Agenda packet, first session — Modesto City Council, April 11, 2023 (part 7 of 8)

On May 26, 2020, under Resolution 2020-241, Council approved a three-year extension of the irrevocable direct pay Letter of Credit (LOC) issued by JP Morgan which supports the 2008 Water Refunding Revenue Certificates of Participation (Water Bonds). The LOC will expire on June 15, 2023. The Water Bonds are also supported by a financial guaranty insurance policy issued by Assured Guaranty Corp.

DISCUSSION:

On January 5, 2023, the City’s Municipal Advisor, PFM Financial Advisors LLC (PFM) submitted a Request for Proposals (RFP) for liquidity facility services for the Water Bonds on behalf of the City. The RFP was distributed to 26 financial bank institutions. Three (3) proposals were received offering three to five-year liquidity facilities with a three to five-year term out period, which included BMO Harris Bank N.A. (formerly Bank of the West1), PNC Bank and JP Morgan.

All three proposals came from national financial banking institutions that have strong credit ratings. BMO Harris Bank N.A. included two proposals, offering either a Letter of Credit or a Standby Certificate Purchase Agreement. Based on the cost comparison, City staff is recommending to move forward with entering into a new Standby Certificate Purchase Agreement for a three-year term with BMO Harris Bank N.A. One reason this SCPA option is more appealing than the LOC option, in addition to the lower annual liquidity fee, is that it allows the City to retain the existing Assured Guaranty Corp. bond insurance associated with the Water Bonds, which further minimizes risk to the City (compared to terminating the bond insurance as part of the legal documentation process for pursuing the BMO Harris Bank N.A. LOC option).

BMO Harris Bank N.A. has presented a significant reduction in the fee structure with their proposed fee at 30 basis points (bps) which is significantly lower compared to the other two proposals ranging from 42 to 72.5 bps. In addition, the three-year term is being recommended to ensure it aligns with the expiration date of the banking services agreement in May 2026.

With the change in banking institution from JP Morgan to BMO Harris Bank N.A., there will be significant one-time fees due to having to issue a new disclosure document to investors but there is still an overall savings with the significant reduction in the bps.

In addition to changing its liquidity provider, the MPFA also intends to change the remarketing agent of the Water Bonds from JP Morgan to PNC Bank. This will result in annual savings because PNC Bank has offered a remarketing fee of 5 bps whereas JP Morgan is currently charging 8 bps. Over the remaining life of the bonds, this change is estimated to result in over $90,000 of remarketing fee savings.

All bond documents will also be reviewed by the City’s Bond Counsel, Norton Rose Fulbright US LLP to ensure all legal requirements are met under this bond transaction. On March 12, 2019, under Resolution 2019-111, Council approved the Third Amendment for outside Legal Bond Counsel for bond transactions in the amount not to exceed $415,000.

FISCAL IMPACT:

By lowering its liquidity fee from 57.5 bps to 30 bps, the City will be reducing its liquidity costs between $100,000 and $125,000 annually. However, the process of replacing the current LOC with a SCPA comes with one-time upfront legal and consultant costs estimated at $145,000.

Therefore, the net effect to the City will be a total savings of $200,000 compared to paying the 1 https://www.bmo.com/en-us/main/bank-of-the-west-joins-bmo/ #33..
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City Council, April 11, 2023
Standby Certificate Purchase Agreement Supporting the Water Refunding Revenue Certificates of Participation, Series 2008A

Page 3 of 3 ends

57.5 bps rate it is currently paying on its LOC for another 3 years.

Fiscal
Year
Liquidity Fee Savings
(57.5bps vs. 30bps)
One-time
Costs
BMO Net
Savings
2024 $124,591 ($145,000) ($20,409)
2025 116,977 - 116,977
2026 104,664 - 104,664
Total $346,233 ($145,000) $201,233
COMMITTEE RECOMMENDATION:

This item was presented at the March 20, 2023, Finance Committee and approved to move forward to Council.

RECOMMENDED COUNCIL ACTION:

Staff Recommendations:

Resolution of the City Council of the City of Modesto relating to Water Refunding Revenue Certificates of Participation, 2008 Series A; approving the forms of and authorizing the execution and delivery of a Standby Certificate Purchase Agreement and a Fee Letter with BMO Harris Bank N.A. (successor in interest to Bank of the West); approving the form of and authorizing the distribution of a remarketing memorandum in connection therewith; and authorizing certain other related actions.

Approved by:

DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
Attachments:

1. Resolution (Water COPs)

2. Standby Certificate Purchase Agreement (Water COPs)

3. First Supplemental Trust Agreement (Water COPs)

4. Fee Letter Agreement (Water COPs)

5. Remarketing Memorandum (Water COPs)
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04/11/2023/FIN/DChristensen/Item XX 2023-XX

MODESTO CITY COUNCIL
RESOLUTION NO. 2023-_____

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MODESTO RELATING TO WATER REFUNDING REVENUE CERTIFICATES OF PARTICIPATION, 2008 SERIES A; APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION

AND DELIVERY OF A STANDBY CERTIFICATE PURCHASE AGREEMENT AND A FEE LETTER WITH BMO HARRIS BANK N.A. (SUCCESSOR IN INTEREST TO BANK OF THE WEST); APPROVING THE FORM OF AND AUTHORIZING THE

DISTRIBUTION OF A REMARKETING MEMORANDUM IN CONNECTION
THEREWITH; AND AUTHORIZING CERTAIN OTHER RELATED ACTIONS WHEREAS, the City of Modesto is a charter city and municipal corporation duly organized and existing under and by virtue of the Constitution and laws of the State of California (the “City”); and
WHEREAS, the City has caused to be executed and delivered the $47,625,000 City of Modesto, California Water Refunding Revenue Certificates of Participation, 2008 Series A (the “2008 Certificates”); and
WHEREAS, in connection with the issuance of the 2008 Certificates, Bank of America, N.A., as liquidity facility provider, the City, and the Modesto Public Financing Authority (the “Authority”) previously entered into a Standby Certificate Purchase Agreement, dated as of May 1, 2008 (the “Original Standby Certificate Purchase Agreement”), relating to the performance of certain duties with respect to the remarketing of the 2008 Certificates; and WHEREAS, the Original Standby Certificate Purchase Agreement was later replaced with an irrevocable direct-pay letter of credit (the “Letter of Credit”) issued by JPMorgan Chase Bank, N.A. (“JPMorgan”) pursuant to the terms of a Reimbursement Agreement, dated as of July 1, 2011, as amended, by and between the City and JPMorgan; and #33..
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WHEREAS, the City has determined to be in its best interest to replace the Letter of Credit with a liquidity facility provