issuance Expenses” means all items of expense directly or indirectly reimbursable to the City relating to the execution and delivery of the Bonds, including but not limited to, filing and recording costs, settlement costs, printing costs, reproduction and binding costs, legal fees and charges, bond insurance premiums, fees and expenses of the Paying Agent, financial and other professional consultant fees, and costs of obtaining credit ratings. “Original Purchaser” means Capital One Public Funding, LLC.
Page J-2.17
5 “Outstanding,” when used as of any particular time with reference to Bonds, means all Bonds except:
(a) Bonds theretofore canceled by the Paying Agent or surrendered to the Paying Agent for cancellation;
(b) Bonds paid or deemed to have been paid within the meaning of Section
9.03 hereof; and
(c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City pursuant to the Agreement. “Owner” or “Bondowner” means any person who shall be the registered owner of any Outstanding Bond.
“Person” means an individual, corporation, firm, association, partnership, trust or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Principal Office” means the office or offices of the Paying Agent for the payment of the Refunding Bonds and the administration of its duties hereunder, as such office or offices shall be identified in a written notice filed with the City by the Paying Agent, provided, however, solely for the purposes of the presentation and surrender of the Refunding Bonds for payment, transfer or exchange, the Principal Office of the Paying Agent shall be the designated corporate trust agency or operations office of the Paying Agent.
“Qualified Institutional Buyer” means a qualified institutional buyer as defined in Rule 144A promulgated pursuant to the United States Securities Act of 1933, as amended. “Regulations” means temporary and permanent regulations promulgated under the Code.
“Supplemental Agreement” means any agreement supplemental to or amendatory of this Agreement entered into in accordance with Article VIII hereof. “Written Request of the City” means an instrument in writing signed by the City Representative.
Section 1.02. Authority for this Agreement. This Agreement is being entered into pursuant to the authority set forth in the Bond Law and the City Resolution, constitutes a continuing agreement with the Owners of all of the Bonds issued or to be issued hereunder and then Outstanding, to secure the full and final payment of principal of and premiums, if any, and the interest on the Bonds, all pursuant to the provisions of the Bond Law.
Page J-2.18
6 ARTICLE II
THE BONDS
Section 2.01. Authorization. Bonds in the aggregate principal amount of ________ dollars ($_________) are hereby authorized to be issued by the City under and subject to the terms of the Bond Law and which may from time to time be executed and delivered hereunder, subject to the covenants, agreements, provisions and conditions herein contained.
The Bonds shall be designated the “City of Menlo Park 2022 General Obligation Refunding Bonds (2001 Election)”.
Section 2.02. Terms of Bonds.
(a) Form; Numbering. The Bonds shall be issued as fully registered Bonds, without coupons, in an Authorized Denomination. Bonds shall be lettered and numbered as the Paying Agent shall prescribe.
The Bonds shall be issued in an Authorized Denomination (b) Date of Bonds. The Bonds shall be dated the Closing Date. (c) CUSIP Identification Numbers. “CUSIP” identification numbers may, at the election of the Original Purchaser, be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of the Purchaser to accept delivery of and pay for the Bonds. In addition, failure on the part of the City to use such CUSIP numbers in any notice to Owners of the Bonds shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice. (d) Maturities; Interest. The Bonds shall bear interest at the rate or rates set forth below, payable on February 1 and August 1 of each year, commencing February 1, 2023 (each an “Interest Payment Date”), and shall mature and become payable as to principal on August 1 of the years and in the amounts as set forth below.
Maturity Date
(August 1)
Principal
Amount
Interest
Rate
2032
Page J-2.19
7 Each Bond shall bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered and authenticated prior to an Interest Payment Date and after the close of business on the fifteenth day of the month preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is registered and authenticated on or prior to January 15, 2010, in which event it shall bear interest from the date of original issuance and authentication of the Bonds; provided, however, that if at the time of registration and authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
Interest on the Bonds shall be calculated on the basis of a 360-day year composed of twelve 30-day months.
(e) Payment. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check mailed on the applicable Interest Payment Date to the Owner thereof at his or her address as it appears on the registration books maintained by the Paying Agent at the close of business on the fifteenth (15th) day of the month preceding the Interest Payment Date, or at such other address as the Owner may have filed with the Paying Agent for that purpose; provided that an Owner shall, at their option, receive payment of interest by wire transfer to an account in the United States of America designated by such Owner to the Paying Agent no later than the fifteenth (15) day of the month immediately preceding the applicable Interest Payment Date. Principal of the Bonds is payable in lawful money of the United States of America at the Principal Office of the Paying Agent.
Section 2.03. Redemption.
(a) Optional Redemption. The Bonds are not subject to optional redemption prior to their maturity date.
(b) Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory sinking fund redemption in part, by lot, prior to their stated maturity date, on each August 1 on and after August 1, 20__, at a redemption price equal to 100% of the principal amount thereof called for redemption, plus accrued interest to the redemption date, without premium, as follows:
Date
(August 1) Amount
(Maturity)
Page J-2.20
8 Section 2.04. Form of Bonds. The Bonds, the form of the Paying Agent’s certificate of authentication and registration and the form of assignment to appear thereon shall be substantially in the forms, respectively, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, as are set forth in Exhibit A attached hereto.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the City by the manual or facsimile signatures of its Mayor and attested by the manual or facsimile signature of its City Clerk. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the Purchaser, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the Purchaser. Any Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such Bond shall be the proper officers of the City although at the nominal date of such Bond any such person shall not have been such officer of the City.
Only such Bonds as shall bear thereon a certificate of authentication and registration in the form set forth in Exhibit A attached hereto, executed and dated by the Paying Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of the Paying Agent shall be conclusive evidence that the Bonds so registered have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 hereof, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office at the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. The Paying Agent shall require the payment by the Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Paying Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount.
No transfers of Bonds shall be required to be made (a) fifteen days prior to the date established for selection of Bonds for redemption or (b) with respect to a Bond after such Bond has been selected for redemption (except with respect to the unredeemed portion thereof).
The Bonds may only be transferred in an Authorized Denomination to an Institutional Accredited Investor or Qualified Institutional Buyer who delivers to the Trustee and the Authority an executed letter substantially in the forms of Exhibit B of this Agreement.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Paying Agent for a like aggregate principal amount of Bonds of Authorized Denomination and of the same maturity. The Paying Agent shall require the payment by the Owner Page J-2.21
9 requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
No exchanges of Bonds shall be required to be made (a) fifteen days prior to the date established for selection of Bonds for redemption or (b) with respect to a Bond after such Bond has been selected for redemption (except with respect to the unredeemed portion thereof).
Section 2.08. Bond Register. The Paying Agent shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the City upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as herein before provided.
Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the City upon the same conditions and in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Office of the Paying Agent and the Paying Agent shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits pursuant to this Agreement as definitive Bonds executed and delivered hereunder.
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated the City, at the expense of the Owner of said Bond, shall execute, and the Paying Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Paying Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Paying Agent shall be canceled by it and delivered to, or upon the order of, the City. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the City and, if such evidence be satisfactory to the City and indemnity satisfactory to it shall be given, the City, at the expense of the Owner, shall execute, and the Paying Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The City may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the City and the Paying Agent in the premises. Any Bond issued under the provisions of this Section 2.10 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the City whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement.
Page J-2.22
10 ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF
BOND PROCEEDS; SECURITY FOR THE BONDS
Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of this Agreement the City may issue and deliver Bonds in the aggregate principal amount of _________ dollars ($__________).
The Bonds, substantially in the form attached hereto as Exhibit A, shall be printed, signed and sealed, and delivered to the Original Purchaser on receipt of the purchase price therefor and upon receipt of the proceeds from the sale of the Bonds described in Section 3.02.
The appropriate officials of the City are hereby authorized to take any and all action any of them deem reasonable in order to enable the City to execute and deliver the Bonds.
The Paying Agent is hereby authorized to deliver the Bonds to the Original Purchaser, upon receipt of a Written Request of the City.
Section 3.02. Application of Proceeds of Sale of Bonds. Upon the receipt of payment for the Bonds from the Original Purchaser, being an amount equal to the purchase price of the Bonds (________), less the amount of $_____, which shall be wired directly to the 2012 Paying Agent for application in accordance with instructions given to the 2012 Paying Agent by the City, the proceeds thereof shall be deposited as follows:
(a) in the Costs of Issuance Fund, an amount required to pay the Issuance Costs ($______) and
(b) in the Debt Service Fund the amount of $__________.
Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be dependent upon the completion of the Project or upon the performance by any person of his or her obligation with respect to such Project.
Section 3.04. Security for the Bonds. The Bonds are general obligations of the City, and the City Council has the power to direct the County of San Mateo to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount, for the payment of the Bonds and the interest thereon, in accordance with Section 43632 of the Government Code. The City hereby covenants to direct the County of San Mateo to levy on all the taxable property in the City, in addition to all other taxes, a continuing direct and ad valorem tax annually during the period the Bonds are Outstanding in an amount sufficient to pay the principal of and interest on the Bonds when due, including the principal of any Bonds upon the mandatory sinking fund redemption thereof under Section 2.03(b), which moneys when collected will be deposited in the Debt Service Fund.
Amounts in the General Fund of the City are not pledged to the payment of the Bonds.
However, nothing herein limits the ability of the City to provide for payment of the principal of and interest and redemption premium (if any) on the Bonds from any source of legally available funds of the City. Any amounts so advanced by the City from legally available funds may be Page J-2.23
11 reimbursed from ad valorem property taxes described in the previous paragraph subsequently collected for the payment of the Bonds.
The principal of and interest and redemption premium (if any) on the Bonds do not constitute a debt of the County of San Mateo, the State of California, or any of its political subdivisions other than the City, or any of the officers, agents or employees thereof, and neither the County of San Mateo, the State of California, any of its political subdivisions nor any of the officers, agents or employees thereof shall be liable thereon Page J-2.24
12 ARTICLE IV
FUNDS AND ACCOUNTS
Section 4.01. Costs of Issuance Fund. There is hereby established with the Paying Agent as a separate fund, to be maintained distinct from all other funds of the Paying Agent, the Costs of Issuance Fund, to the credit of which a deposit shall be made as required by clause (a) of Section 3.02. Money in the Costs of Issuance Fund shall be held by the Paying Agent and disbursed for the payment of Issuance Costs in accordance with written directions given by a City Representative. On July 1, 2022, the Paying Agent shall transfer any remaining amounts in the Costs of Issuance Fund to the Debt Service Fund.
At such time that no amounts remain on deposit in the Costs of Issuance Fund, the City shall close the Project Fund.
Section 4.02. Debt Service Fund. The City hereby establishes a special fund to be held by the City separate and apart from all other funds of the City, to be known as the “Debt Service Fund (2022 General Obligation Refunding Bonds)”. All taxes levied by the County of San Mateo, as directed by the City, for the payment of the principal of and interest and premium (if any) on the Bonds shall be deposited in the Debt Service Fund by the City promptly upon the receipt thereof from the County of San Mateo. The Debt Service Fund is hereby pledged for the payment of the principal of and interest on the Refunding Bonds when and as the same become due. The City shall transfer amounts in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the Bonds as the same become due and payable, to the Paying Agent. Alternatively, the City may direct the County of San Mateo to transfer such taxes, in whole or in part, directly to the Paying Agent for the purpose of making payments of principal of and interest on the Refunding Bonds.
If, after payment in full of the Bonds, any amounts remain on deposit in the Debt Service Fund, the City shall transfer such amounts to its General Fund, to be applied solely in a manner which is consistent with the requirements of applicable state and federal tax law.
The Debt Service Fund shall be administered and disbursements made in the manner and in the order set forth in Section 4.03 hereof.
Section 4.03. Administration and Disbursements From Debt Service Fund. All moneys in the Debt Service Fund shall be used and withdrawn by the City solely for the purpose of paying the principal of and interest on the Bonds as the same shall become due and payable. At least five (5) Business Days prior to each Interest Payment Date, commencing in January, 2023, the City shall transfer to the Paying Agent moneys on deposit in the Debt Service Fund for application by the Paying Agent on the next succeeding Interest Payment Date to the payment of principal of and interest on the Bonds.
Section 4.04. Bond Service Fund. There is hereby established as a separate fund the Bond Service Fund, to be held by the Paying Agent. All moneys received by the Paying Agent from the City pursuant to Section 4.03 shall be deposited into the Bond Service Fund. The moneys on deposit in the Bond Service Fund shall be used solely to pay principal and interest on the Bonds when due.
Page J-2.25
13 Section 4.05. Investment of Moneys.
(a) The City shall invest all moneys held in any of the funds or accounts established with it hereunder in accordance with the investment policies of the City, as such policies shall exist at the time of investment, and in accordance with Section 53601 of the California Government Code. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account.
All interest or gain derived from the investment of amounts in any of the funds or accounts established with it hereunder shall be deposited in the fund or account from which such investment was made, and shall be expended for the purposes thereof. The City covenants that all investments of amounts deposited in any fund or account established with it hereunder, or otherwise containing proceeds of the Bonds, shall be acquired and disposed of at the Fair Market Value thereof. For purposes of this Section 4.03, the term “Fair Market Value” shall mean, with respect to any investment, the price at which a willing buyer would purchase such investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as described above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, or (iii) the investment is a United States Treasury Security - State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt..
(b) The amounts in the Bond Service Fund shall be held uninvested by the Paying Agent.
Page J-2.26
14 ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay, or cause to be paid, the principal of and interest on the Bonds, in strict conformity with the terms of the Bonds and of this Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and of the Bonds. Nothing herein contained shall prevent the City from making advances of its own moneys, howsoever derived, to any of the uses or purposes permitted by law.
Section 5.02. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the City will not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and will not, directly or indirectly, approve any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have so extended or funded.
Section 5.03. Payment of Claims. The City will pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the project financed with the proceeds of the Bonds which might impair the security of the Bonds. Nothing herein contained shall require the City to make any such payment so long as the City in good faith shall contest the validity of said claims.
Section 5.04. Books and Accounts. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City in which complete and correct entries shall be made of all transactions relating to the project financed with proceeds of the Bonds. Such books of record and accounts shall at all times during business hours be subject to inspection by the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives authorized in writing.
Section 5.05. Protection of Security and Rights of Bondowners. The City will preserve and protect the security of the Bonds and the rights of the Bondowners, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.
Section 5.06. Reserved.
Section 5.07. Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Agreement.
Page J-2.27
15 Section 5.08. No Arbitrage. The City shall not take, or permit or suffer to be taken by the Paying Agent or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be “arbitrage bonds” within the meaning of section 148 of the Code.
Section 5.09. Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be “federally guaranteed” within the meaning of section 149(b) of the Code.
Section 5.10. Private Activity Bond Limitation. The City shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code.
Section 5.11. Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds.
Section 5.12. Rebate Requirement. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of Excess Investment Earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds.
Section 5.13. Information Report. The Finance Manager is hereby directed to assure the filing of an information report for the Bonds in compliance with Section 149(e) of the Code.
Section 5.14. Record Retention. . The City will retain its records of all accounting and monitoring it carries out with respect to the Bonds for at least 3 years after the Bonds mature or are redeemed (whichever is earlier); however, if the Bonds are redeemed and refunded, the City will retain its records of accounting and monitoring at least 3 years after the earlier of the maturity or redemption of the obligations that refunded the Bonds.
Section 5.15. Tax Certificates. The City will comply with the provisions of the Certificate as to Arbitrage and the Certificate Regarding Use of Proceeds with respect to the Bonds, which are incorporated herein as if fully set forth herein. The covenants of this Section will survive payment in full or defeasance of the Bonds.
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16 ARTICLE VI
THE PAYING AGENT
Section 6.01. Appointment of Paying Agent. The Bank of New York Mellon Trust Company, N.A., at its Principal Office, or in such other location as approved by the City, is hereby appointed Paying Agent for the Bonds. The Paying Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and, even during the continuance of an Event of Default, no implied covenants or obligations shall be read into this Agreement against the Paying Agent. The Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Agreement by executing and delivering to the City this Agreement.
The City may remove the Paying Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank or trust company doing business in the State of California, having (or, if such bank or trust company is a member of a bank holding company, its parent holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 6.01 the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
The Paying Agent may at any time resign by giving written notice to the City and the Bondowners of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Paying Agent by an instrument in writing. Any resignation or removal of the Paying Agent and appointment of a successor Paying Agent shall become effective upon acceptance of appointment by the successor Paying Agent.
Section 6.02. Paying Agent May Hold Bonds. The Paying Agent may become the owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Paying Agent.
Section 6.03. Liability of Agents. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City, and the Paying Agent assumes no responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, nor shall incur any responsibility in respect thereof, other than as set forth in this Agreement.
The Paying Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default.
In the absence of bad faith, the Paying Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Agreement; but in the case of any such certificates or opinions by which any provision hereof are specifically required to be furnished to the Paying Agent, the Paying Agent shall be under a duty to Page J-2.29
17 examine the same to determine whether or not they conform to the requirements of this Agreement.
The Paying Agent shall not be liable for any error of judgment made in good faith by a responsible officer unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent facts.
No provision of this Agreement shall require the Paying Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The Paying Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Paying Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
Section 6.04. Notice to Agents. The Paying Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Paying Agent may consult with counsel, who may be of counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.
Whenever in the administration of its duties under this Agreement the Paying Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Paying Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warrant to the Paying Agent for any action taken or suffered under the provisions of this Agreement upon the faith thereof, but in its discretion the Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
Section 6.05. Compensation, Indemnification. The City shall pay to the Paying Agent from time to time reasonable compensation for all services rendered under this Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Agreement. A City Representative is hereby authorized to execute an agreement or agreements with the Paying Agent in connection with such fees and expenses.
The City further agrees to indemnify and save the Paying Agent harmless against any liabilities, costs, claims and expenses of any kind which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or bad faith.
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18 Section 6.06. Funds and Accounts. The Paying Agent may establish such funds and accounts as it reasonably deems necessary or appropriate to perform its obligations under this Agreement.
Page J-2.31
19 ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 7.01. Events of Default. If one or more of the following events (“Events of Default”) shall happen, that is to say:
(a) if default shall be made by the City in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed or by declaration or otherwise;
(b) if default shall be made by the City in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable;
(c) if default shall be made by the City in the observance of any of the covenants, agreements or conditions on its part in this Agreement or in the Bonds contained, and such default shall have continued for a period of thirty (30) days after written notice thereof to the City Representative; or
(d) if the City shall file a petition seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, seeking reorganization of the City under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the City or of the whole or any substantial part of its property; then, and in each and every event of default and upon written request of the Owners of not less than sixty percent (60%) in aggregate principal amount of the Bonds at the time Outstanding, the principal of all of the Bonds then Outstanding, and the interest accrued thereon, shall be declared to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Agreement or in the Bonds contained to the contrary notwithstanding.
Such declaration may be rescinded by the Owners of not less than sixty percent (60%) in aggregate principal amount of the Bonds at the time Outstanding provided the City cures such default or defaults, including the deposit with the Paying Agent of a sum sufficient to pay all principal on the respective Bonds matured prior to such declaration and all matured installments of interest (if any) on the Bonds, with interest at the rate of twelve percent (12%) per annum on such overdue installments of principal and, to the extent such payment of interest is lawful at that time, on such overdue installments of interest, so that the City is currently in compliance with all payment, deposit and transfer provisions of this Agreement, and a sum sufficient to pay any expenses incurred by the Paying Agent in connection with such default.
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20 Section 7.02. Application of Funds. All of the sums in the funds and accounts provided for in Sections 4.02 and 4.03 hereof, upon the date of the Event of Default as provided in Section 7.01 hereof, and all sums thereafter received by the Paying Agent hereunder, shall be applied by the Paying Agent in the following order upon presentation of the Bonds, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid:
First, to the payment of the costs and expenses of the Paying Agent hereunder and of the costs and expenses of Bondowners in declaring such event of default, including reasonable compensation to her or their agents, attorneys and counsel; Second, in case the principal of the Bonds shall not have become due and payable, to the payment of the interest in default in the order of the seniority of the installments of such interest, with interest on the overdue installments at the rate of twelve percent (12%) per annum (to the extent that such interest on overdue installments shall have been collected), such payments to be made ratably to the persons entitled thereto without discrimination or preference;
Third, in case the principal of the Bonds shall have become and shall be then due and payable, all such sums shall be applied to the payment of the whole amount then owing and unpaid upon the Bonds for principal and interest, with interest on the overdue principal and installments of interest at the rate of twelve percent (12%) per annum (to the extent that such interest on overdue installments of interest shall have been collected), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest.
Section 7.03. Other Remedies of Bondowners. Any Bondowner shall have the right, for the equal benefit and protection of all Bondowners similarly situated:
(a) by mandamus, suit, action or proceeding, to compel the City and its members, officers, agents or employees to perform each and every term, provision and covenant contained in this Agreement and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the City and the fulfillment of all duties imposed upon it;
(b) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Bondowners’ rights; or (c) upon the happening of any event of default (as defined in Section 7.01 hereon, by suit, action or proceeding in any court of competent jurisdiction, to require the City and its members and employees to account as if it and they were the Paying Agents of an express trust.
Section 7.04. Non-Waiver. Nothing in this Article VII or in any other provision of this Agreement, or in the Bonds, shall affect or impair the obligation of the City, which is absolute Page J-2.33
21 and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as herein provided, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds.
A waiver of any default by any Bondowner shall not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of any Owner of any of the Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Bondowners by this Article VI may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners of the Bonds.
If a suit, action or proceeding to enforce any right or exercise any remedy be abandoned or determined adversely to the Bondowners, the City and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.
Section 7.05. Remedies Not Exclusive. No remedy herein conferred upon the Owners of Bonds shall be exclusive of any other remedy and that each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or thereafter conferred on the Bondowners.
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22 ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
Section 8.01. Amendments Permitted. This Agreement and the rights and obligations of the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the ad valorem taxes of the taxes superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Bond Law, the laws of the State of California or this Agreement), or reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modify any of the rights or obligations of the Paying Agent without its written consent.
This Agreement and the rights and obligations of the City and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:
(a) to add to the covenants and agreements of the City in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the City; (b) to make modifications not adversely affecting any outstanding series of Bonds of the City in any material respect;
(c) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the City and the Paying Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners of the Bonds; and
(d) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Code relating to required rebate of Excess Investment Earnings to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the Bonds or to conform with the Regulations.
Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the Owners. In such event the City is authorized to fix the time and place of said meeting and to provide for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said meeting.
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23 Section 8.03. Procedure for Amendment with Written Consent of Owners. The City and the Paying Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Paying Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided.
Such Supplemental Agreement shall not become effective unless there shall be filed with the Paying Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Paying Agent prior to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Paying Agent. A record, consisting of the papers required by this Section 8.03 to be filed with the Paying Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Paying Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the City and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period.
Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII.
Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties Page J-2.36
24 and obligations under this Agreement of the City and all owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes.
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The City may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Office of the Paying Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that new Bonds, so modified as in the opinion of the City is necessary to conform to such Owners’ action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Paying Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds.
Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.
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25 ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the City, the Paying Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Paying Agent.
Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Agreement or any Supplemental Agreement either the City or the Paying Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the City or the Paying Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
Section 9.03. Discharge of Agreement. The City shall have the option to pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways:
(a) by paying or causing to be paid the principal of, and interest and any premium on, such Bonds Outstanding, as and when the same become due and payable; (b) by depositing with the Paying Agent, in trust, at or before maturity, money which, together with, in the event of a discharge of all of the Bonds, the amounts then on deposit in the funds and accounts provided for in Sections 4.02 and 4.03 is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or
(c) by irrevocably depositing with the Paying Agent, in trust, cash and Federal Securities in such amount as the City shall determine as confirmed by an independent certified public accountant will, together with the interest to accrue thereon and, in the event of a discharge of all of the Bonds, moneys then on deposit in the fund and accounts provided for in Sections 4.02 and 4.03, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates.
If the City shall have taken any of the actions specified in (a), (b) or (c) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Paying Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the funds and moneys provided for in this Agreement and all other obligations of the City under this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Paying Agent. Notwithstanding the foregoing, the obligation of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered Page J-2.38
26 and paid all sums due thereon and all amounts owing to the Paying Agent pursuant to Section
7.05 shall continue in any event.
Upon compliance by the City with the foregoing with respect to all Bonds Outstanding, any funds held by the Paying Agent after payment of all fees and expenses of the Paying Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the City.
Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books.
Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Paying Agent in good faith and in accordance therewith.
Section 9.05. Waiver of Personal Liability. No member, officer, agent or employee of the City shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law.
Section 9.06. Notices to and Demands on City and Paying Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Paying Agent to or on the City may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the City with the Paying Agent) to:
The City of Menlo Park
701 Laurel St.
Menlo Park, CA 94025
Attn: City Manager
Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the City to or on the Paying Agent may be given or served Page J-2.39
27 by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Paying Agent with the City) to:
The Bank of New York Mellon Trust Company, N.A.
2001 Bryan Street, 11th Floor
Dallas, TX 75201
Attn: Corporate Trust
Section 9.07. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The City hereby declares that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable.
Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Paying Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payments of such principal, interest and premium have become payable, if such moneys was held by the Paying Agent at such date, shall be repaid by the Paying Agent to the City as its absolute property free from any trust, and the Paying Agent shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the City for the payment of the principal of, and interest and any premium on, such Bonds.
Section 9.09. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California.
Section 9.10. Conflict with Bond Law. In the event of a conflict between any provision of this Agreement with any provision of the Bond Law as in effect on the Closing Date, the provision of the Bond Law shall prevail over the conflicting provision of this Agreement.
Section 9.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Bond Law relative to their issuance and the levy of the ad valorem taxes securing the payment of the Bonds.
Section 9.12. Payment on Business Day. In any case where the date of the maturity of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date.
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28 Section 9.13. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original.
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29 IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name and the Paying Agent has caused this Agreement to be executed in its name, all as of the date first written above.
CITY OF MENLO PARK
By:
Its:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.,
as Paying Agent
By:
Its:
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A-1
No._______________ $______________________
EXHIBIT A
FORM OF BOND
REGISTERED BOND NO. ______ $____________
CITY OF MENLO PARK
2022 GENERAL OBLIGATION REFUNDING BOND
(2001 Election)
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP
______% per annum August 1, ____
REGISTERED OWNER: Capital One Public Funding, LLC
PRINCIPAL AMOUNT:
The CITY OF MENLO PARK, a municipal corporation duly organized and existing under the laws of the State of California (the “City”), for value received, hereby promises to pay to the Registered Owner named above, or registered assigns, the Principal Amount set forth above on the Maturity Date set forth above, together with interest thereon at the Interest Rate set forth above, calculated on a 30/360 day basis, until the Principal Amount hereof is paid or provided for, such interest to be paid on February 1 and August 1 of each year, commencing _________, 20___ (the “Interest Payment Dates”). This Bond will bear interest from the Interest Payment Date next preceding the date of authentication hereof, unless (a) it is authenticated as of a business day following the 15th day of the month immediately preceding any Interest Payment Date and on or before such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (b) it is authenticated on or before _________, 20___, in which event it shall bear interest from the Dated Date set forth above.
The principal and redemption premium (if any) of and interest on this Bond are payable in lawful money of the United States of America to the person in whose name this Bond is registered (the “Registered Owner”) on the Bond registration books maintained by the Paying Agent, initially The Bank of New York Mellon Trust Company, N.A., Minneapolis, Minnesota.
Principal hereof and any redemption premium is payable upon presentation and surrender of this Bond at the principal corporate trust office of the Paying Agent. Interest hereon is payable by check mailed by the Paying Agent on each Interest Payment Date to the Registered Owner of Page J-2.43
A-2
this Bond by first-class mail at the address appearing on the Bond registration books at the close of business on the 15th day of the calendar month next preceding such Interest Payment Date (the “Record Date”); provided, however, that at the written request of the registered owner of Bonds payments shall be made by wire transfer in immediately available funds to such account of a financial institution within the United States of America as shall be specified in such written request.
This Bond is one of a series of $________ of bonds (the “Bonds”) issued for the purpose of refinancing outstanding bonded indebtedness of the City and paying all necessary financing costs in connection therewith. The Bonds have been issued under authority of and under the laws of the State of California, a resolution of the City Council of the City adopted on April 12, 2022 (the “Bond Resolution”) and a Paying Agent Agreement, dated as of April 1, 2022 (the “Paying Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as paying agent (the “Paying Agent”). The Bonds are payable as to both principal and redemption premium (if any) and interest from the proceeds of the levy of ad valorem taxes on all property subject to such taxes in the City, which taxes are unlimited as to rate or amount, that the City levies for the payment of the Bonds and the interest thereon, in accordance with Section 43632 of the Government Code.
The principal and redemption premium (if any) of and interest on this Bond do not constitute a debt of the County of San Mateo, the State of California, or any of its political subdivisions other than the City, or any of the officers, agents and employees thereof, and neither the County, the State of California, any of its political subdivisions other than the City, nor any of the officers, agents and employees thereof shall be liable hereon. In no event shall the principal and redemption premium (if any) of and interest on this Bond be payable out of any funds or properties of the City other than ad valorem taxes described in the previous paragraph.
The Bonds are issuable only as fully registered Bonds in Authorized Denominations (as defined in the Paying Agent Agreement). This Bond is exchangeable and transferable as described in the Paying Agent Agreement.
The Bonds may only be transferred in an Authorized Denomination to an Institutional Accredited Investor or Qualified Institutional Buyer who delivers to the Trustee and the Authority an executed letter substantially in the form set forth in the Paying Agent Agreement.
Any tax or governmental charges shall be paid by the transferor. The City and the Paying Agent may deem and treat the Registered Owner as the absolute owner of this Bond for the purpose of receiving payment of or on account of principal or interest and for all other purposes, and neither the City nor the Paying Agent shall be affected by any notice to the contrary.
The Bonds are not subject to optional redemption prior to their stated maturity date.
The Bonds are subject to mandatory sinking fund redemption on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to 100% of Page J-2.44
A-3
the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption.
Sinking Fund
Redemption Date
(August 1)
Principal
Amount To Be
Redeemed
Reference is made to the Paying Agent Agreement for a more complete description of the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Paying Agent and the Registered Owners, and the terms and conditions upon which the Bonds are issued and secured. The owner of this Bond assents, by acceptance hereof, to all of the provisions of the Bond Resolution.
IT IS CERTIFIED, RECITED AND DECLARED that all acts and conditions required by the Constitution and laws of the State of California to exist, to be performed or to have been met precedent to and in the issuing of the Bonds in order to make them legal, valid and binding general obligations of the City, have been performed and have been met in regular and due form as required by law; that payment in full for the Bonds has been received; that no statutory or constitutional limitation on indebtedness or taxation has been exceeded in issuing the Bonds; and that due provision has been made for levying and collecting ad valorem property taxes on all of the taxable property within the City in an amount sufficient to pay principal and interest when due, and for levying and collecting such taxes the full faith and credit of the City are hereby pledged.
This Bond shall not be valid or obligatory for any purpose and shall not be entitled to any security or benefit under the Paying Agent Agreement until the Certificate of Authentication below has been manually signed by the Paying Agent.
Page J-2.45
A-4
IN WITNESS WHEREOF, the City of Menlo Park has caused this Bond to be executed by the facsimile signature of its Mayor and attested by the facsimile signature of its City Clerk, all as of the date stated above.
CITY OF MENLO PARK
By
Mayor
Attest:
City Clerk
Page J-2.46
A-5
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the Bond Resolution referred to herein.
Date of Authentication:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.,
as Paying Agent
By
Authorized Signatory
Page J-2.47
A-6
FORM OF 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 Bond and do(es) hereby irrevocably constitute and appoint ______________________ attorney, to transfer the same on the registration books of the Bond Registrar, with full power of substitution in the premises.
Dated: ______________
Signature Guaranteed:
Note: Signature(s) must be guaranteed by
a an eligible guarantor institution.
Note: The signature(s) on this
Assignment must correspond with the
name(s) as written on the face of the
within Bond in every particular without
alteration or enlargement or any change
whatsoever.
Page J-2.48
B-1
EXHIBIT B
FORM OF INVESTOR LETTER
[date]
City of Menlo Park
The Bank of New York Mellon Trust Company, N.A.,
as Paying Agent
Re: City Menlo Park 2022 General Obligation Refunding Bonds (2001 Election) Ladies and Gentlemen:
The undersigned (the “Purchaser”) understands that the City of Menlo Park (the “City”) has issued the captioned bonds (the “Bonds”) in the initial principal amount of $________ pursuant to a Paying Agent Agreement, dated as of April 1, 2022 (the “Paying Agent Agreement”), between the City and Paying Agent identified therein.
In connection with its purchase of the Bonds, the Purchaser makes the certifications, representations, warranties, acknowledgements and covenants contained in this Investor Letter to each of the addressees hereof, with the express understanding that such certifications, representations, warranties, acknowledgements and covenants will be relied upon by such addressees.
The Purchaser hereby certifies, represents, warrants, acknowledges and covenants as follows:
(a) The Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated or formed and is authorized to invest in the Bonds being purchased hereby. The person executing this letter on behalf of the Purchaser is duly authorized to do so on the Purchaser’s behalf. (b) The Purchaser (MARK APPROPRIATELY):
_____ is a “qualified institutional buyer” (a “Qualified Institutional Buyer”) within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or
_____ is an “accredited investor” (an “Institutional Accredited Investor”) as defined in Section 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act.
(c) The Purchaser is not purchasing the Bonds for more than one account, is purchasing the Bonds for its own account and is not purchasing the Bonds with a view to distributing the Bonds.
(d) The Purchaser has sufficient knowledge and experience in financial and business matters, including the purchase and ownership of municipal bonds and other taxPage J-2.49 B-2
exempt obligations similar to the Bonds, to be capable of evaluating the merits and risks of an investment in the Bonds, and the Purchaser is able to bear the economic risks of such an investment.
(e) The Purchaser recognizes that an investment in the Bonds involves significant risks, that there is no established market for the Bonds and that none is likely to develop and, accordingly, that the Purchaser must bear the economic risk of an investment in the Bonds for an indefinite period of time.
(f) The Purchaser understands and agrees that ownership of the Bonds may be transferred: (i) only to a person that the Purchaser reasonably believes is either: (A) a Qualified Institutional Buyer that is purchasing such Bonds for not more than one account, for their own account and not with a view to distributing such Bonds; or (B) an Institutional Accredited Investor that is purchasing such Bonds for not more than one account for investment purposes and not with a view to distributing such Bonds; and (ii) only if such Qualified Institutional Buyer or Institutional Accredited Investor delivers to the County and the Fiscal Agent a completed and duly executed Investor Letter substantially in the form hereof. (g) The Purchaser is not relying upon the County, or any of its affiliates, agents or employees, for advice as to the merits and risks of investment in the Bonds. The Purchaser understands that the Bonds are special, limited obligations payable and secured solely from ad valorem taxes as described in the Paying Agent Agreement. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision.
(h) The Purchaser has conducted its own independent examination of, and has had an opportunity to ask questions and receive answers concerning, the City, the authorizing resolution of the City with respect to the Bonds (the “Resolution”), the Bonds, the Paying Agent Agreement and the security therefor and the transactions and documents related to or contemplated by the foregoing.
(i) The Purchaser has been furnished with all documents and information regarding the City, the Resolution, the Bonds, the Paying Agent Agreement and the security therefor and the transactions and documents related to or contemplated by the foregoing, and all matters related thereto, that it has requested.
(j) The Purchaser understands and agrees that: (i) the offering and sale of the Bonds are exempt from Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, pursuant to Section (d) of said Rule; (ii) the Bonds will not be listed on any stock or other securities exchange and were issued without registration under the provisions of the Securities Act of 1933 or any state securities laws; (iii) no official statement or other disclosure document is being prepared in connection with the issuance of the Bonds; and (iv) the Bonds will not carry any rating from any rating service. (k) The person executing this letter on behalf of the Purchaser is duly authorized to do so on the Purchaser’s behalf.
Page J-2.50
B-3
IN WITNESS WHEREOF, the Purchaser has executed this Investor Letter as of the date set forth below.
[Purchaser signature block to come]
Page J-2.51
1 IRREVOCABLE REFUNDING INSTRUCTIONS
These IRREVOCABLE REFUNDING INSTRUCTIONS (these “Instructions”) are dated April 14, 2022 and are given by the CITY OF MENLO PARK, a municipal corporation and general law city organized and existing under the laws of the State of California (the “City”), to THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, acting as paying agent for the 2012 Bonds (hereinafter referred to as the “2012 Paying Agent”); RECITALS:
1. At an election held on November 6, 2001, the City of Menlo Park (the “City”) submitted the following proposition to the registered voters of the City:
“To renovate and expand the City's parks and recreation facilities, shall the City of MenIo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided, that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?”
2. At least two-thirds of the votes cast on the proposition at the election were in favor.
3. Pursuant to such authorization and Resolution No. 6044 (the “2012 Bond Resolution”), the City has previously issued the 2012 General Obligation Refunding Bonds (the “2012 Bonds”).
4, The 2012 Bonds were issued under a Paying Agent Agreement, dated as of January 18, 2012 (the “2012 Paying Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A. (the “2012 Paying Agent”).
5. The 2012 Bonds are owned by Capital One Public Funding, LLC (“Capital One”); and
6. Capital One has agreed that the City may redeem the 2012 Bonds in whole on April 14, 2022, at a redemption price equal to the outstanding principal amount of the 2012 Bonds, plus interest accrued to the redemption date, without premium, and that the redemption provisions and redemption price set forth herein are acceptable to Capital One.
7. In order to realize debt service savings for the benefit of the taxpayers of the City, the City Council adopted its Resolution No. ____ on April 12, 2022 (the “2022 Bond Resolution”) to authorize the issuance and sale of its City of Menlo Park 2022 General Obligation Refunding Bonds (2001 Election) (the “Refunding Bonds”) for the purpose of refinancing the 2012 Bonds.
The City is issuing the Refunding Bonds on the date hereof pursuant to a Paying Agent Agreement, dated as of April 1, 2022 (the “2022 Paying Agent Agreement”).
8. The 2012 Paying Agent acts as paying agent for the 2012 Bonds and as paying agent for the Refunding Bonds.
ATTACHMENT C Page J-2.52
2 9. The City wishes to give these Instructions to the 2012 Paying Agent for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the redemption of the 2012 Bonds.
NOW, THEREFORE, the City hereby irrevocably instructs the 2012 Paying Agent as follows:
Section 1. Transfer to 2012 Paying Agent; Investment of Amounts. Concurrently with delivery of the Refunding Bonds, the City shall cause Capital One to transfer $____ of the proceeds of the Refunding Bonds to the 2012 Paying Agent for deposit into the Debt Service Fund established and held by the 2012 Paying Agent pursuant to Section 4.01 of the 2012 Paying Agent Agreement. As of the date hereof, the 2012 Paying Agent has on deposit $_____ in the Debt Service Fund. Following the deposit described in the first sentence of this Section 1, the total amount in the Debt Service Fund shall be $__________, which shall be equal to the redemption price of the 2012 Bonds, representing (i) the outstanding principal amount of the 2012 Bonds ($____) and interest accrued to April 14, 2022 ($_____).
The 2012 Paying Agent shall hold all such amounts in the Debt Service Fund uninvested.
Section 2. Proceedings for Redemption of 2012 Bonds. The City hereby irrevocably elects, and directs the 2012 Paying Agent, to redeem, on April 14, 2022, the outstanding 2012 Bonds. Capital One has waived all redemption notices and defeasance notices required by the 2012 Paying Agent Agreement.
Section 3. Application of Funds to Redeem 2012 Bonds. The 2012 Paying Agent shall apply the amounts deposited into the Debt Service Fund pursuant to Section 1 to redeem the 2012 Bonds on April 14, 2022, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, without premium.
Section 4. Amendment. These Instructions shall be irrevocable by the City. These Instructions may be amended or supplemented by the City, but only if the City shall file with the 2012 Paying Agent (a) an opinion of nationally recognized bond counsel engaged by the City stating that such amendment or supplement will not, of itself, adversely affect the exclusion from gross income of interest on the 2012 Bonds or the Refunding Bonds under federal income tax law, and (b) a certification of an independent accountant or independent financial adviser engaged by the City stating that such amendment or supplement will not affect the sufficiency of funds invested and held hereunder to make the payments required by Section 3.
Section 5. Concerning the 2012 Paying Agent. The 2012 Paying Agent shall not be liable for any loss from any investment made by it in accordance with the terms of these Instructions.
The 2012 Paying Agent shall not be liable for the recitals or representations contained in these Instructions and shall not be responsible for the sufficiency of amounts described in Section 3 to pay the redemption price of the 2012 Bonds on the date specified in Section 3.
The protections, limitations from liability and indemnities provided to the 2012 Paying Agent under the 2012 Bond Resolution shall be afforded to the 2012 Paying Agent in acting pursuant to these Instructions and such provisions of the 2012 Bond Resolution are incorporated by reference herein.
Page J-2.53
3 Section 6. Governing Law. These Instructions shall be construed in accordance with and governed by the Constitution and laws of the State of California.
CITY OF MENLO PARK
By
Administrative Services Director
ACKNOWLEDGED AND ACCEPTED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as 2012 Paying
Agent
By
Authorized Representative
CAPITAL ONE PUBLIC FUNDING, LLC
By
Authorized Representative
Page J-2.54
RESOLUTION NO. XXXX
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MENLO PARK AUTHORIZING THE ISSUANCE AND SALE OF 2022 GENERAL OBLIGATION BONDS (2001 ELECTION) FOR THE PURPOSE OF FINANCING THE
CONSTRUCTION, ACQUISITION AND IMPROVEMENT OF PARKS AND
RECREATION FACILITIES, AND APPROVING RELATED DOCUMENTS AND
OFFICIAL ACTIONS
WHEREAS, at an election held on November 6, 2001, the City of Menlo Park (the “City”) submitted the following proposition to the registered voters of the City:
To renovate and expand the City's parks and recreation facilities, shall the City of MenIo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided, that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?"; and
WHEREAS, at least two-thirds of the votes cast on the proposition at the election were in favor; and
WHEREAS, pursuant to such authorization, the City previously issued the following series of bonds to finance the construction, acquisition, and improvement of parks and recreation facilities:
(i) $13,245,000 City of Menlo Park General Obligation Bonds, Series 2002, (ii) $1,080,000 City of Menlo Park General Obligation Bonds Series 2009A, and (iii) $9,360,000 City of Menlo Park General Obligation Bonds Series 2009B (Federally Taxable Build America Bonds); and
WHEREAS, as a result of the issuance of such bonds, there is $14,315,000 of remaining bonding capacity under the authorization; and
WHEREAS, the City Council wishes at this time to approve the issuance of its City of Menlo Park 2022 General Obligation Bonds (2001 Election) (the “Bonds”) in the aggregate principal amount not to exceed $14,315,000 under the November 6, 2001 authorization, this Resolution and Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Bond Law”); and
WHEREAS, in order to comply with Government Code Section 5852.1, certain information relating to the Bonds is set forth in Exhibit B attached to this Resolution, and such information is hereby disclosed and made public; and
WHEREAS, United States Income Tax Regulations section 1.150-2 provides generally that proceeds of tax-exempt debt are not deemed to be expended when such proceeds are used for reimbursement of expenditures made prior to the date of issuance of such debt unless certain ATTACHMENT D Page J-2.55
procedures are followed, one of which is a requirement that (with certain exceptions), prior to the payment of any such expenditure, the issuer declares an intention to reimburse such expenditure; and
WHEREAS, it is in the public interest and for the public benefit that the City declares its official intent to reimburse the expenditures referenced herein; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Menlo Park, as follows:
ARTICLE I
DEFINITIONS; AUTHORITY
Section 1.01. Definitions. The terms defined in this Section 1.01, as used and capitalized herein, shall, for all purposes of this Resolution, have the meanings given them below, unless the context clearly requires some other meaning.
“Bond Counsel” means (a) Jones Hall, A Professional Law Corporation, and (b) any other attorney or firm of attorneys nationally recognized for expertise in rendering opinions as to the legality and tax exempt status of securities issued by public entities. “Bond Law” means Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, as in effect on the date of adoption of this Resolution and as amended from time to time.
"Bond Purchase Agreement" means the bond purchase agreement, dated the date of sale of the Bonds, by and between the Underwriter and the City, pursuant to which the Underwriter agrees to purchase all of the Bonds, subject to the conditions contained in Section 3.01 hereof. “Bonds” means the City of Menlo Park 2022 General Obligation Bonds (2001 Election) authorized to be issued under this Resolution.
“City” means the City of Menlo Park, a municipal corporation organized under the laws of the State of California, and any successor thereto.
“City Representative” means (i) the City Manager, the Administrative Services Director, the Finance Director and (ii) any other officer of the City authorized by resolution of the City Council of the City or by one of the City Manager, the Administrative Services Director, the Finance Director to act on behalf of the City with respect to this Resolution and the Bonds. “Closing Date” means the date upon which there is a physical delivery of the Bonds in exchange for the amount representing the purchase price of the Bonds by the Original Purchaser. “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate which is executed and delivered by the Mayor or the City Manager on the Closing Date. “Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the City and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to the costs of preparation and reproduction of documents, printing expenses, Page J-2.56
filing and recording fees, initial fees and charges of the Paying Agent and its counsel, fees and charges of Bond Counsel, disclosure counsel and other legal firms, fees and disbursements of consultants and professionals, rating agency fees, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds.
“Costs of Issuance Custody Agreement” means the Costs of Issuance Custody Agreement between the City and the Costs of Issuance Custodian, dated the Closing Date, and providing for payment of the Costs of Issuance.
“Costs of Issuance Custodian” means The Bank of New York Mellon Trust Company, N.A., as custodian under the Costs of Issuance Custody Agreement. “County” means the County of San Mateo, a political subdivision of the State of California, duly organized and existing under the Constitution and laws of the State of California. “Debt Service Fund” means the account established and held by the City under Section 4.02. “Depository” means (a) initially, DTC, and (b) any other Securities Depository acting as Depository under Section 2.09.
“Depository System Participant” means any participant in the Depository’s book-entry system. “DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.
“Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. “Interest Payment Date” means February 1 and August 1 in each year, commencing February 1, 2023, or as otherwise set forth in the Bond Purchase Agreement. “Original Purchaser” means the Underwriter or such other initial purchaser pursuant to Section
3.01(f).
“Outstanding,” when used as of any particular time with reference to Bonds, means all Bonds except: (a) Bonds theretofore canceled by the Paying Agent or surrendered to the Paying Agent for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of Section
9.02; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City under this Resolution. “Owner”, whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books. “Paying Agent” means the Paying Agent appointed by the City and acting as paying agent, registrar and authenticating agent for the Bonds, its successors and assigns, and any other Page J-2.57
corporation or association which may at any time be substituted in its place, as provided in Section 6.01.
“Principal Office” means the office or offices of the Paying Agent for the payment of the Bonds and the administration of its duties hereunder, as such office or offices shall be identified in a written notice filed with the City by the Paying Agent, provided, however, solely for the purposes of the presentation and surrender of the Bonds for payment, transfer or exchange, the Principal Office of the Paying Agent shall be the designated corporate trust agency or operations office of the Paying Agent.
“Project Fund Custody Agreement” means the Project Fund Custody Agreement between the City and the Project Fund Custodian, dated the Closing Date, and providing for payment the costs of acquiring, constructing and improving parks and recreation facilities authorized under the November 6, 2001 authorization.
“Project Fund Custodian” means The Bank of New York Mellon Trust Company, N.A., as custodian under the Project Fund Custody Agreement.
“Record Date” means the 15th day of the month preceding an Interest Payment Date, whether or not such day is a business day.
“Registration Books” means the records maintained by the Paying Agent for the registration of ownership and registration of transfer of the Bonds under Section 2.08. “Resolution” means this Resolution, as originally adopted by the City Council on April 12, 2022, and including all amendments hereto and supplements hereof which are duly adopted by the City Council from time to time in accordance herewith.
“Securities Depositories” means DTC; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in a Written Request of the City delivered to the Paying Agent.
“Supplemental Resolution” means any resolution supplemental to or amendatory of this Resolution, adopted by the City in accordance with Article VIII. “Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under said Code. “Underwriter” the purchaser of the Bonds pursuant to the Bond Purchase Agreement. “Written Request of the City” means an instrument in writing signed by a City Representative or by any other officer of the City duly authorized to act on behalf of the City under a written certificate of a City Representative.
Section 1.02. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is Page J-2.58
for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Resolution; unless the context clearly indicates otherwise, the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Resolution as a whole and not to any particular Article, Section or subdivision hereof.
Section 1.03. Authority for this Resolution; Findings. This Resolution is entered into under the provisions of the Bond Law. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of the Bonds do exist, have happened or have been performed in due and regular time and manner as required by the laws of the State of California, and that the amount of the Bonds, together with all other indebtedness of the City, does not exceed any limit prescribed by any laws of the State of California.
Section 1.04. Declaration of Intent to Reimburse Expenditures. The City intends to issue the Bonds for the purpose of paying the costs of constructing, acquiring or improving the parks and recreation facilities authorized under the November 6, 2001 authorization. The City hereby declares that it reasonably expects (i) to pay certain costs of such parks and recreation facilities prior to the date of issuance of the Bonds and (ii) to use a portion of the proceeds of the Bonds for reimbursement of expenditures for such parks and recreation facilities that are paid before the date of issuance of the Bonds.
ARTICLE II
THE BONDS
Section 2.01. Authorization. The City Council hereby authorizes and finds that it is required in the prudent management of the fiscal affairs of the City to provide for the issuance of the Bonds under and subject to the terms of the Bond Law and this Resolution, for the purpose of financing the construction, acquisition, and improvement of authorized parks and recreation facilities under the November 6, 2001 authorization, Bonds and to pay the Costs of Issuance incurred in connection therewith. This Resolution constitutes a continuing agreement between the City and the Owners of all of the Bonds issued or to be issued hereunder and then Outstanding to secure the full and final payment of principal of and interest and premium, if any, on all Bonds which may be Outstanding hereunder, subject to the covenants, agreements, provisions and conditions herein contained.
The Bonds are designated the “City of Menlo Park 2022 General Obligation Bonds (2001 Election).” The Bonds may be sold in one or more series, as federally taxable bonds or federally tax-exempt bonds and with such series designations as directed by a City Representative.
In accordance with the November 6, 2001 authorization, the Bonds shall not be issued unless the City determines that, as of the date of issuance of the Bonds and based on the fiscal year 2021-22 assessed valuation of taxable property in the City, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per Page J-2.59
$100,000 in assessed valuation. Before issuing the Bonds, the City shall receive confirmation from its municipal advisor that such requirement has been satisfied.
Section 2.02. Terms of Bonds.
(a) Principal Amount of Bonds. The Bonds are authorized to be issued in an aggregate principal amount not to exceed $14,315,000.
(b) Form; Numbering. The Bonds will be issued in fully registered form, without coupons, in authorized denominations of $5,000 each or any integral multiple thereof. The Bonds will be lettered and numbered as the Paying Agent prescribes. (c) Date of Bonds. The Bonds will be dated as of the Closing Date. (d) CUSIP Identification Numbers. “CUSIP” identification numbers will be imprinted on the Bonds, but such numbers do not constitute a part of the contract evidenced by the Bonds and no error or omission with respect thereto will constitute cause for refusal of the Underwriter to accept delivery of and pay for the Bonds. In addition, failure on the part of the City to use such CUSIP numbers in any notice to Owners of the Bonds will not constitute an event of default or any violation of the City’s contract with such Owners and will not impair the effectiveness of any such notice. (e) Maturities; Basis of Interest Calculation. The Bonds shall mature (or, alternatively, be subject to mandatory sinking fund redemption as hereinafter provided) on August 1 in the years and in the amounts, and shall bear interest at the rates, as determined upon the sale thereof. The final maturity of the Bonds shall be not later than 40 years from the Closing Date. Interest on the Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months.
Each Bond shall bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless (i) it is authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated on or before the first Record Date, in which event it shall bear interest from the Closing Date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
(f) Manner of Payment. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Paying Agent mailed to the Owner thereof at such Owner’s address as it appears on the Registration Books at the close of business on the preceding Record Date; except that at the written request of the Owner of at least $1,000,000 aggregate principal amount of the Bonds, which written request is on file with the Paying Agent as of any Record Date, interest on such Bonds shall be paid by wire transfer on the succeeding Interest Payment Date to an account in the United States of America as shall be specified in such written request.
Principal of and premium (if any) on the Bonds is payable in lawful money of the United States of America upon presentation and surrender at the Principal Office of the Paying Agent.
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Section 2.03. Redemption.
(a) Optional Redemption. The Bonds are subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as designated by the City and by lot within a maturity, from any available source of funds, on the dates and at the respective redemption prices as set forth in the Bond Purchase Agreement.
(b) Mandatory Sinking Fund Redemption. If the Bond Purchase Agreement specifies that any one or more maturities of the Bonds are term bonds which are subject to mandatory sinking fund redemption, each such maturity of Bonds shall be subject to such mandatory sinking fund redemption on August 1 in each of the years and in the respective principal amounts as set forth in the Bond Purchase Agreement, at a redemption price equal to 100% of the principal amount thereof to be redeemed, together with interest accrued thereon to the date fixed for redemption, plus premium, if any. If any such term bonds are redeemed under the provisions of the preceding clause (a), the total amount of all future payments under this subsection (b) with respect to such term bonds shall be reduced by the aggregate principal amount of such term bonds so redeemed, to be allocated among such payments as determined by the City (written notice of which determination shall be given by the City to the Paying Agent).
(c) Selection of Bonds for Redemption. Whenever less than all of the Outstanding Bonds of any one maturity are designated for redemption, the Paying Agent shall select the Outstanding Bonds of such maturity to be redeemed by lot in any manner deemed fair by the Paying Agent. For purposes of such selection, each Bond will be deemed to consist of individual Bonds of $5,000 denominations each, which may be separately redeemed.
(d) Redemption Procedure. The Paying Agent will cause notice of any redemption to be (i) posted on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website and (ii) mailed, first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the respective Owners of any Bonds designated for redemption, at their addresses appearing on the Registration Books. Such mailing is not a condition precedent to such redemption and the failure to mail or to receive any such notice will not affect the validity of the proceedings for the redemption of such Bonds. In addition, the Paying Agent will give notice of redemption by telecopy or certified, registered or overnight mail to each of the Securities Depositories at least two days prior to such mailing to the Bond Owners.
The sole remedy for the Paying Agent’s failure to post such notice on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access website shall be an action by the holders of the Bonds in mandamus for specific performance or a similar remedy to compel performance.
Such notice must state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the serial numbers of the Bonds to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, or by stating that all of the Bonds of one or more maturities have been called for redemption, and shall require that such Bonds be then surrendered at the Principal Office of the Paying Agent for redemption at the said redemption Page J-2.61
price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date.
Upon surrender of Bonds redeemed in part only, the City shall execute and the Paying Agent shall authenticate and deliver to the Owner, at the expense of the City, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.
From and after the date fixed for redemption, if notice of such redemption has been duly given and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, the Bonds called for redemption will cease to be entitled to any benefit under this Resolution other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in the notice. The Paying Agent will cancel all Bonds redeemed under this Section
2.03 and will furnish a certificate of cancellation to the City. (e) Conditional Redemption Notice; Right to Rescind Notice of Optional Redemption. The City may send a conditional redemption notice that provides that redemption is subject to the availability of sufficient funds on the proposed redemption date. The City has the right to rescind any notice of the optional redemption of Bonds by written notice to the Paying Agent on or before the dated fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute a default hereunder.
The City and the Paying Agent have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Paying Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under subsection (d) of this Section.
Section 2.04. Form of Bonds. The form of the Bonds, including the form of the Paying Agent’s Certificate of Authentication and the form of Assignment to appear thereon, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Resolution, are set forth in Exhibit A attached hereto.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the City by the original or facsimile signatures of its Mayor and City Clerk who are in office on the date of adoption of this Resolution or at any time thereafter. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the Original Purchaser, such signature will nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the Original Purchaser. Any Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such Bond are the proper officers of the City although at the nominal date of such Bond any such person does not serve as such officer of the City.
Only those Bonds bearing a Certificate of Authentication in the form set forth in Exhibit A attached hereto, executed and dated by the Paying Agent, will be valid or obligatory for any purpose or entitled to the benefits of this Resolution, and such Certificate of Authentication of the Paying Agent constitutes conclusive evidence that the Bonds so registered have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Resolution.
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Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office at the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. The City may charge a reasonable sum for each new Bond issued upon any transfer.
Whenever any Bond or Bonds are surrendered for transfer, the City shall execute and the Paying Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount.
No transfers of Bonds shall be required to be made (a) 15 days prior to the date established by the Paying Agent for selection of Bonds for redemption or (b) with respect to a Bond which has been selected for redemption.
Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall provide or cause to be provided to the Paying Agent all information necessary to allow the Paying Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Paying Agent shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Paying Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The City may charge a reasonable sum for each new Bond issued upon any exchange.
No exchange of Bonds is required to be made (a) 15 days prior to the date established by the Paying Agent for selection of Bonds for redemption or (b) with respect to a Bond after it has been selected for redemption.
Section 2.08. Registration Books. The Paying Agent shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the City upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as herein before provided.
Section 2.09. Book-Entry System. Except as provided below, DTC will be the Owner of all of the Bonds, and the Bonds will be registered in the name of Cede & Co. as nominee for DTC.
The Bonds shall be initially executed and delivered in the form of a single fully registered Bond for each maturity date of the Bonds in the full aggregate principal amount of the Bonds maturing on such date. The Paying Agent and the City may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for all purposes of this Resolution, and neither the Paying Agent nor the City shall be affected by any notice to the contrary. The Paying Agent and the City shall not have any responsibility or obligation to any Depository System Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or a Depository System Participant, or any other person which is not shown on the register of the City as being an owner, with respect to the accuracy of any records maintained by DTC or any Depository System Participant or the payment by DTC or any Depository System Participant by DTC or any Depository System Participant of any amount in respect of the Page J-2.63
principal or interest with respect to the Bonds. The City shall cause to be paid all principal and interest with respect to the Bonds only to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the City’s obligations with respect to the principal and interest with respect to the Bonds to the extent of the sum or sums so paid. Except under the conditions noted below, no person other than DTC shall receive a Bond. Upon delivery by DTC to the City of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the term “Cede & Co.” in this Resolution shall refer to such new nominee of DTC.
If the City determines that it is in the best interest of the beneficial owners that they be able to obtain Bonds and delivers a written certificate to DTC and the City to that effect, DTC shall notify the Depository System Participants of the availability through DTC of Bonds. In such event, the City shall issue, transfer and exchange Bonds as requested by DTC and any other owners in appropriate amounts. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the City and discharging its responsibilities with respect thereto under applicable law. Under such circumstances (if there is no successor securities depository), the City shall be obligated to deliver Bonds as described in this Resolution. Whenever DTC requests the City to do so, the City will cooperate with DTC in taking appropriate action after reasonable notice to (a) make available one or more separate Bonds evidencing the Bonds to any Depository System Participant having Bonds credited to its DTC account or (b) arrange for another securities depository to maintain custody of certificates evidencing the Bonds.
Notwithstanding any other provision of this Resolution to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal and interest with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, to DTC as provided as in the representation letter delivered on the date of issuance of the Bonds.
ARTICLE III
SALE OF BONDS;
APPLICATION OF PROCEEDS
Section 3.01. Sale of Bonds; Approval of Sale Documents. (a) Authority for the Bonds; Terms of the Bonds. The City Council hereby approves the sale of the Bonds to the Underwriter pursuant to the terms of a Bond Purchase Agreement, between the Underwriter and the City, and dated the date of sale of the Bonds (the “Bond Purchase Agreement”), so long as (i) the principal amount of the Bonds does not exceed $14,315,000, (ii) the true interest cost does not exceed 6.0%, (iii) the Underwriter's discount on the Bonds (without regard to an original issue discount, if any) does not exceed 0.60% and (iv) the condition set forth in the final paragraph of Section 2.01 is satisfied. The City Council hereby approves the Bond Purchase Agreement in substantially the form on file with the City Clerk, together with any changes therein or modifications thereof which are approved by the Mayor or the City Manager, and the execution thereof by the Mayor or City Manager will be conclusive evidence of the approval of any such changes or modifications.
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Each of the City Manager and the Mayor is hereby authorized and directed to execute the Bond Purchase Agreement, so long as the limitations contained herein are reflected in the Bond Purchase Agreement.
The Bond Purchase Agreement shall recite the aggregate principal amount of the Bonds, the date thereof, the maturity dates, principal amounts and annual rates of interest of each maturity thereof, the initial and semiannual interest payment dates thereof, and the terms of optional and mandatory sinking fund redemption thereof, if any.
(b) Reasons for a Negotiated Sale. In accordance with Section 53508.7 of the Bond Law, the City Council has determined to sell the Bonds at negotiated sale for the following reasons: (i) a negotiated sale provides more flexibility to choose the time and date of the sale which is advantageous in a volatile municipal bond market, and (ii) a negotiated sale will permit the time schedule for the issuance and sale of the Bonds to be expedited
(c) Bond Insurance. A City Representative is hereby authorized to solicit proposals from municipal bond insurers, and, if such officer determines it is in the best interest of the City, to arrange for the issuance of a policy of municipal bond insurance for one or more maturities of the Bonds and to execute and deliver an insurance commitment and all other documents necessary in connection therewith. (d) Sale Documentation to be Controlling. Notwithstanding the foregoing provisions of this Resolution, any of the terms of the Bonds may be established or modified by the final form of the Bond Purchase Agreement, and in the event of a conflict or inconsistency between this Resolution and the Bond Purchase Agreement relating to the terms of the Bonds, the provisions of the Bond Purchase Agreement shall be controlling. In the event of a conflict or inconsistency between the Bond Purchase Agreement and the executed Bonds, the provisions of the Bond Purchase Agreement shall govern.
(e) Official Statement. The City Council hereby approves and deems final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the preliminary Official Statement describing the Bonds in the form on file with the Clerk of the City Council. A City Representative is hereby individually authorized, at the request of the Underwriter, to execute an appropriate certificate affirming the City Council’s determination that the preliminary Official Statement has been deemed final within the meaning of such Rule. Distribution of the preliminary Official Statement by the City’s financial advisor to prospective bidders on the Bonds is hereby approved. A City Representative is hereby individually authorized and directed to approve any changes in or additions to a final form of the Official Statement, and the execution thereof by such City Representative shall be conclusive evidence of approval of any such changes and additions. The City Council hereby authorizes the distribution of the final Official Statement by the Underwriter. A City Representative shall execute the final Official Statement in the name and on behalf of the City. (f) Alternative Method of Negotiated Sale. If the City Manager or the Administrative Services Director, after consultation with the City’s municipal advisor and bond counsel, concludes that it is not in the best interests of the City to sell the Bonds in a public offering as described in the preceding provisions of this Section 3.01 and that the best interests of the City would be furthered by a private placement sale of the Page J-2.65
Bonds to a limited number of financial institutions, then the City Manager or Administrative Services Director may select one or more financial institutions in accordance with a procedure recommended by the City’s municipal advisor. In such event, the terms of the Bonds may be established or modified by the final form of the documents for such private placement, which may include a bond purchase agreement or a paying agreement, and in the event of a conflict or inconsistency between this Resolution and such agreement, then the bond purchase agreement or paying agent agreement shall be controlling. In the event of a conflict or inconsistency between the bond purchase agreement or paying agent agreement and the executed Bonds, the provisions of the bond purchase agreement or paying agent agreement shall govern. Each of the City Manager and the Mayor is hereby authorized and directed to execute such bond purchase agreement or paying agent agreement.
Section 3.02. Application of Proceeds of Sale of Bonds. The proceeds of the Bonds shall be applied by the Original Purchaser on the Closing Date in accordance with a Written Request of the City, as follows:
(a) The Original Purchaser shall transfer a portion of the proceeds of the Bonds to the Cost of Issuance Custodian, for application as set forth in Section 3.04. (b) After making the transfer described in the preceding clause (a), the Original Purchaser shall transfer any remaining premium to the City for deposit in the Debt Service Fund.
(c) The Original Purchaser shall cause the remainder of such proceeds to be deposited in the Project Fund.
Section 3.03. Project Fund. The City Council hereby establishes a special fund to be held by the City separate and apart from all other funds of the City, to be known as the Project Fund.
The proceeds from the sale of the Bonds, to the extent required under Section 3.02, shall be deposited by the City in the Project Fund, and shall be expended by the City solely for the payment of (a) Costs of Issuance of the Bonds to the extent not paid as set forth in Section
3.04, and (b) costs of acquisition or improvement of real property for which the Bond proceeds are authorized to be expended under the November 6, 2001 authorization. All interest and other gain arising from the investment of amounts deposited to the Project Fund shall be retained in the Project Fund and used for the purposes thereof. Any amounts remaining on deposit in the Project Fund and not needed for the purposes thereof shall be withdrawn from the Project Fund and transferred to the Debt Service Fund, to be applied to pay the principal of and interest and premium (if any) on the Bonds.
The Project Fund may be held by the Project Fund Custodian under the Project Fund Custody Agreement approved by this Resolution.
Section 3.04. Payment of Costs of Issuance. The City shall pay the Costs of Issuance from original issue premium received from the Original Purchaser and deposited with the Costs of Issuance Custodian pursuant to the Costs of Issuance Custody Agreement. Any amounts received by the City for payment of Costs of Issuance that are not required for payment of Costs of Issuance shall be deposited into the Debt Service Fund, to be applied to pay interest next coming due and payable on the Bonds.
Page J-2.66
The City Council hereby approves the Costs of Issuance Custody Agreement in substantially the form on file with the City Clerk, together with any changes therein or modifications thereof which are approved by the Mayor or the City Manager, and the execution thereof by the Mayor or City Manager will be conclusive evidence of the approval of any such changes or modifications. The Mayor or the City Manager is directed to authenticate and execute the final form of the Costs of Issuance Custody Agreement on behalf of the City, and to deliver the executed Costs of Issuance Custody Agreement on the Closing Date.
Section 3.05. Presentation of Actual Cost Information at City Council Meeting; Report to California Debt and Investment Advisory Commission. As required by Government Code Section 53509.5, after the sale of the Bonds, the City Council shall present actual cost information for the sale at its next scheduled public meeting. In addition, Bond Counsel is authorized to submit an itemized summary of the costs of the Bond sale to the California Debt and Investment Advisory Commission.
ARTICLE IV
SECURITY FOR THE BONDS;
PAYMENT OF DEBT SERVICE
Section 4.01. Security for the Bonds. The Bonds are general obligations of the City, and the City Council has the power to direct the County to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount, for the payment of the Bonds and the interest thereon, in accordance with Section 43632 of the Government Code. The City hereby directs the County to levy on all the taxable property in the City, in addition to all other taxes, a continuing direct and ad valorem tax annually during the period the Bonds are Outstanding in an amount sufficient to pay the principal of and interest on the Bonds when due, including the principal of any Bonds upon the mandatory sinking fund redemption thereof under Section 2.03(b), which moneys when collected will be deposited in the Debt Service Fund.
Amounts in the General Fund of the City are not pledged to the payment of the Bonds.
However, nothing herein limits the ability of the City to provide for payment of the principal of and interest and redemption premium (if any) on the Bonds from any source of legally available funds of the City. Any amounts so advanced by the City from legally available funds may be reimbursed from ad valorem property taxes described in the previous paragraph subsequently collected for the payment of the Bonds.
The principal of and interest and redemption premium (if any) on the Bonds do not constitute a debt of the County, the State of California, or any of its political subdivisions other than the City, or any of the officers, agents or employees thereof, and neither the County, the State of California, any of its political subdivisions nor any of the officers, agents or employees thereof shall be liable thereon.
Section 4.02. Debt Service Fund. The City Council hereby establishes a special fund to be held by the City separate and apart from all other funds of the City, to be known as the “2022 General Obligation Bonds (2001 Election) Debt Service Fund”. All taxes levied by the County, as directed by the City, for the payment of the principal of and interest and premium (if any) on the Bonds shall be deposited in the Debt Service Fund by the City promptly upon the receipt thereof from the County. The Debt Service Fund is hereby pledged for the payment of the principal of and interest on the Bonds when and as the same become due. The City shall transfer amounts in the Debt Service Fund, to the extent necessary to pay the principal of and Page J-2.67
interest on the Bonds as the same become due and payable, to the Paying Agent. Alternatively, the City may direct the County to transfer such taxes, in whole or in part, directly to the Paying Agent for the purpose of making payments of principal of and interest on the Bonds.
If, after payment in full of the Bonds, any amounts remain on deposit in the Debt Service Fund, the City shall transfer such amounts to its General Fund, to be applied solely in a manner which is consistent with the requirements of applicable state and federal tax law.
Section 4.03. Investments. The City shall invest all moneys held in any of the funds or accounts established with it hereunder in accordance with the investment policies of the City, as such policies shall exist at the time of investment, and in accordance with Section 53601 of the California Government Code. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account.
All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the fund or account from which such investment was made, and shall be expended for the purposes thereof. The City covenants that all investments of amounts deposited in any fund or account created by or under this Resolution, or otherwise containing proceeds of the Bonds, shall be acquired and disposed of at the Fair Market Value thereof. For purposes of this Section 4.03, the term “Fair Market Value” shall mean, with respect to any investment, the price at which a willing buyer would purchase such investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as described above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United States Treasury Security - State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt.
ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City shall punctually pay, or cause to be paid, the principal of and interest on the Bonds, in strict conformity with the terms of the Bonds and of this Resolution, and shall faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and of the Bonds. Nothing herein contained prevents the City from making advances of its own moneys howsoever derived to any of the uses or purposes permitted by law.
Section 5.02. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the City will not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and will not, directly or indirectly, approve any such arrangement by purchasing or funding said claims for interest or in any other manner.
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Section 5.03. Books and Accounts; Financial Statements. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City in which complete and correct entries are made of all transactions relating to the Bonds.
Such books of record and accounts shall at all times during business hours be subject to the inspection of the Paying Agent and the Owners of not less than 10% in aggregate principal amount of the Bonds then Outstanding, or their representatives authorized in writing.
Section 5.04. Protection of Security and Rights of Bond Owners. The City will preserve and protect the security of the Bonds and the rights of the Bond Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of any of the Bonds by the City, the City may not contest the authorization, issuance, sale or repayment of the Bonds.
Section 5.05. Tax Covenants Relating to the Bonds. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. To that end, and without limiting the generality of the foregoing covenant, the City hereby covenants with the Owners of the Bonds as follows:
(a) Private Activity Bond Limitation. The proceeds of the Bonds shall not be so used as to cause the Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code.
(b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Paying Agent or otherwise, any action with respect to the Bond proceeds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code.
(d) Rebate of Excess Investment Earnings. The City shall calculate or cause to be calculated all amounts of excess investment earnings with respect to the Bonds which are required to be rebated to the United States of America under Section 148(f) of the Tax Code, at the times and in the manner required under the Tax Code. The City shall pay or cause to be paid when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code, such payments to be made from any source of legally available funds of the City. The City shall keep or cause to be kept, and retain or cause to be retained for a period of 6 years following the retirement of the Bonds, records of the determinations made under this subsection (d).
(e) Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the owners of the Bonds to the same extent as such interest is permitted to be Page J-2.69
excluded from gross income under the Tax Code as in effect on the date of issuance of the Bonds.
(f) Record Retention. The City will retain its records of all accounting and monitoring it carries out with respect to the Bonds for at least 3 years after the Bonds mature or are redeemed (whichever is earlier); however, if the Bonds are redeemed and refunded, the Issuer will retain its records of accounting and monitoring at least 3 years after the earlier of the maturity or redemption of the obligations that refunded the Bonds.
(g) Compliance with Tax Certificate. The City will comply with the provisions of the Tax Certificate and the Certificate Regarding Use of Proceeds with respect to the Bonds, which are incorporated herein as if fully set forth herein. The covenants of this Section will survive payment in full or defeasance of the Bonds.
Section 5.06. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate, which the Mayor or the City Manager is hereby authorized and directed to execute and deliver on the Closing Date. Notwithstanding any other provision of this Resolution, failure of the City to comply with the Continuing Disclosure Certificate will not be considered a default by the City hereunder or under the Bonds; however, any Participating Underwriter (as such term is defined in the Continuing Disclosure Certificate) or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.
Section 5.07. Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Resolution, and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Resolution.
ARTICLE VI
THE PAYING AGENT
Section 6.01. Appointment of Paying Agent. The Bank of New York Mellon Trust Company, N.A. is hereby appointed to act as Paying Agent for the Bonds. The Paying Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Resolution, and even during the continuance of an event of default with respect to the Bonds, no implied covenants or obligations shall be read into this Resolution against the Paying Agent. The Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by executing and delivering to the City a certificate to that effect.
The City Council hereby authorizes the Mayor or the City Manager to execute on behalf of the City a Paying Agency Agreement with The Bank of New York Mellon Trust Company, N.A. in substantially the form on file with the City Clerk. As provided in said agreement, The Bank of New York Mellon Trust Company, N.A. will act as Paying Agent as described in this Resolution.
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The City may remove the Paying Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank or trust company doing business and having an office in the State of California, having a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, under law or under the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 6.01 the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
The Paying Agent may at any time resign by giving written notice to the City and the Bond Owners of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Paying Agent by an instrument in writing. Any resignation or removal of the Paying Agent and appointment of a successor Paying Agent becomes effective upon acceptance of appointment by the successor Paying Agent.
Section 6.02. Paying Agent May Hold Bonds. The Paying Agent may become the Owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Paying Agent.
Section 6.03. Liability of Paying Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City, and the Paying Agent assumes no responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of this Resolution or of the Bonds, nor shall incur any responsibility in respect thereof, other than as set forth in this Resolution.
The Paying Agent is not liable in connection with the performance of its duties hereunder, except for its own negligence or willful default.
In the absence of bad faith, the Paying Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Resolution.
No provision of this Resolution requires the Paying Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The Paying Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Paying Agent shall be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it hereunder.
Section 6.04. Notice to Paying Agent. The Paying Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Paying Agent may consult with counsel, who may be of counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.
Whenever in the administration of its duties under this Resolution the Paying Agent deems it necessary or desirable that a matter be proved or established prior to taking or suffering any Page J-2.71
action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Paying Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate will be full warrant to the Paying Agent for any action taken or suffered under the provisions of this Resolution upon the faith thereof, but in its discretion the Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
Section 6.05. Compensation; Indemnification. The City will pay to the Paying Agent from time to time reasonable compensation for all services rendered under this Resolution, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Resolution. The City further agrees to indemnify the Paying Agent against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or bad faith.
Section 6.06. Furnishing of Statements. The Paying Agent shall furnish the City periodic cash transaction statements which include detail for all investment transactions effected by the Paying Agent or brokers selected by the City. Upon the City’s election, such statements will be delivered via the Paying Agent’s online service and upon electing such service, paper statements will be provided only upon request. The City waives the right to receive brokerage confirmations of security transactions effected by the Paying Agent as they occur, to the extent permitted by law. The City further understands that trade confirmations for securities transactions effected by the Paying Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker.
ARTICLE VII
REMEDIES OF BOND OWNERS
Section 7.01. Remedies of Bond Owners. Upon the happening and continuation of any default by the City hereunder or under the Bonds, any Bond Owner has the right, for the equal benefit and protection of all Bond Owners similarly situated:
(a) by mandamus, suit, action or proceeding, to compel the City and its members, officers, agents or employees to perform each and every term, provision and covenant contained in this Resolution and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the City and the fulfillment of all duties imposed upon it;
(b) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Bond Owners’ rights; or (c) by suit, action or proceeding in any court of competent jurisdiction, to require the City and its members and employees to account as if it and they were the trustees of an express trust.
Section 7.02. Remedies Not Exclusive. No remedy herein conferred upon the Owners of Bonds is exclusive of any other remedy. Each remedy is cumulative and shall be in addition to every other remedy given hereunder or thereafter conferred on the Bond Owners.
Page J-2.72
ARTICLE VIII
AMENDMENT OF THIS RESOLUTION
Section 8.01. Amendments Effective Without Consent of the Owners. For any one or more of the following purposes and at any time or from time to time, the City Council may by Supplemental Resolution amend this Resolution in whole or in part, without the consent of any of the Bond Owners:
(a) to add to the covenants and agreements of the City in this Resolution, other covenants and agreements to be observed by the City which are not contrary to or inconsistent with this Resolution as theretofore in effect; (b) to confirm, as further assurance, any pledge under, and to subject to any lien or pledge created or to be created by, this Resolution, of any moneys, securities or funds, or to establish any additional funds or accounts to be held under this Resolution;
(c) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Resolution, which in any event does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the City; or
(d) to make such additions, deletions or modifications as may be necessary to assure compliance with the applicable provisions of the Tax Code relating to the rebate of excess investment earnings to the United States or otherwise as may be necessary to assure that the interest on the Bonds remains excludable from gross income of the Owners thereof for federal income tax purposes, in the opinion of Bond Counsel filed with the City.
Section 8.02. Amendments Effective with Consent to the Owners. Any modification or amendment of this Resolution and of the rights and obligations of the City and of the Owners of the Bonds, in any particular, may be made by a Supplemental Resolution, with the written consent of the Owners of a majority in aggregate principal amount of the Bonds Outstanding at the time such consent is given. Without the consent of the Owners of all affected Bonds, no such modification or amendment may (a) change the maturity of the principal of any Bonds or any interest payable thereon, (b) reduce the principal amount of the Bonds or the rate of interest thereon, (c) reduce the percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, (d) change any of the provisions in Section 7.01 relating to a default by the City hereunder or under the Bonds, (e) reduce the amount of moneys pledged for the repayment of the Bonds. Without the consent of the Paying Agent, no such modification or amendment may change or modify any of the rights or obligations of the Paying Agent.
Page J-2.73
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Resolution Limited to Parties. Nothing in this Resolution, expressed or implied, is intended to give to any person other than the City, the Paying Agent, the Owners of the Bonds and any bond insurer which insures all or a portion of the Bonds, any right, remedy, claim under or by reason of this Resolution. Any covenants, stipulations, promises or agreements in this Resolution contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners of the Bonds.
Section 9.02. Defeasance.
(a) Discharge of Resolution. Bonds may be paid by the City, in whole or in part, in any of the following ways provided that the City also pays or causes to be paid any other sums payable hereunder by the City:
(i) by paying or causing to be paid the principal of and interest or redemption price on such Bonds, as and when the same become due and payable; (ii) by irrevocably depositing, in trust, at or before maturity, money or securities in the necessary amount to pay such Bonds as provided in Section 9.02(c); or (iii) by delivering such Bonds to the Paying Agent for cancellation by it.
If the City pays all Outstanding Bonds and also pays or causes to be paid all other sums payable hereunder by the City, then and in that case, at the election of the City (evidenced by a certificate of a City Representative filed with the Paying Agent, signifying the intention of the City to discharge all such indebtedness and this Resolution), and notwithstanding that any Bonds have not been surrendered for payment, this Resolution, all taxes and other assets pledged under this Resolution and all covenants, agreements and other obligations of the City under this Resolution shall cease, terminate, become void and be completely discharged and satisfied, except only as provided in Section 9.02(b). In such event, upon request of the City, the Paying Agent shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and shall execute and deliver to the City all such instruments as may be necessary to evidence such discharge and satisfaction, and the Paying Agent shall pay over, transfer, assign or deliver to the City all moneys or securities or other property held by it under this Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption. (b) Discharge of Liability on Bonds. Upon the deposit, in trust, at or before maturity, of money or securities in the necessary amount to pay any Outstanding Bond Bonds as provided in Section 9.02(c), then all liability of the City in respect of such Bond will cease and be completely discharged, except only that thereafter the Owner thereof is entitled only to payment of the principal of and interest on such Bond by the City, and the City remains liable for such payment, but only out of such money or securities deposited with the Paying Agent as aforesaid for such payment, provided further, however, that the provisions of Section 9.02(d) apply in all events.
Page J-2.74
The City may at any time surrender to the Paying Agent for cancellation by it any Bonds previously issued and delivered, which the City acquires in any manner whatsoever, and such Bonds, upon such surrender and cancellation, will be deemed paid and retired. (c) Deposit of Money or Securities with Paying Agent. Whenever in this Resolution it is provided or permitted that there be deposited with or held in trust by the Paying Agent money or securities in the necessary amount to pay any Bonds, the money or securities so to be deposited or held may include money or securities held by the Paying Agent in the funds and accounts established under this Resolution and must be:
(i) lawful money of the United States of America in an amount equal to the principal amount or redemption price of such Bonds and all unpaid interest thereon to maturity or the prior redemption date; or
(ii) Federal Securities the principal of and interest on which when due, in the opinion of a certified public accountant delivered to the City, will provide money sufficient to pay the principal of and all unpaid interest to maturity or the prior redemption date on the Bonds to be paid, as such principal and interest or redemption price become due.
(d) Payment of Bonds After Discharge of Resolution. Notwithstanding any provisions of this Resolution, any moneys held by the Paying Agent in trust for the payment of the principal of, or interest on, or redemption price of, any Bonds and remaining unclaimed for two years after the principal of all of the Bonds has become due and payable, if such moneys were so held at such date, or two years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall, upon request of the City, be repaid to the City free from the trusts created by this Resolution, and all liability of the Paying Agent with respect to such moneys shall thereupon cease. Before the repayment of such moneys to the City as aforesaid, the Paying Agent may (at the cost of the City) first mail to the Owners of all Bonds which have not been paid at the addresses shown on the Registration Books a notice in such form as may be deemed appropriate by the Paying Agent, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof.
Section 9.03. Execution of Documents and Proof of Ownership. Any request, declaration or other instrument which this Resolution may require or permit to be executed by Owners of Bonds may be in one or more instruments of similar tenor, and shall be executed by such Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any Bond Owner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same are proved by the Registration Books.
Page J-2.75
Any request, declaration or other instrument or writing of the Owner of any Bond binds all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Paying Agent in good faith and in accordance therewith.
Section 9.04. Waiver of Personal Liability. No City Council member, officer, agent or employee of the City has any individual or personal liability for the payment of the principal of or interest on the Bonds. Nothing herein contained relieves any City Council member, officer, agent or employee from the performance of any official duty provided by law.
Section 9.05. Destruction of Canceled Bonds. Whenever in this Resolution provision is made for the surrender to the City of any Bonds which have been paid or canceled under the provisions of this Resolution, a certificate of destruction duly executed by the Paying Agent constitutes the equivalent of the surrender of such canceled Bonds and the City is entitled to rely upon any statement of fact contained in any certificate with respect to the destruction of any such Bonds therein referred to.
Section 9.06. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Resolution is for any reason held illegal or unenforceable, such holding will not affect the validity of the remaining portions of this Resolution. The City hereby declares that it would have adopted this Resolution and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant hereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses, or phrases of this Resolution may be held illegal, invalid or unenforceable.
Section 9.07. Execution of Documents. Each City Representative is authorized and directed in the name and on behalf of the City to make any and all certificates, requisitions, agreements, notices, consents, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate the lawful issuance, sale and delivery of the Bonds. Whenever in this Resolution the Mayor or the City Manager is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of the Mayor or the City Manager by any person designated by the Mayor or the City Manager to act on his or her behalf in the case the Mayor or the City Manager shall be absent or unavailable.
Section 9.08. Approval of Professional Services. The City Council hereby appoints the firm of Urban Futures, Inc. as municipal advisor to the City in connection with the issuance of the Bonds and the Mayor or the City Manager is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. The City Council hereby appoints the firm of Jones Hall, A Professional Law Corporation, as Bond Counsel and disclosure counsel to the City in connection with the issuance of the Bonds, and the Mayor or City Manager is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk.
Section 9.09. Effective Date of Resolution. This Resolution becomes effective upon the date of its passage and adoption.
//
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Page J-2.76
I, Judi A. Herren, City Clerk of Menlo Park, do hereby certify that the above and foregoing City Council Resolution was duly and regularly passed and adopted at a meeting by said City Council on the twelfth day of April, 2022, by the following votes:
AYES:
NOES:
ABSENT:
ABSTAIN:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of said City on this __ day of April, 2022.
Judi A. Herren, City Clerk
Exhibits
A. Form of bond
B. Government Code Section 5852.1 Disclosure
Page J-2.77
FORM OF BOND
REGISTERED BOND NO. ______ $____________
CITY OF MENLO PARK
2022 GENERAL OBLIGATION BOND
(2001 Election)
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP
______% per
annum
August 1, ____
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
The CITY OF MENLO PARK, a municipal corporation duly organized and existing under the laws of the State of California (the “City”), for value received, hereby promises to pay to the Registered Owner named above, or registered assigns, the Principal Amount set forth above on the Maturity Date set forth above, together with interest thereon at the Interest Rate set forth above, calculated on a 30/360 day basis, until the Principal Amount hereof is paid or provided for, such interest to be paid on February 1 and August 1 of each year, commencing _________, 20___ (the “Interest Payment Dates”). This Bond will bear interest from the Interest Payment Date next preceding the date of authentication hereof, unless (a) it is authenticated as of a business day following the 15th day of the month immediately preceding any Interest Payment Date and on or before such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (b) it is authenticated on or before _________, 20___, in which event it shall bear interest from the Dated Date set forth above.
The principal and redemption premium (if any) of and interest on this Bond are payable in lawful money of the United States of America to the person in whose name this Bond is registered (the “Registered Owner”) on the Bond registration books maintained by the Paying Agent, initially The Bank of New York Mellon Trust Company, N.A., Minneapolis, Minnesota. Principal hereof and any redemption premium is payable upon presentation and surrender of this Bond at the principal corporate trust office of the Paying Agent. Interest hereon is payable by check mailed by the Paying Agent on each Interest Payment Date to the Registered Owner of this Bond by first-class mail at the address appearing on the Bond registration books at the close of business on the 15th day of the calendar month next preceding such Interest Payment Date (the “Record Date”); provided, however, that at the written request of the registered owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Paying Agent prior to any Record Date, interest on such Bonds shall be paid on each succeeding EXHIBIT A Page J-2.78
Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as shall be specified in such written request.
This Bond is one of a series of $________ of bonds (the “Bonds”) issued for the purpose of financing the construction, acquisition, and improvement of authorized parks and recreation facilities under a November 6, 2001 general obligation bond measure. The Bonds have been issued under authority of and under the laws of the State of California, and under a resolution of the City Council of the City adopted on April 12, 2022 (the “Bond Resolution”). The Bonds are payable as to both principal and redemption premium (if any) and interest from the proceeds of the levy of ad valorem taxes on all property subject to such taxes in the City, which taxes are unlimited as to rate or amount, that the City levies for the payment of the Bonds and the interest thereon, in accordance with Section 43632 of the Government Code.
The principal and redemption premium (if any) of and interest on this Bond do not constitute a debt of the County, the State of California, or any of its political subdivisions other than the City, or any of the officers, agents and employees thereof, and neither the County, the State of California, any of its political subdivisions other than the City, nor any of the officers, agents and employees thereof shall be liable hereon. In no event shall the principal and redemption premium (if any) of and interest on this Bond be payable out of any funds or properties of the City other than ad valorem taxes described in the previous paragraph.
The Bonds are issuable only as fully registered Bonds in the denominations of $5,000 or any integral multiple thereof. This Bond is exchangeable and transferable for Bonds of other authorized denominations at the principal corporate trust office of the Paying Agent, by the Registered Owner or by a person legally empowered to do so, upon presentation and surrender hereof to the Paying Agent, together with a request for exchange or an assignment signed by the Registered Owner or by a person legally empowered to do so, in a form satisfactory to the Paying Agent, all subject to the terms, limitations and conditions provided in the Bond Resolution. Any tax or governmental charges shall be paid by the transferor. The City and the Paying Agent may deem and treat the Registered Owner as the absolute owner of this Bond for the purpose of receiving payment of or on account of principal or interest and for all other purposes, and neither the City nor the Paying Agent shall be affected by any notice to the contrary.
The Bonds maturing on or before August 1, ___ are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after August 1, ___ are subject to redemption prior to maturity as a whole, or in part among maturities on such basis as shall be designated by the City and by lot within a maturity, at the option of the City, from any available source of funds, on August 1, ___ and on any Interest Payment Date thereafter, at a redemption price (expressed as a percentage of the principal amount of Bonds to be redeemed) as set forth in the following table, together with interest thereon to the date fixed for redemption.
Redemption Dates Redemption Price
Page J-2.79
[If applicable:] The Bonds maturing on August 1, 20__ (the “Term Bonds”) are also subject to mandatory sinking fund redemption on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to 100% of the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Term Bonds have been redeemed under the preceding paragraph, the aggregate principal amount of Term Bonds to be redeemed under this paragraph shall be reduced as shall be designated under written notice filed by the City with the Paying Agent.
Sinking Fund
Redemption Date
(August 1)
Principal
Amount To Be
Redeemed
The Paying Agent shall give notice of the redemption of the Bonds at the expense of the City. Such notice shall specify: (a) that the Bonds or a designated portion thereof are to be redeemed, (b) the numbers and CUSIP numbers of the Bonds to be redeemed, (c) the date of notice and the date of redemption, (d) the place or places where the redemption will be made, and (e) descriptive information regarding the Bonds including the dated date, interest rate and stated maturity date. Such notice shall further state that on the specified date there shall become due and payable upon each Bond to be redeemed, the portion of the principal amount of such Bond to be redeemed, together with interest accrued to said date, the redemption premium, if any, and that from and after such date interest with respect thereto shall cease to accrue and be payable.
Notice of redemption shall be by registered or otherwise secured mail or delivery service, postage prepaid, to the registered owner of the Bonds, to a municipal registered securities depository and to a national information service that disseminates securities redemption notices and, by first class mail, postage prepaid, to the City and the respective Owners of any Bonds designated for redemption at their addresses appearing on the Bond registration books, in every case at least 20 days, but not more than 60 days, prior to the redemption date; provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such Bonds.
The City may send a conditional redemption notice and rescind such notice, all as set forth in the Bond Resolution.
Neither the City nor the Paying Agent will be required: (a) to issue or transfer any Bond during a period beginning with the opening of business on the 15th calendar day next preceding either any Interest Payment Date or any date of selection of any Bond to be redeemed and ending with the close of business on the Interest Payment Date or a day on which the applicable notice of redemption is given, or (b) to transfer any Bond which has been selected or called for redemption in whole or in part.
Reference is made to the Bond Resolution for a more complete description of the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Paying Agent and the Registered Owners, and the terms and conditions upon which the Bonds are issued and secured.
The owner of this Bond assents, by acceptance hereof, to all of the provisions of the Bond Resolution.
Page J-2.80
IT IS CERTIFIED, RECITED AND DECLARED that all acts and conditions required by the Constitution and laws of the State of California to exist, to be performed or to have been met precedent to and in the issuing of the Bonds in order to make them legal, valid and binding general obligations of the City, have been performed and have been met in regular and due form as required by law; that payment in full for the Bonds has been received; that no statutory or constitutional limitation on indebtedness or taxation has been exceeded in issuing the Bonds; and that due provision has been made for levying and collecting ad valorem property taxes on all of the taxable property within the City in an amount sufficient to pay principal and interest when due, and for levying and collecting such taxes the full faith and credit of the City are hereby pledged.
This Bond shall not be valid or obligatory for any purpose and shall not be entitled to any security or benefit under the Bond Resolution until the Certificate of Authentication below has been manually signed by the Paying Agent.
Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the City or the Paying Agent for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of 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, the City of Menlo Park has caused this Bond to be executed by the facsimile signature of its Mayor and attested by the facsimile signature of its City Clerk, all as of the date stated above.
CITY OF MENLO PARK
By
Mayor
Attest:
City Clerk
Page J-2.81
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the Bond Resolution referred to herein.
Date of Authentication:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.,
as Paying Agent
By
Authorized Signatory
FORM OF 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 Bond and do(es) hereby irrevocably constitute and appoint ______________________
attorney, to transfer the same on the registration books of the Bond Registrar, with full power of substitution in the premises.
Dated: ______________
Signature Guaranteed:
Note: Signature(s) must be guaranteed by
a an eligible guarantor institution.
Note: The signature(s) on this Assignment
must correspond with the name(s) as
written on the face of the within Bond in
every particular without alteration or
enlargement or any change whatsoever.
Page J-2.82
Government Code Section 5852.1 Disclosure
The following information consists of estimates that have been provided in good faith by the City’s Municipal Advisors:
(A) True Interest Cost of the Bonds: 3.35%
(B) Finance Charge of the Bonds (Sum of all fees/charges paid to third parties):
$246,575
(C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $14,315,000
(D) Total Payment Amount Through Maturity: $22,151,544
The foregoing estimates constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.
EXHIBIT B Page J-2.83
Jones Hall Draft of March 27, 2022
PRELIMINARY OFFICIAL STATEMENT DATED ______, 2022
NEW ISSUE - FULL BOOK-ENTRY RATING:
Moody’s: “___”
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “LEGAL MATTERS – Tax Exemption.”
$14,315,000*
CITY OF MENLO PARK
2022 General Obligation Bonds
(2001 Election)
Dated: Date of Delivery Due August 1, as shown on inside front cover Issuance. The general obligation bonds captioned above (the “Bonds”) are being issued by the City of Menlo Park (the “City”) under provisions of the California Government Code and a Resolution adopted by the City Council of the City (the “City Council”) on April 12, 2022 (the “Bond Resolution”). The Bonds were authorized at an election of the registered voters of the City held on November 6, 2001, which authorized the issuance of general obligation bonds for the purpose of financing the construction, acquisition, and improvement of parks and recreation facilities (the “2001 Authorization”). The Bonds are the fourth and final series of bonds to be sold and issued under the 2001 Authorization.
See “THE BONDS – Authority for Issuance.”
Purpose. The Bonds are being issued for the purpose of financing the construction, acquisition, and improvement of parks and recreation facilities. See “PLAN OF FINANCE – Purpose of Issue.” Security. The Bonds are general obligations of the City, payable solely from ad valorem property taxes levied by the City and collected by San Mateo County (the “County”). The City Council is empowered and obligated to annually levy ad valorem taxes for the payment of interest on, and principal of, the Bonds upon all property subject to taxation by the City, without limitation of rate or amount (except certain personal property that is taxable at limited rates). See “SECURITY FOR THE BONDS.”
Book-Entry Only. The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The Bonds are issuable as fully registered securities in denominations of $5,000 or any integral multiple of $5,000. Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the Bonds. See “THE BONDS” and “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Payments. Interest on the Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2023. Payments of principal and interest on the Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., as paying agent (the “Paying Agent”), to DTC for subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the Bonds. See “THE BONDS – Description of the Bonds.”
Redemption. The Bonds are subject to optional and mandatory redemption prior to maturity. See “THE BONDS – Redemption.”
Maturity Schedule
(See inside cover)
Cover Page. This cover page contains certain information for general reference only. It is not a summary of all the provisions of the Bonds. Prospective investors must read the entire Official Statement to obtain information essential to making an informed investment decision.
The Bonds will be offered when, as and if issued and accepted by the Underwriter, subject to the approval as to legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel to the City, and subject to certain other conditions. Jones Hall is also serving as Disclosure Counsel to the City. Certain legal matters are being passed upon for the City by the City Attorney. It is anticipated that the Bonds, in book entry form, will be available for delivery by DTC in New York, New York, on or about May 5, 2022*.
BofA SECURITIES
The date of this Official Statement is _________, 2022.
*
Preliminary; subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered 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 sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Page J-2.84 ATTACHMENT E
MATURITY SCHEDULE
(Base CUSIP†
: _____)
Maturity Date
(August 1)
Principal
Amount
Interest
Rate Yield Price CUSIP†
C: Priced to first par optional call date of August 1, 20__.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by FactSet Research Systems Inc on behalf of The American Bankers Association. Neither the City nor the Underwriter takes any responsibility for the accuracy of the CUSIP data.
Page J-2.85
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
This Official Statement is not a contract between any bond owner and the City or the Underwriter. This Official Statement and the information contained herein are subject to completion or amendment without notice.
No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations relating to the Bonds other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Underwriter.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
Estimates and Projections. When used in this Official Statement and in any continuing disclosure by the City, in any press release and in any oral statement made with the approval of an authorized officer of the City, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.
Information in Official Statement. The information set forth in this Official Statement has been furnished by the City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness by the City.
Involvement of Underwriter. The Underwriter (as defined in “UNDERWRITING”) has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Document Summaries. All summaries of the Bond Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions.
No Securities Laws Registration. The Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the securities laws of any state.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, or the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement.
Website. The City maintains a website; however, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.
Page J-2.86
CITY OF MENLO PARK
ELECTED OFFICIALS
Betsy Nash, Mayor
Jen Wolosin, Vice Mayor
Drew Combs, Councilmember
Ray Mueller, Councilmember
Cecilia Taylor, Councilmember
CITY OFFICIALS AND STAFF
Justin Murphy, Interim City Manager
Mary Morris-Mayorga, Interim Administrative Services Director Marvin Davis, Interim Finance Director
Judi A. Herren, City Clerk
Adam Benson, Consultant
Nira F. Doherty, City Attorney
PROFESSIONAL SERVICES
BOND AND DISCLOSURE COUNSEL
Jones Hall, A Professional Law Corporation
San Francisco, California
MUNICIPAL ADVISOR
Urban Futures, Inc.
Walnut Creek, California
BOND REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The Bank of New York Mellon Trust Company, N.A.
Dallas, Texas
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i
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................................1 PLAN OF FINANCE......................................................................................................................................3 Purpose of Issue.....................................................................................................................................3 Sources and Uses of Funds ...................................................................................................................3 THE BONDS .................................................................................................................................................4 Authority for Issuance.............................................................................................................................4 Description of the Bonds ........................................................................................................................4 Payment..................................................................................................................................................5 Redemption ............................................................................................................................................5 Registration, Transfer and Exchange of Bonds......................................................................................7 Defeasance.............................................................................................................................................7 DEBT SERVICE SCHEDULE.......................................................................................................................8 SECURITY FOR THE BONDS .....................................................................................................................9 Ad Valorem Taxes ..................................................................................................................................9 Debt Service Fund..................................................................................................................................9 Limited Obligation ................................................................................................................................. 10 COVID-19 Global Pandemic.................................................................................................................10 PROPERTY TAXATION .............................................................................................................................11 Property Tax Collection Procedures.....................................................................................................11 Taxation of State-Assessed Utility Property .........................................................................................12 Assessed Valuation ..............................................................................................................................13 Alternative Method of Tax Apportionment - Teeter Plan ......................................................................16 Appeals of Assessed Value..................................................................................................................17 Tax Rates .............................................................................................................................................18 Major Taxpayers...................................................................................................................................19 Direct and Overlapping Debt ................................................................................................................19 CONSTITUTIONAL AND STATUTORY PROVISIONS..............................................................................21 AFFECTING CITY REVENUES AND APPROPRIATIONS........................................................................21 Article XIIIA of the State Constitution ...................................................................................................21 Legislation Implementing Article XIIIA..................................................................................................21 Article XIIIB of the State Constitution ...................................................................................................22 Articles XIIIC and XIIID of the State Constitution .................................................................................22 Proposition 62.......................................................................................................................................23 Proposition 1A ......................................................................................................................................24 Possible Future Initiatives.....................................................................................................................25 LEGAL MATTERS ......................................................................................................................................25 Tax Exemption......................................................................................................................................25 Continuing Disclosure...........................................................................................................................26 Material Litigation..................................................................................................................................27 RATING.......................................................................................................................................................27 MUNICIPAL ADVISOR ...............................................................................................................................29 UNDERWRITING........................................................................................................................................29
APPENDIX A - GENERAL INFORMATION ABOUT THE CITY OF MENLO PARK
AND SAN MATEO COUNTY
APPENDIX B - CITY FINANCIAL INFORMATION
APPENDIX C - ANNUAL FINANCIAL REPORT FOR YEAR ENDED JUNE 30, 2021
APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM
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__________________________________
OFFICIAL STATEMENT __________________________________
$14,315,000*
CITY OF MENLO PARK
2022 General Obligation Bonds
(2001 Election)
The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the “Bonds”) by the City of Menlo Park (the “City”). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Bond Resolution (as defined below).
INTRODUCTION
This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of Bonds to potential investors is made only by means of the entire Official Statement.
The City. The City is a general law city that was first incorporated in 1874, and reincorporated in 1927. The City is located in the southern portion of San Mateo County (the “County”), on the west side of San Francisco Bay, approximately 25 miles south of San Francisco and 25 miles north of San Jose. The City is served by major freeways and public transportation networks. The Caltrain commuter rail service stops in the City and provides access to downtown San Francisco and San José. Local and commuter bus transportation is provided by the San Mateo County Transit District.
For demographic and financial information regarding the City and County, see “APPENDIX A – GENERAL INFORMATION ABOUT THE CITY OF MENLO PARK AND SAN MATEO COUNTY,” “APPENDIX B – CITY FINANCIAL INFORMATION,” and “APPENDIX C – ANNUAL FINANCIAL REPORT FOR YEAR ENDED JUNE 30, 2021.”
COVID-19 Statement. The COVID-19 pandemic has resulted in a public health crisis that is fluid and unpredictable with financial and economic impacts that cannot be predicted. As such, investors are cautioned that the City cannot at this time predict the impacts that the ongoing pandemic or other public health emergencies may have on its operations and finances, property values in the City, and economic activity in the City, the State of California (the “State”) and the nation, among others. For more disclosure regarding the COVID-19 emergency, see “SECURITY FOR THE BONDS – COVID-19 Global Pandemic.”
* Preliminary; subject to change.
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Authority for Issuance. The Bonds are being issued under Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, and pursuant to and consistent with the Charter of the City. The City authorized the issuance of the Bonds under a Resolution adopted by the City Council of the City (the “City Council”) on April 12, 2022 (the “Bond Resolution”). The Bonds are the fourth and final series of bonds issued under the 2001 Authorization. Following the issuance of the Bonds, there will be $______ remaining under the 2001 Authorization.*
See “THE BONDS – Authority for Issuance.”
Purpose for Issuance. The net proceeds of the Bonds will be used to finance the construction, acquisition, and improvement of parks and recreation facilities, as approved by the voters at an election held in the City on November 6, 2001 (the “Bond Election”) with respect to the bond measure known as Measure T. See “PLAN OF FINANCE – Purpose of Issue.” Security and Sources of Payment for the Bonds. The Bonds are general obligations of the City payable solely from ad valorem property taxes levied by the City and collected by the County. The City Council is empowered and is obligated to annually levy ad valorem taxes for the payment of interest on, and principal of, the Bonds upon all property subject to taxation by the City, without limitation of rate or amount (except with respect to certain personal property that is taxable at limited rates). See “SECURITY FOR THE BONDS.” The impact that the current COVID-19 outbreak might have on the assessed valuation of property located in the City is uncertain at this time. See “PROPERTY TAXATION – Assessed Valuations” and “SECURITY FOR THE BONDS – COVID-19 Global Pandemic.” Payment and Registration of the Bonds. The Bonds will be dated their date of original issuance and delivery (the “Dated Date”) and will be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple of $5,000, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described below. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See “THE BONDS” and “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Interest on the Bonds accrues from the Dated Date and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2023. See “THE BONDS – Description of the Bonds.”
Early Redemption. The Bonds are subject to optional and mandatory redemption prior to their maturity as described in “THE BONDS – Redemption.” 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 in this Official Statement and information concerning the Bonds are available from the City of Menlo Park City Clerk, 701 Laurel Street, California 94025, (650) 330-6600. The City may impose a charge for copying, mailing and handling.
* Preliminary; subject to change.
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PLAN OF FINANCE
Purpose of Issue
The proceeds of the Bonds will be used to finance projects approved by more than the requisite 2/3 of City voters at the Bond Election. The abbreviated form of the ballot measure for Measure T was:
“To renovate and expand the City's parks and recreation facilities, shall the City of MenIo Park be authorized to issue $38,000,000 in General Obligation Bonds phased over several years for the construction, acquisition, and improvement of such facilities and all costs incident thereto; provided, that at the time any bond is issued, the highest tax rate required to service all bonds authorized by this measure and issued shall not be in excess of $14 per $100,000 in assessed valuation?" The Bonds will be the fourth and final series of bonds issued pursuant to the authority received at the Bond Election.
Sources and Uses of Funds
The estimated sources and uses of funds with respect to the Bonds will be applied as follows:
Sources of Funds
Principal Amount of Bonds
Plus: Net Original Issue Premium
Less: Underwriter’s Discount
Total Sources
Uses of Funds
Deposit to Project Fund
Deposit to Debt Service Fund
Costs of Issuance (1)
Total Uses
(1) Includes Municipal Advisor fees, Bond Counsel and Disclosure Counsel fees, printing costs, rating agency fees and other related costs.
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THE BONDS
Authority for Issuance
The Bonds are being issued under Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”) and other applicable law, and pursuant to the City’s powers under and consistent with the Charter of the City. The City Council authorized the issuance of the Bonds pursuant to the Bond Resolution.
The net proceeds of the Bonds will be used to finance the construction, acquisition, and improvement of parks and recreation facilities, as approved by the voters at an election held in the City on November 6, 2001 (the “Bond Election”) with respect to the bond measure known as Measure T.
The City received authorization at the Bond Election, by an affirmative vote of more than 2/3 of the eligible voters within the City (the “2001 Authorization”) to issue $38,000,000 of general obligation bonds. The Bonds are the fourth and final series of Bonds to be sold and issued under the 2001 Authorization.
Description of the Bonds
Book-Entry Form. The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the Bonds. Payments of principal of and interest on the Bonds will be paid by the Paying Agent to DTC for subsequent disbursement to DTC Participants which will remit such payments to the Beneficial Owners of the Bonds.
As long as DTC’s book-entry method is used for the Bonds, the Paying Agent will send any notice of prepayment or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the prepayment of the Bonds called for prepayment or of any other action premised on such notice.
The Paying Agent, the City, and the Underwriter of the Bonds have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Bonds.
See “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Interest. Interest on the Bonds is payable semiannually on February 1 and August 1 of each year (the “Interest Payment Dates”), commencing February 1, 2023.
Interest on the Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless:
1. a Bond is authenticated as of an Interest Payment Date, in which event it will bear interest from such date,
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2. a Bond is authenticated prior to an Interest Payment Date and after the close of business on the 15th day of the month preceding the Interest Payment Date (each, a “Record Date”), in which event it will bear interest from such Interest Payment Date,
3. a Bond is authenticated on or before January 15, 2023, in which event it shall bear interest from the Closing Date, or
4. at the time of authentication of a Bond, interest is in default thereon, in which event it will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
Interest on the Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months.
Denominations and Maturity. The Bonds shall be issued in denominations of $5,000 each or any integral multiple of $5,000. The Bonds mature on August 1 in the years and amounts set forth on the inside cover page hereof.
See the maturity schedule on the inside cover page hereof and “DEBT SERVICE SCHEDULE” below.
Payment
Interest on the Bonds (including the final interest payment upon maturity) is payable by check of the Paying Agent mailed to the owner thereof at such owner’s address as it appears on the Registration Books (as defined below) at the close of business on the preceding Record Date, except that at the written request of the Owner of at least $1,000,000 aggregate principal amount of the Bonds, which written request is on file with the Paying Agent as of any Record Date, interest on such Bonds shall be paid by wire transfer on the succeeding Interest Payment Date to an account in the United States of America as shall be specified in such written request.
Principal of and premium (if any) on the Bonds is payable in lawful money of the United States of America upon presentation and surrender at the principal office of the Paying Agent.
Redemption*
Optional Redemption. The Bonds maturing on or before August 1, 20__, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after August 1, 20__, are subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as designated by the City and by lot within a maturity, from any available source of funds, on August 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.
Mandatory Sinking Fund Redemption. The Term Bonds maturing on August 1, 20__ and August 1, 20__ (the “Term Bonds”) are subject to redemption prior to their stated maturity date, without a redemption premium, in part by lot, from mandatory sinking fund payments on
* Preliminary; subject to change.
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each August 1, on and after August 1, 20__, in the principal amounts as set forth in the following tables:
$_______ Term Bond Due August 1, 20__
Payment Date
(August 1)
Payment
Amount
(Maturity)
$_______ Term Bond Due August 1, 20__
Payment Date
(August 1)
Payment
Amount
(Maturity)
If some but not all of the Term Bonds have been optionally redeemed, the aggregate principal amount of Term Bonds to be subject to Mandatory Sinking Fund Redemption in each year will be reduced on a pro rata basis in integral multiples of $5,000, as designated in written notice filed by the City with the Paying Agent.
Redemption Procedure. The Paying Agent will cause notice of any redemption to be mailed, first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, (i) to the Securities Depositories and the Municipal Securities Rulemaking Board, and (ii) to the respective Owners of any Bonds designated for redemption, at their addresses appearing on the Registration Books (as defined below) maintained by the Paying Agent. Such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice will not affect the validity of the proceedings for the redemption of such Bonds.
The City is entitled to send a redemption notice that declares that the redemption is conditional upon the availability of moneys to accomplish the redemption, and the City may rescind any notice of optional redemption of the Bonds by written notice to the Paying Agent on or prior to the date fixed for redemption, and the Paying Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this section. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption. The City and the Paying Agent have no liability to the Owners or any other party related to or arising from such rescission.
A redemption notice will state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, will designate the serial numbers of the Bonds to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, or by stating that all of the Bonds of one or more maturities have been called for redemption, and will require that such Bonds be then surrendered at the principal office of the Paying Agent for redemption at the said redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date.
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Partial Redemption. Upon surrender of Bonds redeemed in part only, the City will execute and the Paying Agent will authenticate and deliver to the owner, at the expense of the City, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.
Effect of Redemption. From and after the date fixed for redemption, if notice of such redemption has been duly given and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under the Bond Resolution other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice.
Registration, Transfer and Exchange of Bonds
If the book-entry system as described above and in Appendix F is no longer used with respect to the Bonds, the following provisions will govern the registration, transfer, and exchange of the Bonds.
Registration Books. The Paying Agent will keep or cause to be kept sufficient books for the registration and transfer of the Bonds (the “Registration Books”), which will at all times be open to inspection by the City upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the Bonds.
Transfer. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the principal office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. The City may charge a reasonable sum for each new Bond issued upon any transfer.
Whenever any Bond or Bonds are surrendered for transfer, the City will execute and the Paying Agent will authenticate and deliver a new Bond or Bonds, for like aggregate principal amount.
Exchange. Bonds may be exchanged at the principal office of the Paying Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The City may charge a reasonable sum for each new Bond issued upon any exchange.
Defeasance
The City has the option to pay and discharge the entire indebtedness on all or any portion of the outstanding Bonds in any one or more of the following ways:
(a) by paying or causing to be paid the principal of and interest on such Bonds, as and when the same become due and payable;
(b) by irrevocably depositing, in trust, at or before maturity:
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(i) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity; or
(ii) Federal Securities (as defined below), the principal of and interest on, which when due, in the opinion of a certified public accountant delivered to the City, will provide money sufficient to pay the principal of and all unpaid interest to maturity on the Bonds to be paid, as such principal and interest become due.
(c) by delivering such Bonds to the Paying Agent for cancellation by it. “Federal Securities” means United States Treasury notes, bonds, bills or certificates of indebtedness, or any other obligations, the timely payment of which is directly or indirectly guaranteed by the faith and credit of the United States of America.
DEBT SERVICE SCHEDULE
The following table shows the debt service schedule with respect to the Bonds (assuming no optional redemptions).
Year Ending
August 1 Principal Interest
Total
Debt Service
Total
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SECURITY FOR THE BONDS
Ad Valorem Taxes
Bonds Payable from Ad Valorem Property Taxes. The Bonds are general obligations of the City, payable solely from ad valorem property taxes levied by the City and collected by the County. The City is empowered and is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the City subject to taxation by the City, without limitation of rate or amount (except certain personal property that is taxable at limited rates).
Levy and Collection. The City will levy and the County will collect such ad valorem taxes in such amounts and at such times as is necessary to ensure the timely payment of debt service.
Such taxes, when collected, will be deposited into a debt service fund for the Bonds, which is maintained by the City and which is irrevocably pledged for the payment of principal of and interest on the Bonds when due.
City property taxes are assessed and collected by the County in the same manner, at the same time and in the same installments as other ad valorem taxes on real property and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the other ad valorem taxes on real property. As described below, although the County has adopted the Teeter Plan, the City has elected not to participate in the Teeter Plan, meaning that the City receives all of the property taxes that are actually collected, and the City also receives any penalties and interest on delinquent taxes. See “PROPERTY TAXATION – Alternative Method of Tax Apportionment – Teeter Plan.”
Annual Tax Rates. The amount of the annual ad valorem tax levied by the City to repay the Bonds will be determined by the relationship between the assessed valuation of taxable property in the City and the amount of debt service due on the Bonds. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the City may cause the annual tax rate to fluctuate.
In accordance with the Bond Election, the Bonds will not be issued unless the highest tax rate required to service all bonds authorized by Measure T and issued will not be in excess of $14 per $100,000 in assessed valuation, based on the fiscal year 2021-22 assessed valuation. Before issuing the Bonds, the City will receive confirmation from the Municipal Advisor that such requirement has been satisfied.
Economic and other factors beyond the City’s control, such as economic recession, deflation of land values, a relocation out of the City or financial difficulty or bankruptcy by one or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood or other natural disaster, could cause a reduction in the assessed value within the City and necessitate a corresponding increase in the annual tax rate. See “PROPERTY TAXATION – Assessed Valuation – Factors Relating to Increases/Decreases in Assessed Value.” See also “— COVID-19 Global Pandemic.” Debt Service Fund
The City will establish the Debt Service Fund for the Bonds (the “Debt Service Fund”), which will be established as a separate fund to be maintained distinct from all other funds of the Page J-2.97
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City. All taxes levied by the City pursuant to the Bond Resolution for the payment of the principal of and interest and premium (if any) on the Bonds will be deposited in the Debt Service Fund by the City promptly upon receipt from the County. The Debt Service Fund is pledged for the payment of the principal of and interest and premium (if any) on the Bonds when and as the same become due. The City will transfer amounts in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the Bonds as the same become due and payable, to the Paying Agent, as required to pay the principal of and interest and premium (if any) on the Bonds.
If, after payment in full of the Bonds, any amounts remain on deposit in the Debt Service Fund, the City shall transfer such amounts to its General Fund, to be applied solely in a manner that is consistent with the requirements of applicable state and federal tax law.
Limited Obligation
The Bonds are payable solely from the proceeds of an ad valorem tax levied by the City, and collected by the County, for the payment of principal and interest on the Bonds. Although the County is obligated to collect the ad valorem tax for the payment of the Bonds, the Bonds are not a debt of the County.
COVID-19 Global Pandemic
General. The spread of the novel strain of coronavirus that causes the disease known as COVID-19 (“COVID-19”) and local, state, and federal actions in response to COVID-19, is having a significant impact on the economy and on the City’s operations and finances. On February 11, 2020, the World Health Organization (“WHO”) announced the official name for the outbreak of COVID-19, an upper respiratory tract illness. COVID-19 has since spread across the globe. The COVID-19 pandemic has had an adverse effect on, among other things, the world economy, global supply chain, international travel, and a number of travel-related industries. The temporary and permanent business closures caused by the COVID-19 pandemic have led to a stark increase in unemployment across the County and the nation. Depending on the length and the breadth of the impacts of the COVID-19 pandemic, the economic costs may be very significant for the City and the region’s economy. On June 8, 2020, the National Bureau of Economic Research announced that the United States of America (the “U.S.”) officially entered into a recession in February 2020. In addition, capital markets in the United States and globally have been volatile.
In mid-March 2020, based on guidance and directives from the State and public health agencies, all counties in the Bay Area and the City implemented and revised Shelter-in-Place (“Shelter-in-Place”) emergency orders or directives, which directed individuals to stay home, except for limited travel for the conduct of essential services. Most retail establishments (including restaurants, bars and nightclubs, entertainment venues and gyms) were closed in response to the Shelter-in-Place orders or directives. The Governor of the State announced similar Shelterin-Place emergency orders effective for the entire State, which were lifted in June 2021.
In December 2020, two vaccines were approved for emergency use in the United States and vaccinations began in California. A third vaccine was approved for emergency use in February 2021. In July 2021, as a result of the Delta variant, all Bay Area counties and the City issued recommendations that all persons wear masks in indoor settings, regardless of vaccination status, and the recommendation became mandatory in August 2021. Also in August 2021, booster shots became available to all Americans. In January 2022, the Omicron variant surged in the State, and began to wane in February 2022 and on February 16, 2022, the State and the City lifted the indoor bask mandate in most public settings for vaccinated people.
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Impacts of COVID-19 Emergency Uncertain. The COVID-19 pandemic is still ongoing, however, indications are strong that the pandemic is transitioning to its endemic stage though its dynamic nature leads to uncertainties. There are many variables that will continue to contribute to the economic impact of the COVID-19 pandemic and the recovery, including the length of time social distancing measures are in place, the effectiveness of State and Federal governments’ relief programs and the timing for the containment and treatment of COVID-19. The ultimate impact of COVID-19 on the City’s operations and finances is not fully known, and it may be some time before the full impact of the COVID-19 pandemic is known.
General Obligation Bonds Secured by Ad Valorem Tax Revenues. Notwithstanding the impacts the COVID-19 emergency may have on the economy in the State, the County and the City or on the City’s general purpose revenues, the Bonds described herein are voterapproved general obligations of the City payable solely from the levy and collection of ad valorem property taxes, unlimited as to rate or amount, and are not payable from the general fund of the City. The City cannot predict the impacts that the Coronavirus emergency might have on local property values or tax collections. See “SECURITY FOR THE BONDS – Ad Valorem Taxes” and “PROPERTY TAXATION – Tax Levies and Delinquencies” herein.
PROPERTY TAXATION
Property Tax Collection Procedures
In California, property that is subject to ad valorem taxes is classified as “secured” or “unsecured.” The “secured roll” is that part of the assessment roll containing state assessed public utilities’ property and property, the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County.
Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB813 provided increased revenue to taxing jurisdictions Page J-2.99
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to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date and result in increased assessed value.
Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The taxing authority has four ways of collecting unsecured personal property taxes: (1) 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 judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes for the amount of taxes which are delinquent.
Taxation of State-Assessed Utility Property
The State Constitution provides that most classes of property owned or used by regulated utilities are assessed by the State Board of Equalization (“SBE”) and taxed locally. Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as “unitary property,” a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and “operating nonunitary” property (which excludes nonunitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special county-wide rates and tax proceeds are distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year.
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Assessed Valuation
Assessed Valuation History. The following is a table summarizing the historical assessed valuation of the taxable property in the City.
Table 1
CITY OF MENLO PARK
Assessed Valuations of All Taxable Property
Fiscal Years 2012-13 to 2021-22
Fiscal Year Local Secured Utility Unsecured Total Percent Change 2012-13 $9,898,375,396 $962,685 $763,104,021 $10,662,442,102 --% 2013-14 10,609,696,649 842,890 742,562,403 11,353,101,942 6.48 2014-15 11,315,595,466 842,890 739,703,055 12,056,141,411 6.19 2015-16 12,575,019,760 1,295,910 844,648,919 13,420,964,589 11.32 2016-17 14,021,536,919 1,295,910 1,073,056,024 15,095,888,853 12.48 2017-18 15,581,435,344 1,295,910 1,398,795,673 16,981,526,927 12.49 2018-19 17,912,242,654 869,015 941,142,287 18,854,153,956 11.03 2019-20 19,780,228,195 993,160 1,046,462,723 20,827,684,078 10.47 2020-21 21,743,778,008 993,160 1,007,916,459 22,743,687,627 9.20 2021-22 23,310,406,154 993,160 1,086,160,175 24,397,559,489 7.27
Source: California Municipal Statistics, Inc.
Factors Relating to Increases/Decreases in Assessed Value. As indicated in the previous table, assessed valuations are subject to change in each year. Increases or decreases in assessed valuation result from a variety of factors including but not limited to general economic conditions, supply and demand for real property in the area, government regulations such as zoning, pandemics, and natural disasters such as earthquakes, fires, floods and droughts.
Earthquake Risk. Property values could be reduced by factors beyond the City’s control, including an earthquake, or a depressed real estate market due to general economic conditions in the County, the region, and the State.
The City is located in a seismically active region. Active earthquake faults underlie both the City and the surrounding Bay Area. Three major earthquake faults that comprise the San Andreas fault system extend through the Bay Area, including the San Andreas fault, the Hayward fault, and the Calaveras fault. On August 24, 2014, an earthquake occurred in Napa, California.
The tremor’s epicenter was located approximately 3.7 miles northwest of American Canyon near the West Napa Fault and registered 6.0 on the Richter scale of earthquake intensity. The Napa earthquake caused fires, damaged buildings and roads, and injured approximately 200 people.
The Napa earthquake was the largest earthquake in the Bay Area since the 1989 Loma Prieta earthquake on the San Andreas Fault, which was centered about 60 miles south of San Francisco and registered 6.9 on the Richter scale of earthquake intensity. The Loma Prieta earthquake caused fires and collapses of and structural damage to buildings, highways and bridges in the Bay Area..
In August 2016, the 2014 Working Group on California Earthquake Probabilities (a collaborative effort of the United States Geological Survey, the California Geological Society and the Southern California Earthquake Center) issued a revised report that states there is a 72% chance that one or more earthquakes of magnitude 6.7 or larger will occur in the Bay Area before the year 2043. Such earthquakes may be very destructive. Property within the City could sustain Page J-2.101
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extensive damage in a major earthquake, and a major earthquake could adversely affect the area’s economic activity.
Drought. In recent years, the State has experienced severe drought conditions. On October 19, 2021, the Governor declared a drought emergency for the entire State. The State reports that climate change induced earlier than expected warm temperatures and extremely dry soil, which have further depleted the expected runoff water from the Sierra-Cascade snowpack, resulting in historic and unanticipated reductions in the amount of water flowing to major reservoirs, especially in Klamath River, Sacramento-San Joaquin Delta, and Tulare Lake Watershed counties.
According to the State, 2021 was the second driest water year, with August 2021 being the hottest and driest month on record. California experienced an accelerated rate of snow melt in the Sacramento, Feather and American River watersheds, which feed the major reservoirs of the State and federal water projects. This was exacerbated when much of the snowpack, sitting on very dry ground, seeped into the earth rather than flowing into our rivers and streams and into these reservoirs. Warming temperatures also prompted water diverters below the dams to withdraw their water much earlier and in greater volumes than typical even in other recent critically dry years. The drastic reduction in water supplies means these reservoirs are extremely low for water users, including farmers, and fish and wildlife in the counties the drought proclamation covers.
According to the National Oceanic and Atmospheric Administration and National Integrated Drought Information System, 100% of the State is abnormally dry. The City anticipates that resulting increases in dead and dry vegetation will expand this year’s fire season into winter and spring months with greater potential for larger fires and rapid fire spread.
Wildfire. In recent years, portions of California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures. Property damage due to wildfire could result in a significant decrease in the assessed value of property in the City. It is not possible for the City to make any representation regarding the extent to which wildfires could cause reduced economic activity within the boundaries of the City or the extent to which wildfires may impact the value of taxable property within the City.
The City cannot predict or make any representations regarding the effects that natural disasters including but not limited to earthquakes, fires, floods, droughts and related conditions may have on the value of taxable property within the City, or to what extent the effects said disasters might have had on economic activity in the City or throughout the State. See also “SECURITY FOR THE BONDS – COVID-19 Global Pandemic.”
Property Tax Base Transfer Ballot Measure. 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.
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Assessed Valuation by Land Use. The following table shows the land use of parcels in the City, according to assessed valuation. As shown, the majority of land in the City is used for residential purposes.
Table 2
CITY OF MENLO PARK
Assessed Valuation and Parcels by Land Use
Fiscal Year 2021-22
2021-22 % of No. of % of
Non-Residential: Assessed Valuation (1) Total Parcels Total Commercial/Office $7,364,146,307 31.59% 386 3.82%
Industrial/Business Park 1,264,070,606 5.42 117 1.16
Recreational 32,256,083 0.14 31 0.31
Government/Social/Institutional 58,270,023 0.25 63 0.62 Miscellaneous 21,797,082 0.09 110 1.09
Subtotal Non-Residential $8,740,540,101 37.50% 707 7.00% Residential:
Single Family Residence $11,327,438,862 48.59% 7,409 73.36% Condominium 1,035,443,933 4.44 1,113 11.02
2-4 Residential Units 570,588,708 2.45 540 5.35
5+ Residential Units/Apartments 1,279,120,992 5.49 205 2.03 Hotel/Motel 285,840,196 1.23 9 0.09
Subtotal Residential $14,498,432,691 62.20% 9,276 91.84% Vacant Parcels $71,433,362 0.31% 117 1.16%
Total $23,310,406,154 100.00% 10,100 100.00%
___________________________
(1) Local Secured Assessed Valuation; excluding tax-exempt property.
Source: California Municipal Statistics, Inc.
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Assessed Valuation of Single-Family Residential Parcels. The following table shows a breakdown of the assessed valuations of improved single-family residential parcels in the City, according to assessed valuation.
Table 3
CITY OF MENLO PARK
Per Parcel 2021-22 Assessed Valuation
of Single-Family Homes
No. of 2021-22 Average Median
Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 7,409 $11,327,438,862 $1,528,876 $1,149,138 2021-22 No. of % of Cumulative Total % of Cumulative
Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $199,999 836 11.284% 11.284% $ 101,142,139 0.893% 0.893% $200,000 - $399,999 787 10.622 21.906 231,813,331 2.046 2.939 $400,000 - $599,999 611 8.247 30.153 304,492,378 2.688 5.627 $600,000 - $799,999 535 7.221 37.373 372,005,900 3.284 8.912 $800,000 - $999,999 533 7.194 44.567 480,395,257 4.241 13.153 $1,000,000 - $1,199,999 524 7.072 51.640 575,530,307 5.081 18.233 $1,200,000 - $1,399,999 452 6.101 57.741 584,873,786 5.163 23.397 $1,400,000 - $1,599,999 405 5.466 63.207 608,189,588 5.369 28.766 $1,600,000 - $1,799,999 370 4.994 68.201 628,363,221 5.547 34.313 $1,800,000 - $1,999,999 350 4.724 72.925 662,520,312 5.849 40.162 $2,000,000 - $2,199,999 280 3.779 76.704 586,495,719 5.178 45.340 $2,200,000 - $2,399,999 250 3.374 80.078 574,029,912 5.068 50.407 $2,400,000 - $2,599,999 195 2.632 82.710 485,274,072 4.284 54.691 $2,600,000 - $2,799,999 189 2.551 85.261 508,857,014 4.492 59.184 $2,800,000 - $2,999,999 132 1.782 87.043 380,953,869 3.363 62.547 $3,000,000 - $3,199,999 138 1.863 88.905 427,116,432 3.771 66.317 $3,200,000 - $3,399,999 99 1.336 90.242 327,275,228 2.889 69.207 $3,400,000 - $3,599,999 94 1.269 91.510 329,424,741 2.908 72.115 $3,600,000 - $3,799,999 83 1.120 92.631 306,326,713 2.704 74.819 $3,800,000 - $3,999,999 94 1.269 93.899 366,684,128 3.237 78.056 $4,000,000 and greater 452 6.101 100.000 2,485,674,815 21.944 100.000 7,409 100.000% $11,327,438,862 100.000%
____________________
(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.
Source: California Municipal Statistics, Inc.
Alternative Method of Tax Apportionment - Teeter Plan
The Board of Supervisors of the County has adopted 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. Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The City participates in the Teeter Plan, and thus receives 100% of secured property taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes.
So long as the Teeter Plan remains in effect, the City’s receipt of revenues with respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors can under certain circumstances terminate the Teeter Plan in part or in its entirety with respect to the entire County and, in addition, the Board of Supervisors can terminate Page J-2.104
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the Teeter Plan with respect to the City if the delinquency rate for all ad valorem property taxes levied within the City in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property taxes in the City would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the City.
Notwithstanding that the City receives 100% of its property tax revenues under the Teeter Plan, irrespective of delinquencies, the following table shows secured tax charges and delinquencies within the City during the past five years.
Table 4
CITY OF MENLO PARK
Secured Tax Charges and Delinquencies
General Obligation Bond Debt Service Levy
Fiscal Years 2013-14 to 2020-21
Secured Tax
Charge(1)
Amt. Del.
June 30
% Del
June 30
2013-14 $1,822,399.52 $9,676.26 0.53%
2014-15 1,582,618.92 4,453.60 0.28
2015-16 1,284,010.07 5,400.06 0.42
2016-17 1,298,208.11 5,222.64 0.40
2017-18 1,243,431.57 3,699.39 0.30
2018-19 1,303,377.03 5,799.19 0.44
2019-20 1,284,030.38 6,633.51 0.52
2020-21 1,734,403.15 7,081.62 0.41 ____________________ (1) Debt service levy only.
Source: California Municipal Statistics, Inc.
Appeals of Assessed Value
There are two types of appeals of assessed values that could adversely impact property tax revenues within the City.
Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the least of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value.
Under California law, property owners may apply for a Proposition 8 reduction of their property tax assessment by filing a written application, in form prescribed by the SBE, with the County board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Proposition 8 reductions may also be unilaterally applied by the County Assessor.
Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values when Page J-2.105
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market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter.
The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.
The City cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers. Any reduction in aggregate City assessed valuation due to appeals, as with any reduction in assessed valuation due to other causes, will cause the tax rate levied to repay the Bonds to increase accordingly, so that the fixed debt service on the Bonds (and other outstanding general obligation bonds, if any) may be paid.
Tax Rates
The table below shows historical property tax rates within the City:
Table 5
CITY OF MENLO PARK
TYPICAL TAX RATE PER $100 ASSESSED VALUATION
(TRA 8-001)(1)
Ad Valorem Tax 2017-18 2018-19 2019-20 2020-21 2021-22
General Tax Rate $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 Midpeninsula Regional Open Space District .0009 .0018 .0016 .0015 .0015 San Mateo Community College District .0235 .0175 .0266 .0213 .0227 Sequoia Union High School District .0383 .0365 .0340 .0315 .0290 Menlo Park School District .0385 .0383 .0365 .0351 .0328 City of Menlo park .0080 .0073 .0065 .0080 .0037
Total Tax Rate $1.1092 $1.1014 $1.1052 $1.0974 $1.0897
(1) 2021-22 assessed valuation of TRA 8-001 is $7,011,437,657 which is 28.74% of the district's total assessed valuation.
Source: California Municipal Statistics, Inc.
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Major Taxpayers
The following table shows the twenty largest taxpayers in the City as determined by their secured assessed valuations in 2021-22.
Table 6
CITY OF MENLO PARK
Largest 2021-22 Local Secured Taxpayers
2021-22 % of
Property Owner Primary Land Use Assessed Valuation Total (1)
1. Hibiscus Properties LLC (2) Office Building $2,028,764,343 8.70%
2. Facebook Inc. Office Building 1,140,966,704 4.89
3. Peninsula Innovation Partners LLC (2) Business Park 533,694,889 2.29
4. 3000 SH LLC Office Building 370,749,599 1.59
5. Bohannon MG2 LLC Office Building 369,945,220 1.59
6. Maximus SG New GF Owner LLC Apartments 267,943,303 1.15
7. Quadrus Sand Hill LLC Office Building 260,417,318 1.12
8. 2700 2770 SH LLC Office Building 245,570,000 1.05
9. Real Social Good Inv LLC Office Building 243,626,266 1.05
10. Anton Menlo Blackhorse LLC Apartments 243,002,256 1.04
11. Bohannon MG LLC Office Building 204,491,020 0.88
12. Menlo Prepi I LLC Business Park 194,724,654 0.84
13. BVK 275 Middlefield LLC Office Building 187,903,419 0.81
14. SI 62 LLC Office Building 182,411,826 0.78
15. Sand Hill Commons REIT Inc. Office Building 166,020,893 0.71
16. Leland Stanford Jr. University Hotel & Office 155,128,238 0.67
17. Essex Hamilton LP Apartments 150,089,762 0.64
18. Independence Menlo Hotel Owner LLC Hotel 141,108,449 0.61
19. KR Menlo Park LLC Office Building 138,454,496 0.59
20. Richard Tod & Catherine R. Spieker Apartments 119,233,840 0.51 $7,344,246,495 31.51%
_____________________
(1) 2020-21 Local Secured Assessed Valuation: $23,310,406,154. (2). A wholly owned subsidiary of Facebook Inc.
Source: California Municipal Statistics, Inc.
Direct and Overlapping Debt
Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and effective April 1, 2022. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no 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 percentage that the City’s assessed valuation represents of the total assessed valuation of each public agency identified in the first column; and the third column is an apportionment of the dollar amount of each public agency’s outstanding Page J-2.107
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debt 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 the second column.
Table 7
CITY OF MENLO PARK
STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT
(As of April 1, 2022)
2021-22 Assessed Valuation: $24,397,559,489
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/22 San Mateo Community College District 9.160% $ 67,224,982 Sequoia Union High School District 21.052 100,026,473
Las Lomitas School District 37.734 45,146,844
Menlo Park City School District 61.930 76,039,260
Ravenswood School District 60.369 39,982,389
Redwood City School District 5.024 8,942,029
Midpeninsula Regional Park District 6.902 5,837,367
City of Menlo Park 100.000 15,255,000(1)
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $358,454,344
OVERLAPPING GENERAL FUND DEBT:
San Mateo County General Fund Obligations 9.160% $56,980,301 San Mateo County Board of Education Certificates of Participation 9.160 626,544 Midpeninsula Regional Park District General Fund Obligations 6.902 6,881,681 Menlo Park Fire Protection District Certificates of Participation 51.465 4,773,379 TOTAL OVERLAPPING GENERAL FUND DEBT $69,261,905
OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100.000 % $31,865,000
COMBINED TOTAL DEBT $459,581,249 (2)
Ratios to 2021-22 Assessed Valuation:
DIRECT DEBT ($15,255,000)................................................. 0.06% Total Direct and Overlapping Tax and Assessment Debt....... 1.47% Combined Total Debt ............................................................. 1.88% Ratios to Redevelopment Successor Agency Incremental Valuation ($3,354,684,375):
TOTAL OVERLAPPING TAX INCREMENT DEBT .................. 0.95% (1) Excludes Bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
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CONSTITUTIONAL AND STATUTORY PROVISIONS
AFFECTING CITY REVENUES AND APPROPRIATIONS
Principal of and interest on the Bonds are payable from the proceeds of an ad valorem tax levied by the City for the payment thereof. See “THE BONDS” and “SECURITY FOR THE BONDS” above. Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111, and 218 and 1A, and certain other provisions of law discussed below are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the City to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the City to levy taxes for payment of the Bonds. The tax levied by the City for payment of the Bonds was approved by the City’s voters in compliance with Article XIIIA and all applicable laws.
Article XIIIA of the State Constitution
On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service (i) on indebtedness approved by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two-thirds vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters voting on the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed two percent per year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways.
Legislation Implementing Article XIIIA
Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies.
The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.
Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.
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All taxable property is shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.
Article XIIIB of the State Constitution
In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on Bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.
The State and each local government entity have their own appropriations limits. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years.
If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years.
The City has never exceeded its appropriations limit. Because the issuance of the Bonds has been approved by the voters, the tax levy that is required to pay debt service on the Bonds is not subject to the limitations of Article XIIIB.
Articles XIIIC and XIIID of the State Constitution
On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a Page J-2.110
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number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination.
Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes, even if deposited in the City’s General Fund, require a two-thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs.
Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs. These provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a “special benefit,” as defined in Article XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. If the City is unable to continue to collect these revenues, the services and programs funded with these revenues would have to be curtailed and/or the City’s General Fund might have to be used to support them. The City is unable to predict whether or not in the future it will be able to continue all existing services and programs funded by the fees, charges and assessments in light of Proposition 218 or, if these services and programs are continued, which amounts (if any) would be used from the City’s General Fund to continue to support these activities.
Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City’s General Fund.
Proposition 62
Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a twothirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988.
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California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative.
Proposition 1A
Proposition 1A, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in fiscal year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the motor vehicle license fee rate currently in effect, 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates.
Proposition 1A may result in increased and more stable City revenues. The magnitude of such increase and stability is unknown and would depend on future actions by the State.
However, Proposition 1A could also result in decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing spending on other State programs or other action, some of which could be adverse to the City.
Proposition 22
Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 amended the state Constitution to eliminate or reduce the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues.
Notwithstanding the passage of Proposition 22, the State successfully dissolved redevelopment agencies.
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Possible Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.
LEGAL MATTERS
Tax Exemption
Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes, such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings.
The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the “Tax Code”) that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Page J-2.113
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purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds.
California Tax Status. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes.
Other Tax Considerations. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above.
Form of Opinion. A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX D.
Continuing Disclosure
The City will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the City by not later than April 1 after the end of each fiscal year of the City (currently June 30), commencing April 1, 2023, with the report for the 2021- 22 fiscal year (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events.
The specific nature of the information to be contained in an Annual Report or the notices of enumerated events is set forth in the form of Continuing Disclosure Certificate attached as APPENDIX E. These covenants will be made in order to assist the Purchaser (as defined below) in complying with Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).
The City and its related governmental entities have previously entered into numerous disclosure undertakings under the Rule in connection with the issuance of long-term obligations See Note 6 of the City’s Annual Financial Report attached to this Official Statement as APPENDIX C.
In the previous five years, ______. To ensure compliance with its continuing disclosure undertakings, the City has developed procedures for including all required continuing disclosure information in the supplementary section of its audited financial statements. In addition, the City has engaged Willdan Financial Services to review this information annually to ensure compliance Page J-2.114
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with its continuing disclosure undertakings, including the undertaking to be entered into in connection with the Bonds.
Neither the County nor any other entity other than the City shall have any obligation or incur any liability whatsoever with respect to the performance of the City’s duties regarding continuing disclosure.
Material Litigation
In 2006, voters in the City approved a utility users tax (the “UUT”), which imposes a utility users tax on electricity, natural gas, water and communications, provided findings are made by the City Council every two years that the UUT is necessary for the financial health of the City. On December 28, 2021, a class action lawsuit was filed against the City, alleging that the required findings were not made at any time after June 17, 2014, and that the UUT therefore terminated in 2016. The suit seeks a refund of the UUT collected by the City for the three-year period prior to the filing of the claim, and seeks to invalidate the UUT and prevent the City from collecting the UUT in the future.
Should Plaintiffs succeed in all of their claims for their requested time period, the City could be required to make a one-time refund payment of approximately $5,900,000 out of its general fund, and would lose approximately $1,740,000 in annual general fund revenues from the UUT on a going forward basis. Such a payment and reduction in ongoing revenues would materially impact the City’s ability to maintain its current operations and reserve levels. The City is not able to predict the outcome of the litigation or provide any assurance that the UUT will not be invalidated. Notwithstanding the impacts that the loss of UUT would have on general fund revenues, the City does not believe the litigation will adversely affect the City’s ability to pay debt service on the Bonds because the Bonds are voter-approved general obligations of the City, payable solely from the levy and collection of ad valorem property taxes, unlimited as to rate or amount, and are not payable from the general fund of the City.
Other than as described above, no litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to the purchasers at the time of the original delivery of the Bonds. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City’s ability to receive ad valorem taxes or to collect other revenues or contesting the City’s ability to issue and repay the Bonds.
The City is routinely subject to lawsuits and claims. In the opinion of the City, the aggregate amount of the uninsured liabilities of the City under these lawsuits and claims will not materially affect the financial position or operations of the City. The City may be or may become a party to lawsuits and claims which are unrelated to the Bonds or actions taken with respect to the Bonds and which have arisen in the normal course of operating the City, including as a result of the COVID-19 pandemic. The City maintains certain insurance policies which provide coverage under certain circumstances and with respect to certain types of incidents. The City cannot predict what types of claims may arise in the future.
RATING
Upon issuance of the Bonds, Moody’s Investors Service (“”Moody’s”), will assign the Bonds a rating of “___.”
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The City has furnished to Moody’s information and material which has not been included in this Official Statement. Generally, rating agencies base their ratings on information and material so furnished and on investigations, studies and assumptions made by the rating agencies. The ratings reflect only the view of such organization and an explanation of the significance of such rating may be obtained from Moody’s There is no assurance that the rating will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
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MUNICIPAL ADVISOR
The City has retained Urban Futures, Inc., Walnut Creek, California, as its municipal advisor (the “Municipal Advisor”) in connection with the preparation of this Official Statement and with respect to the issuance of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement.
Urban Futures, Inc., is an independent registered municipal advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
The Municipal Advisor’s compensation is contingent upon the delivery of the Bonds.
UNDERWRITING
Purchase of the Bonds. BofA Securities, Inc. (the “Underwriter”), has entered into a Bond Purchase Agreement with the City under which it will purchase the Bonds at a purchase price of $_________ (which is equal to the par amount of the Bonds, plus a original issue premium of $_________, less an Underwriter’s discount of $________, and less $_______ to be used by the Underwriter to pay the costs of issuing the Bonds).
Offering of the Bonds. The Underwriter intends to offer the Bonds to the public at the offering prices set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell to certain dealers and others at a price lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.
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EXECUTION
The execution of this Official Statement and its delivery have been approved by the City Council.
CITY OF MENLO PARK
By:
Finance Director
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APPENDIX A
GENERAL INFORMATION ABOUT THE CITY OF MENLO PARK
AND SAN MATEO COUNTY
The following information concerning the City of Menlo Park (the “City”) and the County of San Mateo (the “County”) is included only for the purpose of supplying general information regarding the area in and around the City. The County, including its Board of Supervisors, officers, officials, agents and other employees, are required, only to the extent required by law, to: (i) levy and collect ad valorem taxes for payment of the Bonds in accordance with the law; and (ii) transmit the proceeds of such taxes to the paying agent for the payment of the principal of and interest on Bonds at the time such payment is due.
General
The City. The City is located in the southern portion of San Mateo County, on the west side of San Francisco Bay approximately 25 miles south of San Francisco and 25 miles north of San Jose. The mid-peninsula region is one of the most affluent areas in California and is characterized by a growing base of employment. The City is midway between the metropolises of San Francisco and San Jose, California.
Menlo Park began as part of a Spanish Land Grant to Don Luis Antonio Arguello in 1824.
Menlo Park was first incorporated in 1874, which incorporation lapsed shortly thereafter due to lack of public services. The City was reincorporated in 1927 as a general law city. It is administered by a Council-Manager form of government. The five City Council members are elected by district for four-year terms.
The incorporated area of the City totals 19 square miles, of which only 6.2 square miles are actually urbanized. The remainder of the area is in bay waters, marshes and salt ponds. The City has a mild moderate climate with a temperature range of 30º to 90º F. January temperature averages range from a minimum of 39º to a maximum of 58º F with several days of rainy weather.
The County. The County is located on the California coast approximately 15 miles south of the City of San Francisco. The County is a major employment base, and is also accessible to the Daly City and Silicon Valley areas approximately 30 miles south via Interstate 280 or U.S.
Highway 101. The County has an approximate total area of 741 square miles, of which 448 square miles is land and 293 square miles is water. It is the third-smallest county in California by land area.
The County was formed in 1856 after San Francisco County, one of the state's 18 original counties since California's statehood in 1850, was split apart. Until 1856, San Francisco's city limits extended west to Divisadero Street and Castro Street, and south to 20th Street. In response to the lawlessness and vigilantism that escalated rapidly between 1855 and 1856, the California government decided to divide the county. A straight line was then drawn across the tip of the San Francisco Peninsula just north of San Bruno Mountain; everything south of the line became the new San Mateo County.
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Population
The historic population estimates of the cities in the County, as of January 1 of the past five years are shown in the following table:
SAN MATEO COUNTY
Population Estimates
Calendar Years 2017 through 2021 as of January 1
2017 2018 2019 2020 2021
Atherton 6,945 6,948 6,950 6,942 6,896
Belmont 26,951 26,898 26,808 26,669 26,470
Brisbane 4,653 4,654 4,642 4,621 4,579
Burlingame 30,355 30,318 30,224 30,068 29,746
Colma 1,493 1,476 1,496 1,678 1,659
Daly City 108,599 109,088 109,102 108,767 108,599
East Palo Alto 30,641 30,747 30,716 30,630 30,350
Foster City 32,741 32,746 33,221 33,025 32,842
Half Moon Bay 12,391 12,423 12,444 12,404 12,309
Hillsborough 11,455 11,486 11,444 11,442 11,391
Menlo Park 35,195 35,398 35,279 35,120 34,825
Millbrae 22,986 22,975 22,874 22,742 22,509
Pacifica 38,673 38,632 38,470 38,267 37,890
Portola Valley 4,611 4,614 4,607 4,598 4,560
Redwood City 84,779 84,943 85,686 86,444 85,182
San Bruno 45,423 45,442 45,391 45,392 44,936
San Carlos 29,689 29,713 29,644 30,067 29,814
San Mateo 103,038 103,412 103,140 102,766 103,045
South San Francisco 67,156 67,193 67,070 67,730 67,135
Woodside 5,665 5,670 5,647 5,670 5,628
Balance Of County 65,962 66,151 66,305 66,019 64,880
County Total 769,401 770,927 771,160 771,061 765,245
Source: State Department of Finance estimates (as of January 1).
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Employment
The City’s principal employers are set forth below:
CITY OF MENLO PARK
Principal Employers
(As of June 30, 2021)
Company Name Employment
% of Total City
Employment
Facebook, Inc. 18,500 84%
SRI International 784 4
Grail, Inc. 420 2
Intersect, Inc. 345 2
Pacific Biosciences of California 320 1
United Parcel Services 277 1
Exponent 238 1
City of Menlo Park 230 1
Personalis, Inc. 230 1
Safeway Stores Inc 228 1
Top Ten Employers 21,572 98%
Source: City of Menlo Park Annual Comprehensive Financial Report.
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The County’s major employers are set forth below in alphabetized order.
COUNTY OF SAN MATEO
Major Employers
(As of March 2022)
Employer Name Location Industry
3SIXTY Bistro Burlingame Full-Service Restaurant
Bart Daly City Station Daly City Transit Lines
Electric Charging Station Menlo Park Research Service
Electronic Arts Inc Redwood City Game Designers (mfrs)
Facebook Inc Menlo Park Social Media
Fisher Investments Woodside Investment Management
Fisher Investments San Mateo Investment Management
Forced Dump Debris Box Svc Burlingame Garbage Collection Franklin Resources Inc San Mateo Asset Management
Genentech Inc sSan Francisco Biotechnology Products & Services Gilead Sciences Inc Foster City Biological Products (mfrs) Kaiser Permanente Redwood City Redwood City Hospitals
Kaiser Permanente South Sn sSan Francisco Hospitals
Lsa Global Redwood City Training Consultants
Mills-Peninsula Medical Ctr Burlingame Hospitals
Palo Alto VA Hosp Med Ctr Menlo Park Government-Specialty Hosp Ex Psychiatric Plateau Systems San Mateo Computer Software
San Francisco Intl Airport-Sfo San Francisco Airports
San Mateo County Behavior San Mateo Government Offices-County San Mateo County Tax Collector Redwood City Tax Return Preparation & Filing San Mateo Medical Ctr San Mateo Hospitals
Sciex LLC Redwood City Scientific Apparatus & Instruments-Mfrs SRI International Menlo Park Engineers-Research
Visa Inc Foster City Credit Card & Other Credit Plans
Youtube LLC San Bruno Online Services
Source: State of California Employment Development Department, extracted from the America's Labor Market Information System (ALMIS) Employer Database, 2022 1st Edition.
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Employment and Industry
The unemployment rate in the San Francisco-Redwood City-South San Francisco MD was 3.3% in January 2022, up from a revised 2.9% in December 2021, and below the year ago estimate of 6.3%. This compares with an unadjusted unemployment rate of 5.5% for California and 4.4% for the nation during the same period. The unemployment rate was 3.4% in San Francisco County, and 3.1% in San Mateo County.
The table below list employment by industry group for San Francisco and San Mateo Counties for the years 2016 to 2020.
SAN FRANCISCO-REDWOOD CITY-SOUTH SAN FRANCISCO MD
(SAN FRANCISCO AND SAN MATEO COUNTIES)
Annual Average Civilian Labor Force, Employment and Unemployment; Employment by Industry
(March 2020 Benchmark)
2016 2017 2018 2019 2020
Civilian Labor Force (1) 997,100 1,008,600 1,017,700 1,035,900 989,900 Employment 965,300 979,800 993,800 1,013,400 916,700
Unemployment 31,900 28,800 23,800 22,500 73,300
Unemployment Rate 3.2% 2.9% 2.3% 2.2% 7.4%
Wage and Salary Employment: (2)
Agriculture 1,900 1,900 1,700 1,700 1,600
Mining and Logging 100 100 100 100 100
Construction 38,600 39,800 42,400 44,400 42,600
Manufacturing 38,200 39,400 39,000 39,400 36,600
Wholesale Trade 25,900 26,100 26,500 26,000 22,500
Retail Trade 81,200 81,200 80,400 78,400 67,900
Transportation, Warehousing, Utilities 40,500 43,900 47,300 50,600 44,300 Information 70,300 76,600 85,400 97,900 105,400
Finance and Insurance 59,400 59,300 60,900 62,200 62,000 Real Estate and Rental and Leasing 21,000 21,600 22,200 23,800 21,100 Professional and Business Services 262,000 267,000 277,400 288,400 280,200 Educational and Health Services 133,400 136,000 138,900 146,100 141,800 Leisure and Hospitality 141,400 142,400 143,600 147,500 89,400 Other Services 40,700 41,100 41,400 41,500 32,400
Federal Government 17,800 17,600 16,900 16,600 17,000
State Government 35,300 36,100 37,000 37,900 36,800
Local Government 74,600 76,200 77,500 77,100 73,500
Total, All Industries (3) 1,082,200 1,106,300 1,138,700 1,179,400 1,075,300
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
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Construction Activity
The following tables show a five-year summary of the valuation of building permits issued in the City and the County.
CITY OF MENLO PARK
Total Building Permit Valuations
(Figures in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $40,628.7 $26,838.9 $63,089.3 $31,324.2 $24,075.5 New Multi-family 21,735.2 9,125.0 9,463.6 45,750.0 1,255.9 Res. Alterations/Additions 25,882.2 24,323.5 38,610.5 17,856.8 1,952.0 Total Residential 88,246.1 60,287.4 111,163.4 94,931.0 27,283.4 New Commercial 153,777.7 58,249.8 975,365.2 80,599.1 13,870.8 New Industrial 0.0 0.0 0.0 0.0 0.0
New Other 382.4 14,807.0 17,339.4 3,766.1 789.9
Com. Alterations/Additions 8,158.7 206,680.5 76,290.8 30,279.2 18,290.0 Total Nonresidential 162,318.8 279,737.3 1,068,995.4 114,644.4 32,950.7 New Dwelling Units
Single Family 37 35 64 38 19
Multiple Family 105 45 33 183 10
TOTAL 142 80 97 221 29
Source: Construction Industry Research Board, Building Permit Summary.
SAN MATEO COUNTY
Total Building Permit Valuations
(Valuations in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $367,334.0 $338,186.5 $330,908.0 $486,257.4 $273,328.3 New Multi-family 252,560.4 210,996.5 195,226.4 322,896.6 154,590.5 Res. Alterations/Additions 395,240.9 503,351.5 424,804.7 365,784.7 310,315.5 Total Residential 1,015,135.3 1,052,534.5 950,939.1 1,174,938.7 738,234.3 New Commercial 716,150.7 1,207,218.1 1,505,602.0 737,402.4 391,778.1 New Industrial 4,954.8 500.0 0.0 0.0 0.0
New Other 196,145.2 135,392.7 77,503.7 63,741.5 64,772.4 Com. Alterations/Additions 728,965.3 1,047,885.6 972,646.5 618,727.3 923,425.0 Total Nonresidential 1,646,216.0 2,390,996.4 2,555,752.2 1,419,871.2 1,379,975.5 New Dwelling Units
Single Family 458 411 443 497 548
Multiple Family 1,319 1,169 1,046 1,049 439
TOTAL 1,777 1,580 1,489 1,546 987
Source: Construction Industry Research Board, Building Permit Summary.
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Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance).
Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2018 through 2022:
CITY OF MENLO PARK, SAN MATEO COUNTY,
STATE OF CALIFORNIA AND UNITED STATES
Effective Buying Income
2018 through 2022
Year Area
Total Effective
Buying Income
(000s Omitted)
Median Household
Effective
Buying Income
2018 City of Menlo Park $2,309,550 $109,935
San Mateo County 35,362,153 87,101
California 1,113,648,181 59,646
United States 8,640,770,229 50,735
2019 City of Menlo Park $2,551,302 $122,705
San Mateo County 39,578,320 93,319
California 1,183,264,399 62,637
United States 9,017,967,563 52,841
2020 City of Menlo Park $2,549,741 $120,864
San Mateo County 40,511,605 96,614
California 1,243,564,816 65,870
United States 9,487,165,436 55,303
2021 City of Menlo Park $2,678,898 $127,143
San Mateo County 43,397,132 102,641
California 1,290,894,604 67,956
United States 9,809,944,764 56,790
2022 City of Menlo Park $2,845,613 $146,990
San Mateo County 48,351,364 120,425
California 1,452,426,153 77,058
United States 11,208,582,541 64,448
Source: The Nielsen Company (US), Inc for 2018; Claritas, LLC for 2019 through 2022.
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Commercial Activity
Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables. Figures are not yet available for calendar year 2021.
Total taxable sales during the first three quarters of calendar year 2021 in the City were reported to be $350,577,682, an 8.29% increase over the total taxable sales of $323,736,164 reported during the first three quarters of calendar year 2020.
CITY OF MENLO PARK
Taxable Transactions
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2016 756 $301,181 1,345 $471,558
2017 715 284,429 1,293 540,016
2018 736 298,817 1,420 564,552
2019 732 299,065 1,448 593,990
2020 773 205,995 1,532 458,784
Source: State Department of Tax and Fee Administration.
Total taxable sales during the first three quarters of calendar year 2021 in the County were reported to be $13,942,300,942, a 24.89% increase over the total taxable sales of $11,163,237,792 reported during the first three quarters of calendar year 2020.
SAN MATEO COUNTY
Taxable Transactions
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2016 12,966 $10,394,055 21,899 $15,658,573
2017 12,744 10,949,848 21,534 16,552,584
2018 12,802 11,674,214 22,554 17,547,097
2019 12,817 11,989,035 22,908 18,168,258
2020 13,350 10,542,136 23,985 15,746,083
Source: State Department of Tax and Fee Administration.
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Transportation
San Francisco International Airport (“SFO”), the “gateway to the Pacific,” is a world-class airport serving tens of millions of domestic and international passengers annually. One of the world’s 30 busiest airports, SFO is committed to setting the standard for our industry. This includes being a leader in safety and security, customer service and satisfaction, community relations, environmental commitment, quality of facilities, and financial and economic vitality. SFO was the first major U.S. airport to achieve 100 percent fully automated and integrated baggage screening.
Today, efficient operations ensure that passenger screening wait times are among the shortest in the nation.
The Port of Redwood City is also located in the County. The Port has a deep-water channel and handles bulk cargo including lumber and scrap metal.
The County is connected to downtown San Francisco, the Airport, and the East Bay by the San Francisco Bay Area Rapid Transit (“BART”) District.
The County is also served by Caltrain, a commuter rail service between Daly City and San Francisco, running along the Southern Pacific right-of-way.
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APPENDIX B
CITY FINANCIAL INFORMATION
The information in this section concerning the operations of the City and the City’s general fund finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the general fund of the City. The Bonds are payable solely from the proceeds of an ad valorem tax levied by the County, as directed by the City, in an amount sufficient for the payment thereof. Amounts in the City’s general fund are not pledged to the payment of the Bonds.
See “THE BONDS” and “SECURITY FOR THE BONDS” above.
General
The City is a general law city that was first incorporated in 1874 and reincorporated in 1927. The City is located in the southern portion of San Mateo County (the “County”), on the west side of San Francisco Bay approximately 25 miles south of San Francisco and 25 miles north of San Jose.
City Services and Government
The City has operated under the council-manager form of government since its reincorporation in 1927. Policy-making and legislative authority are vested in a five-member governing council consisting of the Mayor and four Councilmembers. The City Council is responsible for, among other things, passing ordinances, adopting the budget, approving the Mayor’s nominees to commissions, and hiring both the City’s manager and its attorney.
The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The City Council is elected on a non-partisan basis. Councilmembers serve four-year staggered terms, with Councilmembers elected every two years. The Mayor is selected annually from the sitting Councilmembers. All Councilmembers are elected by district.
The City provides a broad range of services, including police, construction and maintenance of streets, parks, storm drains and other infrastructure, building inspections, licenses and permits, recreational and cultural activities, and human services programs. The City also manages franchises for solid waste, cable television, and energy.
Budget Process
The City’s budget policies are subject to California State law, generally accepted accounting principles (“GAAP”), and actions of the City Council. The budget process enables the City Council to make resource allocation decisions, including choices about staffing, technology, equipment, and priorities to be addressed in the coming fiscal year. The City’s Annual Operating Budget is adopted by the City Council by July 1 each year. Although the City Council first reviews the budget in May, the City Manager’s Office, the Administrative Services, and other departments begin to prepare it at least six months before that. Throughout the year, staff provides revenue projections and updates on the City’s financial performance, and continues to assess City needs.
In producing the budget, the Budget Team receives input from the public, City Council, and staff.
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At the mid-year budget review that typically takes place in February or March, the Administrative Services Director provides an update to the City Council on the current year’s budget and outlines policy issues facing the City. The City Council provides feedback and direction regarding proposed priorities for the future programming of General Fund resources.
With this direction and the Administrative Services revenue projections, each department prepares a proposed budget. The Budget Team works closely with department managers to ensure that budgets reflect the City Council’s interests, priorities, and goals.
Several weeks before the budget is adopted, the Administrative Services Director presents the budget for the coming year to the City Council, along with information on current year accomplishments and future year goals. Copies of the proposed budget document are available to the public at public hearings, and they are also available in the City Clerk’s Office, and on the City’s website. The Administrative Services Director presents the budget to the City Council in a televised public forum. Included in the Administrative Services Director’s presentation are an update of the City’s financial position and General Fund forecast; a review of the national, State, and local economies; a discussion of financial policies; and an update on department activities.
After reviewing the proposed budget and receiving public comment at public hearings, the City Council may direct staff to revise the proposed budget. On or before June 30, the City Council votes to adopt the budget, including any revisions to the proposed budget. At any time after the adoption of the budget, the City Council may amend or supplement the budget.
Upon final adoption by the City Council, the budget becomes the legal authorization for the various departments to expend resources, subject to conditions established by the City Manager and City Council. Through a resolution adopted by the City Council, the City Manager is authorized to transfer appropriations as needed from any account in the budget to any other accounts within the same fund to meet overall budget requirements. This resolution further authorizes the City Manager to transfer funds designated as “Transfers” in appropriate increments and intervals. The City Council has adopted several financial and budgetary policies, which address debt, reserves, and spending authorizations, and which help guide long-term planning.
Adopted Budget for Fiscal Year 2021-22
The fiscal year 2021-22 adopted operating budget is balanced and incorporates changes from the previous year’s budget to restore lost and reduced services due to the COVID-19 pandemic. One major item of note is the transfer to the general fund from the American Rescue Plan Act fund of $2.91 million, which eliminates an operating deficit, as general fund expenditures exceed revenues in the near future.
The City’s General Fund budget figures for fiscal year 2020-21, estimated actual figures for fiscal year 2020-21, and General Fund adopted budget figures for fiscal year 2021-22 are set forth in the following table. The City’s audited financial statements for the fiscal year ended June 30, 2021, are included as APPENDIX C to this Official Statement.
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Table B-1
CITY OF MENLO PARK
General Fund Adopted Budgets
For Fiscal Years 2020-21 and 2021-22
(Dollars in Millions)
Source: City of Menlo Park.
State Budget and Its Impact on the City
General. Information about the fiscal year 2021-22 adopted State budget and other State budgets are regularly available at http://www.ebudget.ca.gov. An impartial analysis of the budget is posted by the Legislative Analyst Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov.
The information referred to in this paragraph is prepared by the respective State agency maintaining each website and not by the City or Purchaser, and the City and Purchaser take no Estimated Adopted
Actuals Budget
2021-22 2021-22
Revenue
Taxes $40,036,406 $47,469,157
Charges for Services 5,895,638 4,434,716
Licenses & Permits 4,653,741 3,956,000
Other Financing Sources 597,599 2,958,683
Franchise Fees 2,137,124 2,337,020
Use of Money and Property 1,479,221 1,513,549
Fines 408,572 135,000
Other Revenue 127,454 125,000
Inter Governmental Revenue 1,923,457 47,400
Total $57,259,214 $62,976,525
Expenditures
Salaries and Wages $25,118,295 $27,036,491
Fringe Benefits 13,278,117 13,299,285
Services 6,391,893 8,706,618
Operating Expenses 5,726,344 6,791,685
Transfers 5,905,265 3,319,800
Utilities 1,681,882 1,628,204
Repairs & Maintenance 945,562 1,013,701
Fixed Assets & Capital Outlay 302,010 338,460
Special Projects Expenditures 282,070 286,950
Rental of land and buildings 50,675 148,400
Travel 15,836 71,320
Project Control - 30,000
Total $59,697,950 $62,670,914
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responsibility for the continued accuracy of the Internet addresses or for the accuracy or timeliness of information posted there, and such information is not incorporated in this Official Statement by these references.
Future State Budgets. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address a State budget deficit. Future State budgets will be affected by national and state economic conditions and other factors over which the City has no control. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. Decrease in such revenues may have an adverse impact on the City’s ability to pay the Bonds.
Financial Statements
The accounting policies of the City conform to generally accepted accounting principles.
The Governmental Accounting Standards Board (“GASB”) published its Statement No. 34 “Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments” on June 30, 1999. Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public utilities, on new requirements for financial reporting for all governmental agencies in the United States.
Generally, the basic financial statements and required supplementary information should include (i) Management’s Discussion and Analysis; (ii) financial statements prepared using the economic measurement focus and the accrual basis of accounting; (iii) fund financial statements prepared using the current financial resources measurement focus and the modified accrual method of accounting; and (iv) required supplementary information.
Accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. There are three groups of funds: governmental funds (which include the General Fund), proprietary funds (which include internal service funds) and fiduciary funds (which are used to account for resources held for the benefit of parties outside the City).
Information is presented separately in the governmental statement of revenues, expenditures, and changes in fund balances for the General Fund and the other major funds. Data for the nonmajor funds are combined into a single aggregated presentation.
All governmental funds and fiduciary funds use the modified accrual basis of accounting.
The proprietary funds use the accrual basis of accounting. The General Fund is the general operating fund of the City and is used to account for all financial resources except those required to be accounted for in a separate fund.
In fiscal year 2014-15, the City implemented GASB Statements No. 68 and 71. These statements establish standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources and pension plan expenses. GASB Statements No. 68 and No. 71 do not change the pension funding obligations of the City and have had no effect on the General Fund.
The City’s most recent audited financial statements are included in the Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021, which is attached as APPENDIX C to this Official Statement. The financial statements were prepared by the City and audited by Lance, Soll & Lunghard, LLP (the “Auditor”).
The Financial Statements should be read in their entirety. The City has neither requested nor obtained permission from the Auditor to include the audited financial statements as an Page J-2.131
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appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the City or General Fund. In addition, the Auditor has not reviewed this Official Statement.
Set forth on the following pages are (i) a general fund balance sheet for fiscal years 2017- 18 through 2020-21 and (ii) a statement of revenues, expenditures and changes in fund balances for the City’s general fund for the same period.
Table B-2
CITY OF MENLO PARK
General Fund Balance Sheet
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Assets:
Cash and investments held by City $37,150,640 $44,610,050 $46,522,704 $44,205,674 Receivables:
Accounts 2,936,269 3,543,534 1,502,393 1,931,882
Notes 1,339,846 -- -- --
Interest 210,166 335,041 271,317 194,690
Deposits and prepaid items 64,919 31,476 18,687 458,698 Due from other governments 1,922,859 1,716,648 1,511,599 1,974,707 Due from other funds 693,119 311,324 274,719 364,863
Total assets 44,317,818 50,548,073 50,101,419 49,130,514 Liabilities:
Accounts payable 2,241,596 2,170,412 2,007,016 3,634,527 Accrued payroll and related liabilities 675,690 761,199 914,490 1,979,099 Unearned revenue 558,090 1,156,914 699,000 988,168
Deposits 3,364,352 3,894,073 4,177,041 4,034,436
Due to other funds -- -- -- --
Total liabilities 6,839,728 7,983,455 7,797,547 10,636,230 Deferred inflows of resources:
In-lieu agreement payments -- -- -- --
Unavailable revenue 362,002 106,000 782,550 273,918
Total deferred inflows of resources 362,002 106,000 782,550 273,918 Fund Balance:
Nonspendable 1,404,765 31,476 18,687 458,698
Restricted -- -- -- --
Committed 25,600,000 28,980,000 27,918,200 28,950,860
Assigned 6,214,219 7,040,221 7,177,514 4,010,180
Unassigned 3,897,104 6,406,921 6,406,921 4,800,628
Total fund balances 37,116,088 42,458,618 41,521,322 38,220,366 Total liabilities, deferred inflows of resources
and fund balances $44,317,818 $50,548,073 $50,101,419 $49,130,514 Source: City of Menlo Park Annual Comprehensive Financial Reports.
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Table B-3
CITY OF MENLO PARK
Statement of General Fund Revenues, Expenditures and Changes in Fund Balance Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Revenues:
Taxes: $41,260,918 $49,472,104 $47,629,234 $43,737,631
Licenses and permits 6,740,335 3,485,429 2,326,200 3,063,815 Intergovernmental 1,392,765 1,532,390 1,640,825 1,957,360 Charges for services 9,940,815 11,493,149 9,607,262 5,697,303 Use of money and property 1,413,688 2,471,829 3,055,307 949,463 Fines and forfeitures 150,112 1,482,275 733,053 436,753 Contributions -- 250,000 -- --
Miscellaneous/Other 91,792 41,232 81,482 125,883
Total revenues 60,990,425 70,228,408 65,073,363 55,968,208 Expenditures:
Current:
General government 7,223,321 7,221,777 9,948,748 8,149,269 Public safety 17,818,423 19,021,612 19,614,650 18,358,323 Community development 5,858,732 6,401,074 5,503,474 6,119,266 Culture and recreation 11,214,276 12,715,462 12,463,101 9,921,620 Public works 10,123,814 11,478,029 11,562,448 11,051,302 Urban development and housing 8,244 70,593 96,261 127,947 Capital outlay 244,446 185,206 222,658 233,771
Debt service:
Principal -- -- -- --
Interest and fiscal charges -- -- -- --
Total expenditures 52,491,256 57,093,753 59,411,340 53,961,498 Excess of revenues over (under)
expenditures 8,499,169 13,134,655 5,662,023 2,006,710
Other financing sources (uses):
Transfers in 482,795 504,375 547,200 567,500
Transfers out (5,089,894) (8,296,500) (7,146,519) (5,875,166) Proceeds from sale of assets 5,603 -- -- --
Total other financing sources (uses) (4,601,496) (7,792,125) (6,599,319) (5,307,666) Net change in fund balance 3,897,673 5,342,530 937,296 (3,300,956 Fund balance - July 1 33,218,415 37,116,088 42,458,618 41,521,322 Fund balance - June 30 $37,116,088 $42,458,618 $41,521,322 $38,220,366
Source: City of Menlo Park Annual Comprehensive Financial Reports.
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Major Revenues
General. Taxes and other sources of revenue received by the City are listed in the table below, which presents the major revenues of the City’s General Fund for the last four audited fiscal years and the estimated actuals for fiscal year 2018-19.
Certain general taxes currently imposed by the City are affected by Proposition 218. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIC and Article XIIID of the State Constitution.” Table B-4
CITY OF MENLO PARK
Major Revenues by Source – General Fund
(Dollars in thousands)
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Budgeted
2021-22 (1)
% of
2021-22
Total
Property Tax $23,135,956 $26,066,433 $28,478,935 $28,146,419 $30,046,645 63% Sales Tax 7,215,357 7,156,070 6,922,306 6,659,717 6,797,462 14% Transient Occupancy Tax 7,770,969 10,296,163 7,823,528 3,253,778 8,889,940 19% Other Taxes 9,921,476 9,124,553 9,168,081 5,677,718 1,735,110_ 4% Major Revenues $48,043,758 $52,643,219 $51,852,850 $43,737,631 $47,469,157 100.0%
(1) Budgeted.
Source: Fiscal Year 2020-21 Annual Comprehensive Financial Report and 2021-22 Adopted Budget.
Property Taxes
General. This section describes property tax levy and collection procedures and certain information regarding historical assessed values and major property tax payers in the City.
Property taxes represent the largest source of tax revenue to the City (approximately 60% of all General Fund revenues in fiscal year 2020-21). The City has projected to receive approximately $29.86 million in property tax revenue for fiscal year 2021-22. See “ – Assessed Valuation” below.
Property taxes have historically been the primary revenue source affected by voter initiatives and legislative actions. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” and “BOND OWNERS’ RISKS – Limitations on Taxes and Fees.”
Impacts of COVID-19. While there is still substantial uncertainty surrounding the ultimate impacts of COVID-19, property taxes are expected to increase by 6% in fiscal year 2021-22.
ERAF Shift Legislation. Certain property taxes have been shifted from local government agencies to schools by the State Legislature for deposit in the Education Revenue Augmentation Fund (“ERAF”), a shift that has resulted in diversion of City property taxes since fiscal year 1992-
93. The primary change for the City in property tax receipts is a result of a potential change to the distribution formula used for excess Educational Revenue Augmentation Fund (“ERAF”) and property tax in lieu of vehicle license fees, both currently pending evaluation with the County and Page J-2.134
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State. Changes in the distribution formulas may reduce total property tax receipts by up to $2.36 million in fiscal year 2021-22. Additional, the City has maintained a policy of budgeting only 50% of excess ERAF, considering it an endangered revenue source.
Levy and Collection. Property taxes are levied for each fiscal year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing Stateassessed public utilities property and real property the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively.
A penalty of 10% attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property may be sold at public auction.
Property taxes on the unsecured roll are due as of the January 1 lien dates and become delinquent on the following August 31. A 10% penalty attaches to delinquent unsecured taxes.
If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.
Assessed Valuation. All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. Future assessed valuation growth allowed under Article XIIIA of the State Constitution (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”
Assessed Valuation History. Table 1, in the main body of this Official Statement, shows a recent history of the City’s assessed valuation.
Major Property Taxpayers. Table 6, in the main body of this Official Statement, shows the principal property taxpayers in the City as determined by their secured assessed valuations in fiscal year 2021-22.
Proposition 13 and Proposition 8 Property Value Adjustments. Proposition 13, adopted in 1978, established the base year value concept for property tax assessments. Under Page J-2.135
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Proposition 13, the 1975-1976 fiscal year serves as the original base year used in determining the assessment for real property. Thereafter, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or 2%, whichever is less. A new base year value, however, is generally established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed.
Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a “decline-in-value.” As of January 1st (lien date) each year, the Assessor must enroll either a property’s Proposition 13 value (adjusted annually for inflation by no more than 2%) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value, the lower value is commonly referred to as a “Proposition 8 Value.” “Proposition 8 values” are temporary and, once enrolled, must be reviewed annually by the assessor until the Proposition 13 adjusted base year value is enrolled.
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. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual collections) to local political subdivisions, including the City, for which the County acts as the tax-levying or tax-collecting agency. See "PROPERTY TAXATION – Tax Levies and Delinquencies” for additional details.
Transient Occupancy Taxes
Transit occupancy taxes represented approximately 7% of major General Fund tax revenues in fiscal year 2020-21. Transient occupancy tax (also known as a hotel tax) is the tax added to short term rental guest bills for stays of fewer than 30 days. This category of taxes was significantly impacted by the COVID-19 pandemic and the near complete suspension of business and leisure travel beginning in March 2020. The City expects these taxes to rebound quickly, though it remains to be seen whether the demand for business travel will be reduced as telework remains an option for many people.
Beginning July 1, 2013, for the privilege of occupancy in any hotel in the City, each transient pays a tax in the amount of 12% of the rent charged by the renter at the time the rent is paid. Transient occupancy taxes have increased in recent years as a result of higher occupancy and average room rates for most short-term rentals, as well as the opening of new facilities.
While the number of hotel rooms and the average nightly rate are likely to increase as a result of new hotels in the City, the hotel industry is dependent on a strong local economy. The City has budgeted $8.89 million in transient occupancy tax revenue for fiscal year 2021-22, up 88% from fiscal year 2020-21.
Sales and Use Taxes
Sales and use taxes represent approximately 15% of major General Fund tax revenues in fiscal year 2020-21. Sales tax revenue has been a revenue in decline for the past demand in terms of share of overall revenue, even prior to the onset of the COVID-19 pandemic, which resulted in the temporary or permanent closure of many sales tax sources. Given the expectation that sales taxes will return rapidly as sales tax sources reopen and due to pent up demand, the City has budgeted to receive $6.80 million in sales tax revenue for fiscal year 2021-22.
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Sales Tax Rates. The City collects a percentage of taxable sales in the City (minus certain administrative costs imposed by the State Board of Equalization) pursuant to the Bradley-Burns Uniform Local Sales and Use Tax (the “Sales Tax Law”), as shown below.
Currently, taxable transactions in the City are subject to the following sales and use tax, of which the City’s share is only a portion. The State collects and administers the tax, and makes distributions on taxes collected within the City, as follows:
Table B-5
CITY OF MENLO PARK
Sales Tax Rates
Fiscal Year 2021-22
Component Rate
State-Wide Tax Rate 7.25%
San Mateo County 2.125
Total City of Menlo Park Tax Rate 9.375%
Source: California State Board of Equalization.
Sales and use taxes are complementary taxes; when one applies, the other does not. In general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible personal property in the State of California. The use tax is imposed on the purchase, for storage, use or other consumption in the State of tangible personal property from any retailer. The use tax generally applies to purchases of personal property from a retailer outside the State of California where the use will occur within the State of California. The Sales Tax is imposed upon the same transactions and items as the statewide sales tax and the statewide use tax.
Certain transactions are exempt from the State sales tax, including sales of the following products:
• food products for home consumption;
• prescription medicine;
• newspapers and periodicals;
• edible livestock and their feed;
• seed and fertilizer used in raising food for human consumption; and • gas, electricity and water when delivered to consumers through mains, lines and pipes.
This is not an exhaustive list of exempt transactions. A comprehensive list can be found in the State Board of Equalization’s Publication No. 61 entitled “Sales and Use Taxes: Exemptions and Exclusions,” which can be found on the State Board of Equalization’s website at http://www.boe.ca.gov/. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference.
Sales Tax Collection Procedures. Collection of the sales and use tax is administered by the California State Board of Equalization. Under the Sales and Use Tax Law, all sales and use taxes collected by the State Board of Equalization under a contract with any city, city and Page J-2.137
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county, redevelopment agency, or county are required to be transmitted by the Board of Equalization to such city, city and county, redevelopment agency, or county periodically as promptly as feasible. These transmittals are required to be made at least twice in each calendar quarter.
Under its procedures, the State Board of Equalization projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon the State Board of Equalization’s quarterly projection. During the last month of each quarter, the State Board of Equalization adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter.
According to the State Board of Equalization, it distributes quarterly tax revenues to cities, counties and special districts using the following method:
Using the prior year’s like quarterly tax allocation as a starting point, the State Board of Equalization first eliminates nonrecurring transactions such as fund transfers, audit payments and refunds, and then adjusts for growth, in order to establish the estimated base amount. The State Board of Equalization disburses 90% to each local jurisdiction in three monthly installments (advances) prior to the final computation of the quarter’s actual receipts. Ten percent is withheld as a reserve against unexpected occurrences that can affect tax collections (such as earthquakes, fire or other natural disaster) or distributions of revenue such as unusually large refunds or negative fund transfers. The first and second advances each represent 30% of the 90% distribution, while the third advance represents 40%. One advance payment is made each month, and the quarterly reconciliation payment (clean-up) is distributed in conjunction with the first advance for the subsequent quarter. Statements showing total collections, administrative costs, prior advances and the current advance are provided with each quarterly clean-up payment.
The Board of Equalization receives an administrative fee based on the cost of services provided by the Board to the City in administering the City’s sales tax, which is deducted from revenue generated by the sales and use tax before it is distributed to the City.
Historical Composition of Sales Tax Revenue. A historical summary of sales tax composition by category is shown in the following table. The data presented show the full value of the City’s 1.0% share of sales taxes under the Sales Tax Law, and do not reflect the State’s Page J-2.138
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“triple-flip” adjustments, administrative fees, or the 5% of the City’s revenue allocable to San Mateo County.
Table B-6
CITY OF MENLO PARK
Sales Tax Revenue by Category
Source: City of Menlo Park.
Other Sources. The City also collects additional General Fund revenues from franchise fees, license and permit fees, and other more minor sources.
Long-Term Obligations
General Obligation Bonds. As of June 30, 2021, the City had $15,780,000 in long-term debt outstanding. Following is a summary schedule of outstanding debt:
Balance
June 30, 2021
General Obligation Bonds:
2012 General Obligation Refunding Bonds $6,315,000
2019 General Obligation Refunding Bonds 9,465,000
Subtotal $15,780, 000
Source: City of Menlo Park.
Community Development Agency Bonds. In addition to the above general obligations, the City serves as fiduciary for debt issued by the Successor Agency of the former redevelopment area of the City (the “Successor Agency”) for the Las Pulgas Redevelopment Project area. As of June 30, 2021, the Successor Agency’s outstanding debt was $40.71 million. The County of San Mateo provides the Successor Agency with sufficient revenue on an annual basis to meet current year debt service requirements.
Employee Relations
There are approximately 245 full and part-time employees of the City, represented by formal labor organizations or not represented, as shown in the table below.
Category 2016-17 2017-18 2018-19 2019-20 2020-21
Business and Industry 1,464,710 1,624,682 2,134,664 2,221,013 2,278,655 Autos and Transportation 111,628 63,310 51,833 51,833 51,833 General Consumer Goods 976,800 1,056,753 896,130 737,001 757,028 Restaurants and Hotels 1,082,109 1,161,420 1,281,832 975,591 678,087 Building and Construction 346,260 328,728 282,067 282,067 282,067 Fuel and Service Stations 527,599 614,629 709,119 480,603 401,830 Food and Drugs 581,019 593,047 750,749 729,169 666,896
County Pool 993,017 943,109 1,413,714 1,685,803 1,657,934 State Pool 2,862 2,765 3,499 3,162 3,886
Transfers and Unidentified (330,920) (1,163,883) (367,537) (243,937) (118,498) Total 5,755,084 5,224,560 7,156,070 6,922,306 6,659,717 Page J-2.139
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Labor Group
Number of
Employees
Contract
Expiration Date
Service Employees International (SEIU) Local 521 141 06/30/2023 Menlo Park Police Officers’ Association (POA) 34 08/31/2024 American Federation of State, County and
Municipal Employees (AFSCME) Local 829
36 06/30/2023
Menlo Park Police Sergeants Association (PSA) 8 06/20/2022 Not represented 26
Total 245
Risk Management
The City is exposed to various risks of loss related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disaster. The City participates in pooled insurance programs offered by the Bay Cities Joint Powers Insurance Authority (“BCJPIA”) for losses in excess of specific program deductibles. The purpose of the pool is to provide certain levels of liability coverage, claims administration, and loss control support to member Cities. The bylaws of the BCJPIA, the risk coverage agreement, and an associated memorandum of coverage govern the rights and responsibilities of the BCJPIA’s 19 members. Each member chooses its self-insured liability retention levels. Each member has a vote in approving the pool’s self-insured retention level, in setting the coverage limits, in establishing the level of pool reserves and in approving the premium allocation methodology used for setting the premiums for each member.
The City’s liability program has a per claim deductible of $250,000 and a policy limit of $29,000,000. The employment practices program has a per claim deductible of $250,000 and a policy limit of $1,000,000. The property and fire program has a per claim deductible of $10,000 and a policy limit of replacement value.
The City’s workers’ compensation program has a per claim deductible of $350,000 and through BCJPIA, pooled coverage and reinsurance up to statutory limits.
Claims for long-term disability are covered by standard insurance.
Estimated reserves for all claims are recorded in internal service funds. No claim settlement has exceeded the coverage amounts in place for any of the years shown. The amount of claims due in one year from June 30, 2021, is estimated to total $951,766.
See Note 8 in the City’s fiscal year 2020-21 audited financial statements, which are attached to this Official Statement as APPENDIX C, for additional information about the City’s risk management practices.
Employee Retirement System
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This caption contains certain information relating to California Public Employees’ Retirement System (“CalPERS”). The information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The City has not independently verified the information provided by CalPERS and makes no representations and expresses no opinion as to the accuracy of the information provided by CalPERS.
The annual comprehensive financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference in this Official Statement. None of the Authority, City or Purchaser can guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future. Actuarial assessments will change with the future experience of the pension plans.
Plan Description. All qualified permanent and probationary employees are eligible to participate in the City’s Miscellaneous Plan, an agent multiple-employer defined benefit pension plan, administered by the California Public Employees’ Retirement System (“CalPERS”), which acts as a common investment and administrative agent for its participating member employers.
All safety qualified permanent and probationary employees are eligible to participate in the City’s Safety Plan, a cost-sharing multiple-employer defined benefit pension plan, administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers.
Benefit provisions under the Plan are established by State statute and Local Government resolution. CalPERS issues publicly available reports that include a full description of the pension plans 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 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
The Plans’ provisions and benefits in effect at June 30, 2021, are summarized as follows:
Miscellaneous Miscellaneous Second Tier Miscellaneous PEPRA Classic Classic
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payment Monthly for life Monthly for life Monthly for life Retirement age 50 50 52
Monthly benefits, as a %
of annual salary
2.70% at age 55 2.00% at age 60 2.00% at age 62
Required employee
contribution rates
7.322% 7.000% 6.750%
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Required employer
contribution rates
10.072% 10.072% 10.072%
Required UAL payment $2,649,728 -- --
Safety Safety Second Tier Safety PEPRA
Classic Classic
Hire Date Prior to January 1, 2013 On or after January 1, 2013 On or after January 1, 2013 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payment Monthly for life Monthly for life Monthly for life Retirement age 50 55 57
Monthly benefits, as a %
of annual salary
3.00% 3.00% 2.70%
Required employee
contribution rates
9.000% 9.000% 12.000%
Required employer
contribution rates
21.927% 18.928% 13.03%
Required UAL payment $1,65,796 -- $4,969
Source: City of Menlo Park Annual Comprehensive Financial Reports.
Employees Covered. As of June 30, 2021, there were 246 inactive employees currently receiving benefit payments, 222 active employees and 468 total participants for the Miscellaneous Plan. The City's labor contracts for miscellaneous employees have a cost sharing component which requires the City to pay [50%] of the employer contribution above [14.597%] for the Service Employees International Union or [15.850%] for the American Federation of State, County and Municipal Employees. The City's labor contracts for safety employees have a cost sharing component which require first and second tier employees to make an additional [3%] contribution and PEPRA employees to contribute the greater of [12% or 50%] of costs to the City. See “CITY FINANCIAL INFORMATION – Employee Relations.” [CONFIRM/UPDATE] Contributions. Section 20814 (C) of the California Public Employees’ Retirement Law (“PERL”) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. 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 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. For the year ended June 30, 2021, the employer contributions recognized as a reduction to the net pension liability were $5,714,049 and $3,519, 360, for the Miscellaneous plan and the Safety plan, respectively.
Actuarial Assumptions. The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedure. The following actuarial methods and assumptions, applied to all periods unless otherwise specified: the actuarial cost method used was entry age normal, the discount rate was 7.15%, inflation was 2.50%, and salary increases vary by entry age and service. The mortality rate was derived using CalPERS’ Membership Data for all funds. The mortality table used was developed based on CalPERS’ specific data and includes 15 years of mortality improvements using society of Actuaries Scale Page J-2.142
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90% of scale MP 2016. The post retirement benefit increase used contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies.
The discount rate will be lowered for future actuarial valuations. See “- Recent Actions Taken by CalPERS.”
Changes in Pension Liability-Miscellaneous Plan. The changes in pension liability of the City as of June 30, 2021, is shown in the following table:
CHANGES IN TOTAL PENSION LIABILITY
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Balance at June 30, 2019 $141,085,627 $107,999,171 $33,086,456 Changes in the year:
Service Cost 3,296,079 -- 3,296,079
Interest on total pension liability 10,105,458 -- 10,105,458 Difference between actual and expected 2,204,389 -- 2,204,389 Employer Contributions -- 5,792,309 (5,792,309)
Employee Contributions -- 1,491,043 (1,491,043)
Net Investment Income -- 5,432,316 (5,432,316)
Administrative Expenses -- (152,252) 152,252
Benefit Payments (7,205,963) (7,205,963) --
Net Changes 8,399,963 5,357,453 3,042,510
Balance at June 30, 2020 $149,485,590 $113,356,624 $36,128,966
Source: City of Menlo Park Annual Comprehensive Financial Reports.
As of June 30, 2021 the City reported a net pension liability of $29,497,100 for its proportionate share of the net pension liability of the Safety Plan.
The City’s proportionate share of the net pension liability of the safety risk pool for the Safety Plan as of measurement dates June 30, 2019 and 2020 were as follows:
Proportion-June 30, 2019 0.268420%
Proportion-June 30, 2020 0.271102%
Change-Increase (Decrease) 0.002682%
Pension Expense. For the year ended June 30, 2021, the City recognized a pension expense of $6,290,218 and $4,943,853, for the Miscellaneous and Safety plan, respectively. For additional information about the City’s other postemployment benefits, see Notes 12 and 13 of the City’s audited financial statements for fiscal year ended June 30, 2021, attached to the Official Statement as APPENDIX C.
Recent Actions Taken by CalPERS. At its April 17, 2013, meeting, CalPERS’ Board of Administration (the “CalPERS Board”) approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy that spread investment returns over a 15-year period with experienced gains and losses paid for over a rolling 30-year period. After this change, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a 20-year period with a five-year ramp-up, and five-year ramp-down, period. The new amortization and smoothing policy was used for the first time in the June 30, 2013, actuarial valuations in setting employer contribution rates for fiscal year 2015-16.
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On February 18, 2014, the CalPERS Board approved new demographic actuarial assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police 3%@50, Fire 3%@55, and Miscellaneous 2.7%@55 and 3%@60, which will increase costs for those groups. As a result of these changes, rates will increase beginning in fiscal year 2016-17 (based on the June 30, 2014 valuation) with full impact in fiscal year 2020-21.
On November 18, 2015, the CalPERS Board adopted a funding risk mitigation policy intended to incrementally lower its discount rate – its assumed rate of investment return – in years of good investment returns, help pay down the pension fund's unfunded liability, and provide greater predictability and less volatility in contribution rates for employers. The policy establishes a mechanism to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the existing discount rate, currently 7.5%, by at least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the pension system by lowering the volatility of investment returns. More information about the funding risk mitigation policy can be accessed through CalPERS’ web site at the following website address:
https://www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-riskmitigation-policy The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference.
On December 21, 2016, the CalPERS Board voted to lower its discount rate from the current 7.5% to 7.0% over the next three years according to the following schedule.
Valuation
Date
Fiscal Year Required
Contribution
Discount
Rate
June 30, 2016 2018-19 7.375%
June 20, 2017 2019-20 7.250
June 30, 2018 2020-21 7.000
For public agencies like the City, the new discount rate will increase contribution costs beginning in fiscal year 2018-19. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term.
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On November 15, 2021 the CalPERS Board selected a new asset allocation mix that will guide the fund’s investment portfolio for the next four years, while at the same time retaining the reduction of discount rate from 7.0% to 6.8%. Notable changes for employers include a decrease in median total employer contribution rates, from less than 1% in miscellaneous plans to a decrease of more than 2% in some safety plans. Contribution changes will take effect in fiscal year 2023-24 for public agencies.
Other Post-Employment Benefits (“OPEB”)
Plan Description. The City sponsors and administers a single-employer defined benefit postemployment healthcare plan (the Plan) to provide healthcare insurance benefits to eligible retired employees and their dependents. Benefit provisions are established and may be amended by the City.
The City participates in the CalPERS healthcare program (“PEMHCA”) and allows retirees to continue participation in the medical insurance program after retirement. The following summarizes the retiree healthcare benefits:
PEMHCA Minimum: The City pays the PEMHCA minimum required employer contribution for retirees participating in PEMHCA towards the retiree monthly premium.
Retiree Health Benefit Credits (“RHBC”): Employees can convert unused sick or general leave balance (up to a maximum) to RHBC at retirement. The City pays retiree medical or dental coverage based on RHBC. Sick leave hour accrual and RHBC conversion rates vary by bargaining unit and service.
Implied Subsidy: An implied subsidy generally exists when retiree premiums are based on blended active and retiree experience. In May 2014, the American Academy of Actuaries released a new version of Actuarial Standard of Practice No. 6 (ASOP No. 6). The revised ASOP No. 6 requires the implied subsidy to be valued for community plans such as PEMHCA.
Membership of OPEB as of June 30, 2021 was 119 inactive employees currently receiving benefit payments, 236 active employees and 355 total participants.
Contributions. The City pre-funds the Plan through CalPERS OPEB Trust (“CERBT”) by contributing the City’s Annual Required Contribution (“ARC”) every year. For the measurement period 2019-20, the City contributed $931,457, including $760,437 in benefit payments, $168,000 in implicit rate subsidy, and a $3,020 of expenses paid outside of the trust.
CERBT is a tax qualified irrevocable trust, organized under Internal Revenue Code (“IRC”) Section 115, established to prefund OPEB as described in GASB Statement 45. The CERBT issues a publicly available financial report that included financial statements and required supplementary information for the City, not individualizing, but in aggregate with the other CERBT participants. That report may be obtained by contacting CalPERS.
Actuarial Assumptions. The City’s net OPEB asset was measured as of June 30, 2020 and the total OPEB liability used to calculate the net OPEB asset was determined by an actuarial valuation of June 30, 2019 and was determined using the following actuarial methods and assumptions, applied to all periods unless otherwise specified: the actuarial cost method used was entry age normal, the discount rate was 6.75%, inflation was 2.75%, the contribution policy was the full actuarially determined contribution amount, salary increases vary by entry age and Page J-2.145
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service, projected salary increase was 3.00%, investment rate of return was 6.75%, the mortality rate was based on the CalPERS 1997-2015 Experience Study, the post-retirement benefit increase was based on the post-retirement mortality projected fully generational with Scale MP2019, the healthcare trend rate for Non-Medicare was 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and later years and the healthcare trend for Medicare was 6.3% for 2021, decreasing to an ultimate rate of 4.0% in 2076.
Changes in OPEB Liability of the City. The changes in OPEB liability of the City as of June 30, 2021, is shown in the following table:
CHANGES IN TOTAL OPEB LIABILITY
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability/(Asset)
Balance at June 30, 2019 $18,261,041 $22,006,132 $(3,745,091) Changes in the year:
Service Cost 646,231 -- 646,231
Interest 1,244,906 -- 1,244,906
Changes in assumptions (315,068) -- (315,068)
Employer Contributions -- 931,457 931,457
Net Investment Income -- 777,337 (777,337)
Administrative Expenses -- (13,768) 13,768
Benefit Payments (928,437) (928,437) --
Net Changes 647,632 766,589 (118,957)
Balance at June 30, 2020 $18,908,673 $22,772,721 $(3,864,048)
Source: City of Menlo Park Annual Comprehensive Financial Reports.
OPEB Expense. For the year ended June 30, 2021, the City recognized an OPEB expense of $260,609. For additional information about the City’s other postemployments benefits, see Note 13 of the City’s audited financial statements for fiscal year ended June 30, 2018, attached to the Official Statement as APPENDIX C.
Investment Policies and Procedures
The City invests its funds in accordance with the City’s Investment Policy (the “Investment Policy”), which is subject to annual review and approval by the City Council. The purpose of the Investment Policy is to establish the investment goals of safety, liquidity, and yield (in that order).
The Investment Policy complies with the provisions of the California Government Code, Sections 53600 through 53659 (the authority governing investments for municipal governments in the State). The Investment Policy limits the City to investments authorized by State law (Sections 53601 et sec). In addition, the Investment Policy establishes further guidelines.
It is the policy of the City to invest public funds in a prudent manner which will provide the highest yield consistent with the maximum security and preservation of invested principal, while meeting the daily cash flow demands of the City, and conforming to all applicable federal, state and local statutes governing the investment of public funds.
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The City Council receives monthly cash and investments reports. As of June 30, 2021, the City has invested funds as set forth in the table below.
Table B-7
CITY OF MENLO PARK
Investment Portfolio as of June 30, 2021
Value
Securities of U.S Government-Treasury Notes $21,006,603 Securities of U.S Government-Government Agencies 31,800,800 Corporate Bonds 39,636,328
Local Agency Investment Fund 73,088,026
Money Market Mutual Funds 14,464
Total $165,546,221
Source: City of Menlo Park Annual Comprehensive Financial Reports.
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APPENDIX C
ANNUAL FINANCIAL REPORT FOR YEAR ENDED
JUNE 30, 2021
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APPENDIX D
PROPOSED FORM OF OPINION OF BOND COUNSEL
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APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the City of Menlo Park (the “City”) in connection with the issuance of the bonds captioned above (the “Bonds”). The Bonds are being issued under the Constitution and laws of the State of California, including but not limited to, Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, under a resolution adopted by the City Council of the City on April 12, 2022 (the “Bond Resolution”) and pursuant to and consistent with the Charter of the City.
The City hereby covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).
Section 2. Definitions. In addition to the definitions set forth above and in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms have the following meanings:
“Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4.
“Annual Report Date” means the date not later than April 1 after the end of each fiscal year of the City (currently June 30th).
“Dissemination Agent” means the City or any other Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. As of the date of this Disclosure Certificate, the City is acting as Dissemination Agent. “Listed Events” means any of the events listed in Section 5(a). “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.
“Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds.
“Participating Underwriter” means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
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Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2023, with the report for the 2021-22 fiscal year, provide to the MSRB in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:
(a) Financial Statements. Audited financial statements of the City for the preceding fiscal year, prepared in accordance with generally accepted accounting principles. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Other Annual Information. To the extent not included in the audited financial statements of the City, the Annual Report shall also include financial and operating data with respect to the City for the preceding fiscal year, substantially similar to that provided in Table 1, Table 4 and Table 6 in the Official Statement, describing assessed valuations and tax collection records.
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(c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB’s internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or
determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.
(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
(15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material.
(16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.
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(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Resolution.
(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14), and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the Bonds.
The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Resolution.
(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 3 contain the qualifier “if material.” The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the City determines the event’s occurrence is material for purposes of U.S. federal securities law.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in Page J-2.153
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full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).
Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days’ written notice to the City.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Bond Resolution for amendments to the Bond Resolution with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(b).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or Page J-2.154
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including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. If the City fails to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder, and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:
To the City: City of Menlo Park
701 Laurel Street
Menlo Park, California 94025
(650) 330-6600
Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.
Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
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Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
Date: ______________, 2022 CITY OF MENLO PARK
By:
Director of Finance
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Menlo Park (the “City”)
Name of Bond Issue: City of Menlo Park 2022 General Obligation Bonds (2001 Election)
Date of Issuance: ______________, 2022
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated ______________, 2022. The City anticipates that the Annual Report will be filed by _____________.
Date: [DISSEMINATION AGENT]
By:
Name:
Title:
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APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust Page J-2.158
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companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as Page J-2.159
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possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and interest payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
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PAYING AGENCY AGREEMENT
This Paying Agency Agreement (the “Agreement”), entered into as of May __, 2022, by and between the City of Menlo Park (the “Issuer”) and The Bank of New York Mellon Trust Company, N.A., a national banking association having a corporate trust office at San Francisco, California (the “Paying Agent”),
WITNESSETH:
WHEREAS, by the resolutions described in Exhibit A attached hereto (the “Authorization”), the Issuer authorized the issuance of its Bonds or Notes as described in Exhibit A attached hereto (the “Bonds” or “Notes”) and
WHEREAS, said Authorization authorized the Issuer to enter into an agreement of appointment with a bond registrar/transfer agent and paying agent to service such Bonds or Notes.
NOW, THEREFORE, the Issuer and the Paying Agent agree as follows:
Section 1. Appointment and Acceptance. The Issuer hereby appoints The Bank of New York Mellon Trust Company, N.A. as bond registrar/transfer agent and paying agent for the Bonds or Notes, and the Paying Agent accepts such appointments, acknowledging the duties, obligations and responsibilities of the Paying Agent as set forth herein.
Section 2. Documents to be Filed with the Paying Agent. The following documents shall be filed with the Paying Agent in connection with its appointment:
(i) a copy of the Authorization.
(ii) if not printed on the Bonds or Notes, an opinion of bond counsel stating that (a) the Bonds or Notes are valid and legally binding obligations of the Issuer, payable in accordance with their terms and (b) if applicable, the interest on such Bonds or Notes is not included in gross income for federal income tax purposes; (iii) a specimen certificate in the form approved by the Issuer; (iv) if the Bonds or Notes have been delivered prior to the Paying Agent’s appointment:
(1) a list containing the name, address and taxpayer identification number of each holder of the Bonds or Notes as of the date of Paying Agent’s appointment, indicating the date of issuance, the authentication date, the certificate number and the denomination for each outstanding certificate, and (2) a list of stop transfer orders maintained by the Issuer (or its prior paying agents) against outstanding Bond or Note certificates giving details as to certificate numbers, denominations, names of registered owners and dates of stop transfer orders, and, if such certificates have been replaced, the numbers and denominations of the replacement certificates, dates of replacements and documents evidencing the indemnity accepted in connection with the issuance of the replacement certificates; and
(v) such other instruments and certificates as the Paying Agent may reasonably request.
Section 3. Registration, Authentication and Delivery of Initial Bonds or Notes. If the Bonds or Notes are to be newly issued, the Issuer will, or will cause its underwriter to:
ATTACHMENT F Page J-2.161
2 (i) deliver to Paying Agent, not later than five (5) business days prior to the required delivery date, written notice setting forth the maturity date, principal amount and interest rate borne by the Bonds or Notes;
(ii) notify the Paying Agent in writing, not later than three (3) business days prior to the required delivery date, of the name(s) in which Bonds or Notes are to be registered, the mailing addresses of the respective registered holders and their respective taxpayer identification numbers, and the quantity, denominations, interest rates, maturity dates and CUSIP numbers of the certificates to be issued to each registered holder.
The Paying Agent shall inscribe the Bonds or Notes as directed in Section 3(ii) above, authenticate the initial Bonds or Notes and deliver same in accordance with the written directions of the Issuer or its underwriter. If delivered before the Closing, such initial Bonds or Notes shall remain subject to the control of the Paying Agent, as agent for the Issuer, until released by the Paying Agent.
Section 4. Transfer or Exchange of Certificates. The Paying Agent is authorized, empowered and directed to inscribe, to countersign or authenticate as registrar, and to record and deliver new certificates for Bonds or Notes of the Issuer pursuant to requests for transfer and cancellation of other certificates theretofore outstanding, or to replace lost, destroyed, stolen or mutilated certificates, as provided in Section 6 hereof.
If the transfer and/or exchange of the Bond or Note certificate shall have been documented in the manner authorized or required by law, and if the rules, regulations, policies and procedures of the Issuer and of the Paying Agent, governing the transfer and registration of the Bonds or Notes shall have been met, then the Paying Agent shall cancel such certificate being transferred and/or exchanged and shall inscribe, authenticate, record and deliver a new certificate for the Bonds or Notes so transferred or exchanged. In the transfer of Bond or Note certificates, the Paying Agent may require a guarantee of signature by an eligible guarantor institution participating in a recognized signature guarantee program.
The Paying Agent shall incur no liability for the refusal in good faith to make transfers which it, in its judgment, deems improper or unauthorized. The Paying Agent may, in effecting transfers, rely upon the Uniform Commercial Code of the State of California and/or the rules of the Stock Transfer Association, Inc.
Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall provide or cause to be provided to the Paying Agent all information necessary to allow the Paying Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Paying Agent shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information. The Paying Agent acknowledges that the Issuer has no obligation to enforce any obligations imposed by this paragraph on the owners of the Bonds.
Section 5. Bond or Note Certificates. The Issuer will furnish to the Paying Agent a sufficient supply of blank Bond or Note certificates and, from time to time, will replenish such supply upon request of the Paying Agent. Such blank Bond or Note certificates shall be signed by officers of the Issuer, authorized by the Issuer to sign Bond or Note certificates, and shall bear the seal of the Issuer or shall bear, to the extent permitted by law, the facsimile signature of each such officer and a facsimiles of the seal. If an officer of the Issuer, whose signature appears on any Bond or Note certificate, ceases to be an officer of the Issuer before delivery of said Bond or Note certificate, such signature nevertheless shall be valid and sufficient for all purposes, the same as if such officer of the Issuer had remained in office until such delivery and the Paying Agent may inscribe, authenticate, and deliver such certificate as being that of the Issuer whose signature properly shall have been inscribed on such Bond or Note certificate prior to its issuance.
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3 Section 6. Records of Certificates; Lost or Destroyed Certificates. The Paying Agent may open and keep such books and other records, including a bond register, as shall be required for, or convenient in, the performance of its duties. If Bonds or Notes have been issued and delivered prior to the Paying Agent’s appointment, the Paying Agent may accept and adopt as a part of such records all lists of holders of records as may have been employed by any former bond registrar/transfer agent and paying agent for such Bonds or Notes if certified by such former bond registrar/transfer agent and paying agent.
The Paying Agent shall use such list of holders of record of the Issuer’s Bond or Note certificates as sufficient basis for its records and verification of Bond or Note certificates therein described.
Upon receiving written instructions from the Issuer and indemnity satisfactory to the Paying Agent and the Issuer, the Paying Agent may inscribe, authenticate and deliver, to the persons entitled thereto, new certificates in place of certificates represented to have been lost, stolen or destroyed and likewise may issue a new certificate in exchange for, and upon surrender of, an identifiable mutilated certificate.
Section 7. Payments of Interest and Principal. The Paying Agent shall act as paying agent for the Bonds or Notes and in such capacity it shall:
(i) with funds provided by Issuer, pay the interest upon the Bonds or Notes by mailing checks to the persons entitled to receive such interest, as determined by the registry of the Issuer maintained by the Paying Agent, provided that Issuer shall have deposited with the Paying Agent, on or before the day upon which interest checks are to be mailed, sufficient immediately available funds to cover payment of such interest; (ii) with funds provided by Issuer, pay the principal amount (including premium, if any) of the Bonds or Notes to the registered holders of such Bonds or Notes, upon the maturity date or earlier redemption date upon which the principal is to become payable and upon delivery to the Paying Agent of a Bond Note certificate with respect to which such principal payment shall have become payable, provided that the Issuer shall have deposited with the Paying Agent, on or before the payment date, sufficient immediately available funds to pay the aggregate principal amount (including premium, if any) due on all Bonds or Notes so payable;
(iii) if a Bondholder or Noteholder shall report to the Paying Agent that any check so mailed for the payment of interest or principal has been lost and that the proceeds thereof, have not been received and if the check has not been paid then, upon provision of an indemnity satisfactory to the Paying Agent and the Issuer, stop payment upon such check, and issue and deliver to such Bondholder or Noteholder a new check for like amount; provided, however, that it may, at its discretion, defer the issuance of the new check for a reasonable period of time;
(iv) record the fact of payment and cancel Bonds or Notes surrendered to it for payment, coincident with such payment being made to the person thereto entitled; and (v) have no liability for interest on, or investing, any funds received by it; any unclaimed funds remaining in the possession of the Paying Agent for payment of the Bonds or Notes will be escheated in accordance with applicable law and the Paying Agent’s policies and procedures.
Section 8. Redemption Prior to Stated Maturity. If the Bonds or Notes are subject to redemption prior to their stated maturity date(s), the Paying Agent shall be governed by the redemption provisions set forth in the Authorization or as stated in the provisions as set forth on the bond/note form.
The Paying Agent shall not be required to transfer any Bond or Note, or portion thereof, that has been called for redemption. Payment of the principal amount (including premium, if any) of any Bond or Note, or portion thereof, called for redemption shall be made by check payable to the registered owner, only upon presentation of the Bond or Note, at the designated corporate trust office of the Paying Agent on or Page J-2.163
4 after the redemption date. Where the entire principal amount of the Bond or Note has not been called for redemption, a new Bond or Note of the same series, maturity and interest rate in the amount of the unredeemed portion will be issued to the registered holder or its assignee. Whether or not promptly submitted for redemption, interest on any Bond or Note, or portion thereof, called for redemption shall cease to accrue on and after the redemption date provided that sufficient moneys therefore are on deposit with the Paying Agent.
Section 9. Compensation; Indemnification. The Issuer agrees to pay the Paying Agent fees as set forth in Exhibit B attached hereto and made a part hereof, and, if applicable, to reimburse Paying Agent for its out-of-pocket expenses (including without limitation attorneys; fees and expenses). The Issuer assumes full responsibility and, to the extent permitted by law, will indemnify the Paying Agent and its officers, directors, agents and employees and save it and them harmless from and against any and all actions or suits, whether groundless or otherwise, and from and against any and all losses, liabilities, costs and expenses (including attorneys’ fees and expenses) arising out of the agency relationship created by this Agreement, unless such losses, liabilities, costs and expenses shall have been finally adjudicated to have resulted from the willful misconduct or negligence of the Paying Agent, and such indemnification shall survive the Paying Agent’s resignation or removal for any reason, or the termination of this Agreement.
Section 10. Instructions From the Issuer and Opinion From Counsel. At any time the Paying Agent may apply to any duly authorized representative of the Issuer for instructions, and shall have the right, but not the obligation, to consult with counsel of choice at the reasonable expense of the Issuer and shall not be liable for action taken or omitted to be taken either in accordance with such instruction or such advice of counsel, or in accordance with any opinion of counsel to the Issuer addressed to the Paying Agent.
Section 11. Concerning the Paying Agent. The Paying Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. The Paying Agent shall not be answerable for other than its negligence or willful misconduct. The Paying Agent shall have no responsibility for the form of inscription of ownership upon any Bond or Note certificate which has been made in accordance with directions of the Issuer, the Issuer’s underwriter, a broker or a holder of a Bond or Note. The Paying Agent shall be protected in acting upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Issuer. The Paying Agent shall also be protected in recognizing Bond or Note certificates which it reasonably believes to bear the proper manual or facsimile signatures on behalf of the Issuer. The Paying Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Paying Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the Issuer addressed and delivered to the Paying Agent The Paying Agent shall not be under any obligation to prosecute any action or suit in respect of the agency relationship which, in its sole judgment, may involve it in expense or liability. In any action or suit the Issuer shall, as often as requested, reimburse the Paying Agent for any expense or liability growing out of such action or suit by or against the Paying Agent in its agency capacity; provided, however, that no such reimbursement shall be made for any expense or liability arising as a result of Paying Agent’s negligence or willful misconduct.
No provision of this Agreement shall require the Paying Agent to risk or expend its own funds.
The Paying Agent shall not be responsible or liable for any failure or delay in the performance of its obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; wars; terrorism; military disturbances; sabotage; epidemic; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that Paying Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances.
Page J-2.164
5 Anything in this Agreement to the contrary notwithstanding, in no event shall the Paying Agent be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Paying Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.
The Paying Agent shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means (“Electronic Means” means mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Paying Agent, or another method or system specified by the Paying Agent as available for use in connection with its services hereunder); provided, however, that the Issuer shall provide to the Paying Agent an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Issuer whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Paying Agent Instructions using Electronic Means and the Paying Agent in its discretion elects to act upon such Instructions, the Paying Agent’s understanding of such Instructions shall be deemed controlling. The Issuer understands and agrees that the Paying Agent cannot determine the identity of the actual sender of such Instructions and that the Paying Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Paying Agent have been sent by such Authorized Officer. The Issuer shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Paying Agent and that the Issuer and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Issuer. The Paying Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Paying Agent’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Paying Agent, including without limitation the risk of the Paying Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Paying Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Issuer; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Paying Agent immediately upon learning of any compromise or unauthorized use of the security procedures.
Any banking association or corporation into which the Paying Agent may be merged, converted or with which the Paying Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Paying Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Paying Agent shall be transferred, shall succeed to all the Paying Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of the parties hereto, anything herein to the contrary notwithstanding.
Section 12. Notices. Until changed by notice in writing, communications between the parties shall be delivered to:
If to Issuer:
City of Menlo Park
701 Laurel St.
Menlo Park, CA 94025
Attn: Adminstrative Services Director
If to the Paying Agent:
The Bank of New York Mellon Trust Company, N.A.
Page J-2.165
6 2001 Bryan Street, 11th Floor
Dallas, TX 75201
Attn: Corporate Trust
Section 13. Destruction of Instruments, Records and Papers. The Paying Agent may retain in its files records, instruments, and papers maintained by it in relation to its agency as long as the Paying Agent shall consider that such retention is necessary. The Paying Agent shall destroy or dispose of canceled Bonds or Notes in accordance with its customary procedures, unless contrary instructions are received from the Issuer.
Section 14. Resignation or Removal of Paying Agent. Any time, other than on a day during the forty-five (45) day period preceding any payment date for Issuer’s Bonds or Notes, the Paying Agent may resign by giving at least forty-five (45) days’ prior written notice to Issuer; and the Paying Agent’s agency shall be terminated and its duties shall cease upon expiration of such forty-five (45) days or such lesser period of time as shall be mutually agreeable to Paying Agent and Issuer. At any time, following at least forty-five (45) days’ prior written notice (or such lesser period of time as shall be mutually agreeable to the Paying Agent and the Issuer) from the Issuer, the Paying Agent may be removed from its agency.
Such removal shall become effective upon the expiration of the forty-five (45) day or agreed lesser time period, and upon payment to the Paying Agent of all amounts payable to it in connection with its agency.
In such event, the Paying Agent shall deliver to the Issuer, or to the Issuer’s designated representative, all Bonds or Notes and cash belonging to the Issuer and, at the Issuer’s expense, shall furnish to the Issuer, or to the Issuer’s designated representative, reasonably detailed information regarding the status of the Issuer’s outstanding Bonds or Notes and copies of other pertinent records then in the Paying Agent’s possession, reasonably requested by the Issuer.
Section 15. Effectiveness and Term. If the Bonds or Notes already are outstanding as of the date of the execution and delivery of this Agreement, this Agreement is effective as of the date hereof and shall continue until terminated as provided herein.
If the Bonds or Notes are to be newly issued, then this Agreement shall become effective as of the date that the Bonds or Notes are delivered to the original purchaser(s) thereof, and shall continue until terminated. If said Bonds/Notes are not delivered to original purchaser(s), this Agreement shall be null, void and of no effect.
This Agreement shall remain in effect and the agency established by the Agreement shall continue until (i) terminated by mutual agreement of Issuer and Paying Agent, (ii) the resignation or removal of Paying Agent pursuant to Section 14 hereof, or (iii) after all Bonds or Notes have been retired by payment or otherwise, or funds have been deposited for their retirement, and any remaining funds have either been returned to the Issuer or escheated in accordance with law.
Section 16. Conflicts Between Documents. In the event of any conflict between any provision of this Agreement and the Authorization, the terms of the Authorization shall govern.
Section 17. Jury Trial Waiver. Each party hereto hereby agrees not to elect a trial by jury of any issue triable of right by jury, and waives any right to trial by jury fully to the extent that any such right shall now or hereafter exist with regard to this Agreement, or any claim, counterclaim or other action arising in connection herewith. This waiver of right to trial by jury is given knowingly and voluntarily by each party, and is intended to encompass individually each instance and each issue as to which the right to a trial by jury would otherwise accrue.
Section 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
Page J-2.166
7 IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their duly authorized officers as of the date first above written.
CITY OF MENLO PARK
By
Name: Justin I. C. Murphy
Title: Interim City Manager
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.
By
Name: Juliana Haidary
Title: Associate
Page J-2.167
8 EXHIBIT A
DESCRIPTION OF BONDS OR NOTES
Resolution Number Name of Bonds
City of Menlo Park 2022 General Obligation Bonds
(2001 Election)
Page J-2.168
9 EXHIBIT B
FEE SCHEDULE
Registrar, Transfer Agent and Paying Agent
For Fully Registered Bond / Note Issues
Page J-2.169
1 City of Menlo Park
2022 General Obligation Bonds (2001 Election)
COSTS OF ISSUANCE CUSTODY AGREEMENT
This Costs of Issuance Custody Agreement dated as of May __, 2022, has been entered into by and between the City of Menlo Park (the “City") and The Bank of New York Mellon Trust Company, N.A. (the “Custodian”). The City has appointed the Custodian to act as custodian for the proceeds of following bonds (collectively, the “Bonds”) that will be used to pay the costs of issuing the captioned bonds (the “Bonds”).
This Agreement sets out the terms and conditions of said appointment.
For good and valuable consideration, the City and the Custodian agree as follows:
A. Cost of Issuance Fund.
1. The City shall deposit or cause to be deposited proceeds of the Bonds in the amount of $_______ with the Custodian on the date hereof (the “Closing Date”), and Custodian shall deposit the funds in a custody account (the “Costs of Issuance Fund”) established with the Custodian in the name of the Bonds.
2. The Custodian will pay costs of issuance of the Bonds as directed by the City on the date here and pursuant to subsequent written orders of the City in the form and conforming to the procedures identified by the Custodian.
3. Funds held in the Costs of Issuance Fund shall be the property of the City, subject only to the claims for payment of authorized Costs of Issuance of the Bonds as provided in paragraph 2 hereof. Any balances remaining in the Costs of Issuance Fund (including any earnings) on the earlier of July 1, 2022, or as set forth in Section 4 below, will be disbursed to the City for deposit into the Debt Service Fund which has been established for the Bonds.
B. Miscellaneous
1. It is agreed and understood between the parties that the Custodian has not advised, and will not advise, the City on any investment of funds in connection with this Agreement. The Custodian shall not invest any cash held hereunder in the absence of timely and specific written direction from the City. In no event shall the Custodian be liable for the selection of investments or for investment losses incurred thereon. The Custodian shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or the failure of the City to provide timely written investment direction. The Custodian may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Agreement. The Custodian may conclusively rely upon such written direction from the City as to both the suitability and legality of the directed investments.
2. The Custodian shall furnish the City periodic cash transaction statements which include detail for all investment transactions effected by the Custodian.
Upon the City’s election, such statements will be delivered via the ATTACHMENT G Page J-2.170
2 Custodian’s online service and upon electing such service, paper statements will be provided only upon request. The statements described will serve as the sole written notification to City of any securities transaction effected by Custodian unless the City requests that Custodian provide written notification of such transactions pursuant to 12 CFR §12.4(a) or 12 CFR §12.4(b) at no additional cost to Customer.
3. This Agreement will terminate on July 1, 2022, or earlier, as the City shall direct the Custodian in writing that the City has satisfied its obligation to pay all costs due relating to the Bonds.
4. This Agreement shall be governed under the laws of the State of California.
5. The duties and responsibilities of Custodian shall be limited to those expressly set forth in this Agreement which shall be deemed purely ministerial in character, and no implied covenants or obligations shall be read into this Agreement against the Custodian. The Custodian will not be liable for any action taken or omitted to be taken by it under this Agreement or in connection herewith except to the extent caused by the Custodian’s negligence or willful misconduct. In no event shall the Custodian be liable for any special, indirect or consequential damages.
The Custodian will not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion of power conferred upon it by this Agreement. None of the provisions of this Agreement shall require the Custodian to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder. The Custodian may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
The Custodian may consult with counsel and the advice or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel. The Custodian may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed.
The Custodian shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means; provided, however, that the City shall provide to the Custodian an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Custodian Instructions using Electronic Means and the Custodian in its discretion elects to act upon such Instructions, the Custodian’s understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Custodian cannot determine the identity of the actual sender of such Instructions and that the Custodian shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Custodian have been sent by such Authorized Officer. The City shall be responsible for ensuring Page J-2.171
3 that only Authorized Officers transmit such Instructions to the Custodian and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Custodian shall not be liable for any losses, costs or expenses arising directly or indirectly from the Custodian’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Custodian, including without limitation the risk of the Custodian acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Custodian and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Custodian immediately upon learning of any compromise or unauthorized use of the security procedures.
"Electronic Means" shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Custodian, or another method or system specified by the Custodian as available for use in connection with its services hereunder.
Custodian shall receive compensation for its services as agreed between Custodian and City. City agrees to indemnify and hold Custodian harmless from all loss, cost, damages, expenses, liabilities, judgments and attorneys' fees and expenses (including without limitation, allocated costs of in-house counsel) suffered or incurred by Custodian arising out of or in connection with this Agreement, except that this indemnity obligation shall not apply in the event of the negligence or willful misconduct of the Custodian. This indemnity obligation shall survive termination of this Agreement.
Page J-2.172
4 Executed as of the date first above written.
CITY OF MENLO PARK
By: ______________________________
Administrative Services Director
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as custodian
By: _______________________________
Authorized Representative
Page J-2.173
1 $______
CITY OF MENLO PARK
2019 GENERAL OBLIGATION BONDS (2001 ELECTION)
PROJECT FUND CUSTODY AGREEMENT
This Project Fund Custody Agreement dated as of May __, 2022, has been entered into by and between the City of Menlo Park (the “City") and The Bank of New York Mellon Trust Company, N.A. (the “Custodian”). The City has appointed the Custodian to act as custodian for the proceeds of the captioned bonds (the “Bonds”) that will be used to pay the Project Costs (as defined herein). This Agreement sets out the terms and conditions of said appointment. Capitalized terms used herein but not defined herein have the meanings given them in Resolution No. ____, adopted by the City Council on April 12, 2022 (the “Resolution”).
The City and the Custodian agree as follows:
1. The City shall deposit or cause to be deposited the amount of $______ with the Custodian on May __, 2022, and Custodian shall deposit the funds in a custody account (the “Project Fund”) established with the Custodian in the name of the Bonds.
2. The Custodian will pay from the Project Fund the costs of constructing, acquiring or improving parks and recreation facilities authorized under the November 6, 2001 authorization described in the Resolution (the “Project Costs”) as directed by the City on the date here and pursuant to subsequent written orders of the City in the form of Exhibit A.
3. Funds held hereunder shall be the property of the City, subject only to the claims for payment of authorized Project Costs as provided in paragraph 2 hereof. Upon the determination by the City that there are no further authorized uses for the moneys in the Project Fund, the City shall direct the Custodian to transfer the amounts remaining in the Project Fund to the Debt Service Fund for the Bonds.
4. The Custodian will hold funds uninvested in cash unless directed otherwise by the City in writing. The City covenants that it will invest the amounts held in the Project Fund within 30 days of the Closing Date.
Amounts on deposit in the Project Fund shall be invested solely in investments authorized for the investment of City funds under applicable law. Principal and interest earnings from each investment will be retained in the Project Fund.
Except as otherwise provided in the following paragraph, the City covenants that all investments of amounts deposited in the Project Fund will be acquired, disposed of, and valued at Fair Market Value.
Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Code will be valued at their present value, as determined by the City (within the meaning of section 148 of the Tax Code).
If the designated money market mutual fund terminates, closes, or is otherwise unavailable, the Custodian shall hold such funds uninvested until it receives a new ATTACHMENT H Page J-2.174
2 written investment directive from the City. The Custodian shall not invest any cash held hereunder in the absence of timely and specific written direction from the City. In no event shall the Custodian be liable for the selection of investments or for investment losses incurred thereon. The Custodian shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or the failure of the City to provide timely written investment direction. The Custodian may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Agreement. The Custodian may conclusively rely upon such written direction from the City as to both the suitability and legality of the directed investments. The City acknowledges that regulations of the Comptroller of the Currency grant the City the right to receive brokerage confirmations of the security transactions as they occur, at no additional cost.
5. The Custodian shall furnish the City periodic cash transaction statements which include detail for all investment transactions effected by the Custodian.
Upon the City’s election, such statements will be delivered via the Custodian’s online service and upon electing such service, paper statements will be provided only upon request. The statements described will serve as the sole written notification to City of any securities transaction effected by Custodian unless the City requests that Custodian provide written notification of such transactions pursuant to 12 CFR §12.4(a) or 12 CFR §12.4(b) at no additional cost to Customer.
6. This Agreement will terminate on May 31, 2027, or earlier, as the City shall direct the Custodian in writing that the City has no more Project Costs to be paid from proceeds of the Bonds.
7. This Agreement shall be governed under the laws of the State of California.
8. The duties and responsibilities of Custodian shall be limited to those expressly set forth in this Agreement which shall be deemed purely ministerial in character, and no implied covenants or obligations shall be read into this Agreement against the Custodian. The Custodian will not be liable for any action taken or omitted to be taken by it under this Agreement or in connection herewith except to the extent caused by the Custodian’s negligence or willful misconduct. In no event shall the Custodian be liable for any special, indirect or consequential damages.
The Custodian will not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion of power conferred upon it by this Agreement. None of the provisions of this Agreement shall require the Custodian to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder. The Custodian may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
The Custodian may consult with counsel and the advice or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel. The Custodian may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful Page J-2.175
3 misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed.
The Custodian shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means; provided, however, that the City shall provide to the Custodian an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Custodian Instructions using Electronic Means and the Custodian in its discretion elects to act upon such Instructions, the Custodian’s understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Custodian cannot determine the identity of the actual sender of such Instructions and that the Custodian shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Custodian have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Custodian and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Custodian shall not be liable for any losses, costs or expenses arising directly or indirectly from the Custodian’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Custodian, including without limitation the risk of the Custodian acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Custodian and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Custodian immediately upon learning of any compromise or unauthorized use of the security procedures.
"Electronic Means" shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Custodian, or another method or system specified by the Custodian as available for use in connection with its services hereunder.
Custodian shall receive compensation for its services as agreed between Custodian and City. City agrees to indemnify and hold Custodian harmless from all loss, cost, damages, expenses, liabilities, judgments and attorneys' fees and expenses (including without limitation, allocated costs of in-house counsel) suffered or incurred by Custodian arising out of or in connection with this Agreement, except that this indemnity obligation shall not apply in the event of the negligence or willful misconduct of the Custodian. This indemnity obligation shall survive termination of this Agreement.
Page J-2.176
Project Fund Custodian Agreement
-SIGNATURE PAGEExecuted as of the date first above written.
CITY OF MENLO PARK
By: ______________________________
Administrative Services Director
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as custodian
By: _______________________________
Authorized Representative
Page J-2.177
A-1
EXHIBIT A
FORM OF REQUISITION FROM PROJECT FUND
REQUISITION NO. _____
The undersigned hereby states and certifies that:
(i) I am a duly appointed, qualified and acting City Representative of the City of Menlo Park (the “City”), and as such, am familiar with the facts herein certified and am authorized to certify the same.
(ii) In that capacity, I am authorized to submit this Written Requisition under Section 2 of that certain Project Fund Custody Agreement, dated May __, 2022 (“Agreement”), between the City and The Bank of New York Mellon Trust Company, N.A., as Project Fund custodian (the “Custodian”).
(iii) The undersigned hereby requests and authorizes the Custodian to disburse from the account(s) within the Project Fund established under the Agreement to each payee designated on Schedule A attached hereto and by this reference incorporated herein, the amount set forth opposite such payee, for payment or reimbursement of previous payment of a Project Cost (as provided in paragraph 2 of the Agreement) as described on attached Schedule A.
(iv) The disbursements described on the attached Schedule A will pay for Project Costs, and are properly chargeable to the specified account of the Project Fund. (v) No portion of the amount herein requested to be disbursed was set forth in any Written Requisition previously filed requesting disbursement. (vi) The requisition of moneys in the Project Fund and the use of such moneys as proposed by the City will not cause the City to violate the covenants set forth in Section 5.05 of the Resolution, which covenants are incorporated herein by this reference.
Capitalized terms used herein but not defined herein have the meanings given them in the Agreement or the Resolution described in the Agreement.
Page J-2.178
A-2
Dated: CITY OF MENLO PARK
By:
City Representative
Page J-2.179
A-3
SCHEDULE A
Payee Name
and Address or
Wire Instructions
Purpose of
Payment Amount* Account
Page J-2.180
1 152493290v2
$[______________]
CITY OF MENLO PARK
2022 GENERAL OBLIGATION BONDS
(2001 Election)
BOND PURCHASE AGREEMENT
__________, 2022
City of Menlo Park
701 Laurel St.
Menlo Park, California 94025
BofA Securities, Inc. (the “Underwriter”) hereby offers to enter into this Bond Purchase Agreement (the “Purchase Agreement”) with the City of Menlo Park (the “Issuer”), whereby the Underwriter will purchase and the Issuer will sell the Bonds (as defined and described below).
The Underwriter is making this offer subject to the acceptance by the Issuer at or before 5:00 P.M., California Time, on the date hereof. If the Issuer accepts this Purchase Agreement, this Purchase Agreement shall be in full force and effect in accordance with its terms and shall bind both the Issuer and the Underwriter. The Underwriter may withdraw this Purchase Agreement upon written notice delivered by the Underwriter to the Issuer at any time before the Issuer accepts this Purchase Agreement. Terms used but not defined in this Purchase Agreement are defined in the Bond Resolution (as defined below).
1. PURCHASE AND SALE.
Upon the terms and conditions and in reliance upon the representations, warranties and agreements herein set forth, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the following bonds: City of Menlo Park, 2022 General Obligation Bonds (2001 Election) (the “Bonds”), at the purchase price of $[____________], representing the aggregate principal amount of the Bonds less an Underwriter’s discount of $[__________] plus original issue premium of $[_________]. The Underwriter intends to make an initial bona fide public offering of the Bonds at the price or prices described in Schedule I hereto; provided, however, the Underwriter reserves the right to change such initial public offering prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds (but in all cases subject to the requirements of Section 4 hereof), and may offer and sell the Bonds to certain dealers, unit investment trusts and money market funds, certain of which may be sponsored or managed by the Underwriter at prices lower than the public offering prices or yields greater than the yields set forth therein (but in all cases subject to the requirements of Section 4 hereof).
The Issuer acknowledges and agrees that: (i) the Underwriter is not acting as a municipal advisor within the meaning of Section 15B of the Securities Exchange Act, as amended, (ii) the primary role of the Underwriter, as an underwriter, is to purchase securities, for resale to investors, in an arm’s length commercial transaction between the Issuer and the Underwriter and the ATTACHMENT I Page J-2.181
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Underwriter has financial and other interests that differ from those of the Issuer; (iii) the Underwriter is acting solely as a principal and is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer and has not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Issuer on other matters); (iv) the only obligations the Underwriter has to the Issuer with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement; and (v) the Issuer has consulted its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent it has deemed appropriate.
2. DESCRIPTION AND PURPOSE OF THE BONDS.
The Bonds have been authorized pursuant to Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, and pursuant to and consistent with the Charter of the Issuer (the “Bond Law”). The Issuer authorized the issuance of the Bonds under a Resolution adopted by the City Council of the Issuer (the “City Council”) on April 12, 2022 (the “Bond Resolution”). The Bonds were authorized at an election of the registered voters of the City held on November 6, 2001, which authorized the issuance of general obligation bonds for the purpose of financing the construction, acquisition, and improvement of parks and recreation facilities (the “2001 Authorization”). The Bonds are the fourth and final series of bonds to be sold and issued under the 2001 Authorization. The Bonds shall be dated their date of delivery.
The proceeds of the sale of the Bonds will be used to (i) finance the construction, acquisition, and improvement of parks and recreation facilities, as approved by the voters at an election held in the City on November 6, 2001 (the “Bond Election”) with respect to the bond measure known as Measure T, and (ii) pay certain costs of issuance associated with the Bonds.
The Bonds will be secured under the provisions of the Bond Law and the Bond Resolution.
The Bonds shall mature in the years, bear interest, be purchased at the prices and be subject to redemption at the times and in the amounts, all as set forth in Schedule I attached hereto. The authorized denominations, record dates, interest payment dates, sinking fund payment dates, and other details and particulars of the Bonds shall be as described in the Bond Resolution and the Official Statement (as defined below) of the Issuer. The paying agent, registrar and authenticating agent for the Bonds, as designated by the Bond Resolution, shall be The Bank of New York Mellon Trust Company, N.A. (the “Paying Agent”).
3. DELIVERY OF THE OFFICIAL STATEMENT AND OTHER DOCUMENTS. (a) The Issuer has approved and delivered or caused to be delivered to the Underwriter copies of the Preliminary Official Statement dated [_________], 2022, which, including the cover page and all appendices thereto, is herein referred to as the “Preliminary Official Statement.” It is acknowledged by the Issuer that the Underwriter may deliver the Preliminary Official Statement and a final Official Statement (as hereinafter defined) electronically over the internet and in printed paper form. The Issuer deems the Preliminary Official Statement final as of its date and as of the date hereof for purposes of Rule 15c2-12 promulgated under the Page J-2.182
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Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), except for any information which is permitted to be omitted therefrom in accordance with paragraph (b)(1) of Rule 15c2-12. (b) Within seven (7) business days from the date hereof, and in any event not later than two (2) business days before the Closing Date, the Issuer shall deliver to the Underwriter a final Official Statement relating to the Bonds dated the date hereof (such Official Statement, including the cover page, and all appendices attached thereto, together with all information previously permitted to have been omitted by Rule 15c2-12 and any amendments or supplements and statements incorporated by reference therein or attached thereto, as have been approved by the Issuer, Bond Counsel, and the Underwriter, is referred to herein as the “Official Statement”) and such additional conformed copies thereof as the Underwriter may reasonably request in sufficient quantities to comply with Rule 15c2-12, rules of the Municipal Securities Rulemaking Board (“MSRB”) and to satisfy potential customer requests for copies of the Official Statement. The Underwriter agrees to file a copy of the Official Statement, including any amendments or supplements thereto prepared by the Issuer, with the MSRB on its Electronic Municipal Markets Access (“EMMA”) system. The Official Statement shall be executed by and on behalf of the Issuer by an authorized officer of the Issuer. The Official Statement shall be in substantially the same form as the Preliminary Official Statement and, other than information previously permitted to have been omitted by Rule 15c2-12, the Issuer shall only make such other additions, deletions and revisions in the Official Statement which are approved by the Underwriter, such approval to not be unreasonably withheld. The Issuer hereby agrees to deliver to the Underwriter an electronic copy of the Official Statement in a form that permits the Underwriter to satisfy its obligations under the rules and regulations of the MSRB and the U.S. Securities and Exchange Commission (“SEC”) including in a word-searchable pdf format including any amendments thereto. The Issuer hereby ratifies, confirms and consents to and approves the use and distribution by the Underwriter before the date hereof of the Preliminary Official Statement and hereby authorizes and consents to the use by the Underwriter of the Official Statement and the Bond Resolution in connection with the public offering and sale of the Bonds.
(c) In order to assist the Underwriter in complying with Rule 15c2-12, the Issuer will undertake, pursuant to the Continuing Disclosure Certificate, dated as of [_______, 2022 (the “Disclosure Certificate”), to provide annual financial information and notices of the occurrence of specified events. A description of the Disclosure Certificate is set forth in, and a form of such agreement is attached as an appendix to, the Preliminary Official Statement and the Official Statement.
4. ESTABLISHMENT OF ISSUE PRICE.
(a) The Underwriter agrees to assist the Issuer in establishing the issue price of the Bonds and shall execute and deliver to the Issuer at Closing an “issue price” or similar certificate, substantially in the form attached hereto as Exhibit A, together with the supporting pricing wires or equivalent communications, with such modifications as may be deemed appropriate or necessary, in the reasonable judgment of the Underwriter, the Issuer and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the Issuer under this section to establish the issue price of the Bonds may be taken on behalf of the Issuer by the Issuer’s municipal advisor Page J-2.183
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identified herein and any notice or report to be provided to the Issuer may be provided to the Issuer’s municipal advisor.
(b) Except for the maturities set forth in Schedule A to Exhibit A attached hereto, the Issuer represents that it will treat the first price at which 10% of each maturity of the Bonds (the “10% Test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% Test). If, as of the date hereof, the 10% Test has not been satisfied as to any maturity of the Bonds for which the Issuer has elected to utilize the 10% Test, the Underwriter agrees to promptly report to the Issuer the prices at which Bonds of that maturity or maturities have been sold by the Underwriter to the public. That reporting obligation shall continue until the earlier of the date upon which the 10% Test has been satisfied as to the Bonds of that maturity or maturities or the Closing Date.
(c) The Underwriter confirms that it has offered the Bonds 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 A to Exhibit A attached hereto, except as otherwise set forth therein. Schedule A to Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the 10% Test has not been satisfied and for which the Issuer and the Underwriter agree that the restrictions set forth in the next sentence shall apply (the “hold-the-offering-price rule”). So long as the hold-the-offeringprice rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
(d) The Underwriter confirms that:
(i) any selling group agreement and each third-party distribution agreement (to which the Underwriter is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% Test has been satisfied as to the Bonds of that maturity and (ii) to comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter and as set forth in the related pricing wires, and Page J-2.184
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(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or such dealer that the 10% Test has been satisfied as to the Bonds of that maturity 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 or the dealer and as set forth in the related pricing wires.
The Issuer acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a dealer who is a member of the selling group is a party to a third-party distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-theoffering-price rule, if applicable, as set forth in the third-party distribution agreement and the related pricing wires. The Issuer further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds. (e) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party to an underwriter,
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Page J-2.185
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public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public),
(iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (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.
5. REPRESENTATIONS. The Issuer represents to and agrees with the Underwriter that:
(a) The Issuer is duly organized and validly existing, with full legal right, power and authority to issue, sell and deliver the Bonds to the Underwriter pursuant to the Bond Law and the Bond Resolution, and adopt, execute, deliver and perform its obligations, as the case may be, under this Purchase Agreement, the Bond Resolution, the Bonds, the Paying Agent Agreement, the Project Fund Custody Agreement, the Cost of Issuance Custody Agreement and the Disclosure Certificate (collectively, the “Legal Documents”) and to perform and consummate all obligations and transactions required or contemplated by each of the Legal Documents and the Official Statement.
(b) The Bond Resolution approving and authorizing the execution, adoption and delivery, as the case may be, by the Issuer of this Purchase Agreement, the Bonds and the Disclosure Certificate, and the offering, issuance and sale of the Bonds upon the terms set forth herein and in the Official Statement, was duly adopted at a meeting of the City Council of the Issuer 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 is in full force and effect and has not been amended or repealed.
(c) The Bond Resolution and the Bonds conform to the descriptions thereof contained in the Preliminary Official Statement and the Official Statement and the Bonds, when duly issued and authenticated in accordance with the Bond Law and the Bond Resolution and delivered to the Underwriter as provided herein, will be validly issued and outstanding obligations of the Issuer, entitled to the benefits of the Bond Law and the Bond Resolution, and payable from the sources therein specified.
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(d) The Issuer has executed, adopted and delivered, or will execute, adopt and deliver, as the case may be, on or before the Closing Date, each of the Legal Documents. Each of the Legal Documents constitutes, or will, as of the Closing Date, constitute, a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency or other laws affecting creditors’ rights or remedies heretofore or hereafter enacted. Each of the Legal Documents has been executed, adopted and delivered, or will be executed, adopted and delivered, as the case may be, on or before the Closing Date, by each respective signatory and is currently in full force and effect or, as of the Closing Date, will be in full force and effect.
(e) The Issuer is not in breach of or default under any constitutional provision, law or administrative regulation of the State of California (the “State”) or of the United States or any agency or instrumentality of either, or of any other governmental agency, or any Material Judgment or Agreement (as defined below) which would have a material adverse impact on its ability to fulfill its obligations under the Bonds, the Bond Resolution, or the Purchase Agreement, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute a default or event of default under any Material Judgment or Agreement which would have a material adverse impact on its ability to fulfill its obligations under the Bonds, the Bond Resolution, or the Purchase Agreement; and the adoption of the Bond Resolution, the issuance, delivery and sale of the Bonds and the execution and delivery of the other Legal Documents and compliance with and performance of the Issuer’s obligations therein and herein will not in any material respect conflict with, violate or result in a breach of or constitute a default under, any such constitutional provision, law, administrative regulation or any Material Judgment or Agreement, nor will any such execution, delivery, adoption 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 the property or assets of the Issuer (except as described in or contemplated by the Legal Documents and the Official Statement) or under the terms of any such law, administrative regulation or Material Judgment or Agreement. As used herein, the term “Material Judgment or Agreement” means any judgment or decree or any loan agreement, indenture, bond, note, ordinance or resolution or any material agreement or other instrument to which the Issuer is a party or to which the Issuer or any of its property or assets is otherwise subject (including, without limitation, the Bond Law, the Bond Resolution and the other Legal Documents). (f) All approvals, consents and orders of any governmental authority, board, agency, council, commission or other body having jurisdiction which would constitute a condition precedent to the performance by the Issuer of its obligations hereunder and under the Legal Documents have been obtained; provided, that the Issuer makes no representations as to any approvals, consents or other actions which may be necessary to qualify the Bonds for offer and sale under Blue Sky or other state securities laws or regulations. (g) Any certificates executed by any officer of the Issuer and delivered to the Underwriter pursuant hereto or in connection herewith shall be deemed a representation and warranty of the Issuer as to the accuracy of the statements therein made. (h) Between the date hereof and the time of the closing on the Closing Date, the Issuer shall not, without the prior written consent of the Underwriter, offer or issue in any material amount any bonds, notes or other obligations for borrowed money, similarly secured or Page J-2.187
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payable from the General Fund of the Issuer, or incur any material liabilities, direct or contingent, except in the course of normal business operations of the Issuer or except for such borrowings as may be described in or contemplated by the Official Statement. (i) The audited financial statements of the Issuer as of June 30, 2021 fairly represent the receipts, expenditures, assets, liabilities and cash balances of the Issuer and, insofar as presented, other funds of the Issuer as of the dates and for the periods therein set forth. Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially adverse change in the financial condition of the Issuer or in its operations since June 30, 2021 and there has been no occurrence, circumstance or combination thereof which is reasonably expected to result in any such materially adverse change. (j) Except for information which is permitted to be omitted pursuant to Rule 15c2-12(b)(1), the Preliminary Official Statement (excluding therefrom information relating to The Depository Trust Company (“DTC”) and its book-entry system), as of its date and as of the date hereof was and is true and correct in all material respects and did not and does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(k) The Official Statement is, as of its date and at all times after the date of the Official Statement (excluding therefrom information relating to DTC and its book-entry system) up to and including the Closing Date will be, true and correct in all material respects and will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(l) If the Official Statement is supplemented or amended, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended) at all times subsequent thereto up to and including that date that is 25 days from the “end of the underwriting period” (as defined in Rule 15c2-12), the Official Statement as so supplemented or amended will be true and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (m) If between the date hereof and the end of the underwriting period, any event shall occur which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer shall notify the Underwriter thereof, and if, in the reasonable opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Issuer shall promptly (and in any event before the Closing) prepare and furnish (at the expense of the Issuer) a reasonable number of copies of an amendment of or supplement to the Official Statement in form and substance reasonably satisfactory to the Underwriter.
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(n) Except as described in the Preliminary Official Statement and Official Statement, no litigation, proceeding or official investigation of any governmental or judicial body is pending against the Issuer or against any other party of which the Issuer has notice or, to the knowledge of the Issuer, threatened against the Issuer: (i) seeking to restrain or enjoin the issuance, sale or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, (ii) in any way contesting or affecting any authority for the issuance of the Bonds or the validity or binding effect of any of the Legal Documents, (iii) which is in any way contesting the creation, existence, powers or jurisdiction of the Issuer or the validity or effect of the Bond Resolution or the Bond Law or any provision thereof or the application of the proceeds of the Bonds, (iv) contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or (v) which, if adversely determined, could materially adversely affect the financial position or operating condition of the Issuer or the transactions contemplated by the Preliminary Official Statement and Official Statement or any of the Legal Documents. The Issuer shall advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Preliminary Official Statement or the Official Statement in connection with the offering, sale or distribution of the Bonds.
(o) During the last five years, the Issuer has not failed to materially comply with any previous undertaking relating to continuing disclosure of information pursuant to Rule 15c2-12.
(p) The Issuer, to the best of its knowledge, has never been and is not in default in the payment of principal of, premium, if any, or interest on, or otherwise is not nor has it been in default with respect to, any bonds, notes, or other obligations which it has issued, assumed or guaranteed as to payment of principal, premium, if any, or interest.
All representations, warranties and agreements of the Issuer shall remain operative and in full force and effect, regardless of any investigations made by the Underwriter or on the Underwriter’s behalf, and shall survive the delivery of the Bonds.
6. CLOSING.
At 8:00 A.M., California Time, on [___________], 2022, or at such other time or date as the Underwriter and the Issuer may mutually agree upon as the date and time of the closing (the “Closing Date”), the Issuer will deliver or cause to be delivered to the Underwriter at the offices of Jones Hall, A Professional Law Corporation (“Bond Counsel”), 475 Sansome Street, Suite 1700, San Francisco, California 94111, or at such other place as the Underwriter and the Issuer may mutually agree upon, the documents specified in Section 7. On the Closing Date, (a) upon satisfaction of the conditions herein specified, the Underwriter shall accept the delivery of the Bonds, and pay the purchase price therefor in federal funds payable as directed by the Issuer and (b) the Issuer shall deliver or cause to be delivered the duly executed and authenticated Bonds to the Underwriter through the facilities of DTC in definitive or temporary form, duly executed by the Issuer and in the authorized denominations as specified by the Underwriter at the closing and the Issuer shall deliver the other documents hereinafter mentioned. The Bonds shall be made Page J-2.189
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available to the Underwriter at least one (1) business day before the Closing Date for purposes of inspection.
7. CONDITIONS PRECEDENT.
The Underwriter has entered into this Purchase Agreement in reliance upon the representations and agreements of the Issuer contained herein and the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the Closing Date. The Underwriter’s obligations under this Purchase Agreement are and shall be subject to the following further conditions:
(a) The representations of the Issuer contained herein shall be true, complete and correct in all material respects on the date of acceptance hereof and on and as of the Closing Date.
(b) At the time of the closing on the Closing Date, the Official Statement, the Bond Resolution and the other Legal Documents shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter.
(c) The Issuer shall perform or have performed all of its obligations required under or specified in the Bond Resolution, the other Legal Documents and the Official Statement to be performed at or prior to the Closing Date.
(d) The Issuer shall have delivered to the Underwriter final Official Statements by the time, and in the numbers, required by Section 3 of this Purchase Agreement. (e) As of the date hereof and at the time of closing on the Closing Date, all necessary official action of the Issuer relating to the Legal Documents and the Official Statement shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect absent the written agreement of the Underwriter. (f) After the date hereof, up to and including the time of the closing on the Closing Date, there shall not have occurred any change in or affecting the Issuer, the Bond Law, the Bond Resolution or the other Legal Documents as the foregoing matters are described in the Preliminary Official Statement and the Official Statement, which in the reasonable professional judgment of the Underwriter materially and adversely affects the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds. (g) At or prior to the Closing Date, the Underwriter shall receive the following documents (in each case with only such changes as the Underwriter shall approve in writing):
i. The approving opinion of Bond Counsel relating to the Bonds, dated the Closing Date, substantially in the form attached as Appendix D to the Official Statement, and, if not otherwise directly addressed to the Underwriter, a reliance letter with respect thereto addressed to the Underwriter;
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ii. The supplemental opinion of Bond Counsel, addressed to the Underwriter, dated the Closing Date, to the effect that:
1. This Purchase Agreement has been duly executed and delivered by the Issuer and is a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, reorganization or creditors' rights generally, to the application of equitable principles, the exercise of judicial discretion and the limitations on legal remedies against public entities in the State;
2. The statements contained in the Preliminary Official Statement and the Official Statement on the cover page and in the sections entitled “INTRODUCTION,” “THE BONDS,” (other than the information concerning DTC and the book-entry system) “SECURITY FOR THE BONDS” insofar as such statements expressly summarize certain provisions of the Bond Law, the Bond Resolution, the Bonds, and the form and content of such counsel's opinion attached as Appendix D to the Preliminary Official Statement and the Official Statement, are accurate in all material respects; and
3. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”) and the Bond Resolution is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”); iii. A letter, dated the Closing Date and addressed to the Underwriter, from Jones Hall, A Professional Law Corporation, as disclosure counsel to the City, to the effect that based upon the information made available to them in the course of their participation in the preparation of the Preliminary Official Statement and the Official Statement and without passing on and without assuming any responsibility for the accuracy, completeness and fairness of the statements in the Preliminary Official Statement and the Official Statement, and having made no independent investigation or verification thereof, nothing has come to their attention which would lead them to believe that the Preliminary Official Statement, as of its date, did not and does not, and the Official Statement as of its date and all times subsequent thereto during the period up to and including the Closing Date, did not and does not, contain an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; iv. The opinion of Burke, Williams & Sorensen, LLP, as Attorney to the Issuer, dated the date of the Closing and addressed to the Underwriter, to the effect that:
1. The Issuer has been duly organized and is validly existing under the Constitution and laws of the State, and has all requisite power and Page J-2.191
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authority thereunder: (a) to adopt the Bond Resolution, and to enter into, execute, adopt, deliver and perform its covenants and agreements under the Legal Documents; (b) to approve and authorize the use, execution and distribution of the Preliminary Official Statement and the Official Statement; and (c) to carry on its activities as currently conducted;
2. The Issuer has taken all actions required to be taken by it before the Closing Date material to the transactions contemplated by the documents mentioned in paragraph (a) above, and the Issuer has duly authorized the execution, adoption and delivery of, as the case may be, and the due performance of its obligations under, the Legal Documents;
3. The Bond Resolution was duly adopted by the City Council of the Issuer at meetings of the City Council of the Issuer which were called and held pursuant to law and with all required notices and in accordance with all applicable open meetings laws and at which a quorum was present and acting at the time of the adoption of the Bond Resolution, as applicable;
4. The adoption of the Bond Resolution, the execution and delivery by the Issuer of the other Legal Documents and the compliance with the provisions of the Legal Documents, do not and will not conflict with or violate any California constitutional, statutory or regulatory provision, or, to the best of such counsel’s knowledge after due inquiry, conflict with or constitute on the part of the Issuer a breach of or default under any agreement or instrument to which the Issuer is a party or by which it is bound which would have a material adverse impact on its ability to fulfill its obligations under the Bonds, the Bond Resolution, or the Purchase Agreement;
5. The Legal Documents constitute legal, valid and binding obligations of the Issuer and are enforceable according to the terms thereof, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors’ rights generally, and by the application of equitable principles if equitable remedies are sought, by the exercise of judicial discretion and the limitations on legal remedies against public entities in the State;
6. No litigation is pending or, to the best of such counsel’s knowledge after due inquiry, threatened against the Issuer in any court in any way affecting the titles of the officials of the Issuer to their respective positions, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, or the collection of revenues pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of Page J-2.192
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the Bond Resolution or the other Legal Documents, or contesting in any way the completeness or accuracy of the Official Statement, or contesting the powers of the Issuer or its authority with respect to the Bond Resolution or the other Legal Documents;
7. The information contained in the Preliminary Official Statement, as of its date and as of the date hereof and the Official Statement as of its date and as of the Closing Date under the caption “LEGAL MATTERS – Absence of Material Litigation” does not contain any untrue statement of a material fact and does not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
8. To the best of such counsel’s knowledge after due inquiry, no authorization, approval, consent or other order of the State or any local agency of the State, other than such authorizations, approvals and consents which have been obtained, is required for the valid authorization, execution and delivery by the Issuer of the Legal Documents and the authorization and distribution of the Preliminary Official Statement and the Official Statement (provided that no opinion need be expressed as to any action required under state securities or Blue Sky laws in connection with the purchase of the Bonds by the Underwriter); and
9. To the best of such counsel’s knowledge after due inquiry, the Issuer is not in breach of or default under any applicable law or administrative regulation of the State or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject, which breach or default would materially adversely affect the Issuer’s ability to adopt or enter into or perform its obligations under the Legal Documents, 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 and which would materially adversely affect the Issuer’s ability to adopt, enter into or perform its obligations under the Legal Documents;
v. The opinion of Katten Muchin Rosenman LLP, counsel to the Underwriter, dated the Closing Date and addressed to the Underwriter, and covering such matters as the Underwriter may reasonably request; vi. A certificate, dated the Closing Date, signed by an authorized officer of the Issuer to the effect that: (a) the representations and agreements of the Issuer contained herein are true and correct in all material respects as of the Closing Date; (b) the Legal Documents have been duly authorized, adopted and executed, as the case may be, and are in full force and effect; (c) except as described in the Page J-2.193
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Preliminary Official Statement as of its date and the Official Statement as of its date, no litigation is pending or, to his or her knowledge, threatened (i) seeking to restrain or enjoin the issuance or delivery of the Bonds, (ii) in any way contesting or affecting any authority for the issuance of the Bonds or the validity of the Bonds, the Bond Resolution or any Legal Document, (iii) in any way contesting the creation, existence or powers of the Issuer or the validity or effect of the Bond Law or the Bond Resolution or any provision thereof or the application of the proceeds of the Bonds, or (iv) which, if adversely determined, could materially adversely affect the financial position or operating condition of the Issuer or the transactions contemplated by the Preliminary Official Statement as of its date and the Official Statement as of its date and as of the Closing Date or any Legal Document; and (d) the Official Statement is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that no review has been made of information in the Official Statement related to DTC and its book-entry system; vii. Executed or certified copies of the Bond Resolution; viii. Executed or certified copies of each other Legal Document; ix. A Tax Certificate of the Issuer, in form satisfactory to Bond Counsel, executed by such officials of the Issuer as shall be reasonably satisfactory to the Underwriter;
x. Evidence that the Bonds have been assigned the rating from [_______________] as set forth in the Official Statement; xi. A certificate of an authorized officer of the Paying Agent, in form and substance reasonably satisfactory to the Issuer, Bond Counsel, the Underwriter and counsel for the Underwriter.
xii. Evidence that a Form 8038-G relating to the Bonds has been executed by the Issuer and will be filed with the Internal Revenue Service (the “IRS”) within the applicable time limit:
xiii. A copy of the Blue Sky Survey with respect to the Bonds; xiv. A copy of the Issuer’s executed Blanket Letter of Representation to DTC; and
xv. Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter, counsel for the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Issuer with legal requirements, the truth and accuracy, as of the Closing Date, of the representations of the Issuer herein contained and the due performance or satisfaction by the Issuer at or prior to such time of all agreements then to be Page J-2.194
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performed and all conditions then to be satisfied by the Issuer and all conditions precedent to the issuance of the Bonds pursuant to the Bond Law and Bond Resolution shall have been fulfilled.
8. TERMINATION.
If the Issuer shall be unable to satisfy the conditions of the Underwriter’s obligations contained in this Purchase Agreement or if the Underwriter’s obligations shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement may be cancelled by the Underwriter at, or at any time before the Closing Date. Notice of such cancellation shall be given by the Underwriter to the Issuer in writing, or by telephone confirmed in writing. The performance by the Issuer of any and all conditions contained in this Purchase Agreement for the benefit of the Underwriter may be waived by the Underwriter. (a) The Underwriter shall also have the right, before the Closing Date, to cancel its obligations to purchase the Bonds, by written notice to the Issuer, if between the date hereof and the Closing Date:
(i) Any event or circumstance occurs or information becomes known, which, in the professional judgment of the Underwriter, makes untrue any statement of a material fact set forth in the Preliminary Official Statement as amended or supplemented in accordance with the terms hereof or the Official Statement or results in an omission to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; or
(ii) The market for the Bonds or the market prices of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds shall have been materially and adversely affected, in the professional judgment of the Underwriter, by:
(1) An amendment to the Constitution of the United States or the State shall have been passed or legislation shall have been introduced in or enacted by the Congress of the United States or the legislature of the State or legislation pending in the Congress of the United States shall have been amended or legislation (whether or not then introduced) shall have been recommended to the Congress of the United States or otherwise endorsed for passage (by press release, other form of notice or otherwise) 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 legislation shall have been proposed (whether or not then introduced) for consideration by either such Committee by any member thereof or presented as an option for consideration (whether or not then introduced) by either such Committee by the staff of such Committee or by the staff of the joint Committee on Taxation of the Congress of the United States, or legislation shall have been favorably reported for passage 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 a decision shall have been rendered by a court of the Page J-2.195
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United States or of the State or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States, the Internal Revenue Service or other federal or State authority, with respect to federal or State taxation upon revenues or other income of the general character to be derived by the Issuer or upon interest received on obligations of the general character of the Bonds which, in the judgment of the Underwriter, may have the purpose or effect, directly or, indirectly, of affecting the tax status of the Issuer, its property or income, its securities (including the Bonds) or the interest thereon, or any tax exemption granted or authorized by State legislation; or
(2) The declaration of war or engagement in or escalation of military hostilities by the United States or the occurrence of any other national emergency or calamity or terrorism affecting the operation of the government of, or the financial community in, the United States; or
(3) The declaration of a general banking moratorium by federal, New York or California authorities; or
(4) The occurrence of a major financial crisis, a material disruption in commercial banking or securities settlement or clearance services, or a material disruption in the fixed income or municipal securities market; or (5) Additional material restrictions not in force or being enforced as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; or (6) The general suspension of trading on any national securities exchange; or
(iii) Legislation enacted, introduced in the Congress or recommended for passage (whether or not then introduced) by the President of the United States, or a decision rendered by a court established under Article III of the Constitution of the United States or by the Tax Court of the United States, or an order, ruling, regulation (final, temporary or proposed) or official statement issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter shall have been made or issued to the effect that the Bonds, other securities of the Issuer or obligations of the general character of the Bonds are not exempt from registration under the 1933 Act, or that the Bond Resolution is not exempt from qualification under the Trust Indenture Act; or (iv) Any change in or particularly affecting the Issuer, the Bond Law, the Bond Resolution or the other Legal Documents as the foregoing matters are described in the Preliminary Official Statement or the Official Statement, which in the professional judgment of the Underwriter materially impairs the investment quality of the Bonds; or Page J-2.196
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(v) An order, decree or injunction of any court of competent jurisdiction, issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including any or all underlying obligations, as contemplated hereby or by the Preliminary Official Statement or the Official Statement, is or would be in violation of any applicable law, rule or regulation, including (without limitation) any provision of applicable federal securities laws as amended and then in effect; or (vi) A stop order, ruling, regulation or official statement by the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, or the adoption, execution and delivery of any Legal Documents, as contemplated hereby or by the Preliminary Official Statement or the Official Statement, is or would be in violation of any applicable law, rule or regulation, including (without limitation) any provision of applicable federal securities laws, including the 1933 Act, the Securities Exchange Act of 1934 or the Trust Indenture Act, each as amended and as then in effect; or (vii) Any litigation shall be instituted or be pending on the Closing Date to restrain or enjoin the issuance, sale or delivery of the Bonds, or in any way contesting or affecting any authority for or the validity of the proceedings authorizing and approving the Bond Resolution, the Legal Documents or the existence or powers of the Issuer with respect to its obligations under the Legal Documents; or
(vii) A reduction or withdrawal in the assigned rating to the Bonds as described above, or, as of the Closing Date, the failure by [______________] to assign the rating described above to the Bonds.
9. AMENDMENTS TO OFFICIAL STATEMENT.
During the period commencing on the Closing Date and ending twenty-five (25) days from the end of the underwriting period, the Issuer shall advise the Underwriter if any event relating to or affecting the Official Statement shall occur as a result of which it may be necessary or appropriate to amend or supplement the Official Statement in order to make the Official Statement not misleading in light of the circumstances existing at the time it is delivered to a purchaser or “potential customer” (as defined for purposes of Rule 15c2-12). If the Official Statement is supplemented or amended, at the time of each supplement or amendment thereto and at all times subsequent thereto up to and including that date that is 25 days from the end of the “underwriting period” (as defined in Rule 15c2-12), the Official Statement as supplemented or amended will not contain any untrue statement of a material fact or omit to state any 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 and shall amend or supplement the Official Statement (in form and substance reasonably satisfactory to counsel for the Underwriter) so that the Official Statement will not contain any 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 under which they were made, not misleading.
10. EXPENSES.
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All expenses and costs of the Issuer incident to the performance of its obligations in connection with the authorization, issuance and sale of the Bonds to the Underwriter, including the costs of printing or reproduction of the Bonds, the Legal Documents and the Official Statement in reasonable quantities, fees of consultants, fees of rating agencies, advertising expenses, fees and expenses of the Paying Agent and fees and expenses of counsel to the Issuer, including the City Attorney and Bond Counsel, shall be paid by the Issuer from the proceeds of the Bonds or other revenues of the Issuer. All expenses and costs of the Underwriter incurred with respect to the Bonds or under or pursuant to this Purchase Agreement, including, without limitation, the cost of preparing this Purchase Agreement and other Underwriter documents, travel expenses and the fees and expenses of counsel to the Underwriter, shall be paid by the Underwriter (which may be included as an expense component of the Underwriter’s discount). The Underwriter shall also be responsible for payment of the fee due to the California Debt and Investment Advisory Commission (CDIAC) related to the Bonds.
11. USE OF DOCUMENTS.
The Issuer hereby authorizes the Underwriter to use, in connection with the public offering and sale of the Bonds, this Purchase Agreement, the Preliminary Official Statement, the Official Statement and the Legal Documents, and the information contained herein and therein.
12. QUALIFICATION OF SECURITIES.
The Issuer will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and to provide for the continuance of such qualification; provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any state.
13. NOTICES.
Any notice or other communication to be given to the Issuer under this Purchase Agreement may be given by delivering the same in writing to City of Menlo Park, 701 Laurel Street, Menlo Park, California 94025, Attention Marvin Davis, Interim Finance Director and any such notice or other communication to be given to the Underwriter may be given by delivering the same in writing to BofA Securities, Inc., 555 California Street, Suite 1160, San Francisco, California 94104, Attention: Holly Vocal, Managing Director.
14. BENEFIT.
This Purchase Agreement is made solely for the benefit of the Issuer and the Underwriter (including their successors or assigns) and no other person, partnership, association or corporation shall acquire or have any right hereunder or by virtue hereof. Except as otherwise expressly provided herein, all of the agreements and representations of the Issuer contained in this Purchase Agreement and in any certificates delivered pursuant hereto shall remain operative and in full force and effect regardless of: (i) any investigation made by or on behalf of the Underwriter; (ii) delivery Page J-2.198
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of and payment for the Bonds hereunder; or (iii) any termination of this Purchase Agreement, other than pursuant to Section 8.
15. GOVERNING LAW. THIS PURCHASE AGREEMENT SHALL BE DEEMED TO
BE A CONTRACT UNDER, AND FOR ALL PURPOSES SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CHOICE OF LAW RULES.
16. WAIVER OF JURY TRIAL. THE ISSUER HEREBY IRREVOCABLY WAIVES
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS PURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
17. MISCELLANEOUS.
(a) This Purchase Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements, prior writings and representations with respect thereto.
(b) This Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original hereof.
[Signature page follows]
Page J-2.199
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Very truly yours,
BOFA SECURITIES, INC.,
as Underwriter
By:______________________________
Authorized Officer
Approved and Agreed to: [__________], 2022
CITY OF MENLO PARK
By:
Authorized Officer
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SCHEDULE I
Maturities, Principal Amounts, Interest Rates, Yields, Prices and Redemption Provisions $[__________]
CITY OF MENLO PARK
2022 GENERAL OBLIGATION BONDS
(2001 Election)
Maturity Date
(August 1)
Principal
Amount
Interest
Rate Yield Price
$[_______] [______]% Term Bond due August 1, 20[__]; Yield: [___]% Price: [_____]C $[_______] [______]% Term Bond due August 1, 20[__]; Yield: [___]% Price: [_____]C ________________
C Priced to first par optional call date of August 1, 20[__].
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Redemption Provisions:
Optional Redemption. The Bonds maturing on or before August 1, 20[__], are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after August 1, 20[__], are subject to redemption prior to maturity, at the option of the Issuer, in whole or in part among maturities on such basis as designated by the Issuer and by lot within a maturity, from any available source of funds, on August 1, 20[__], and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.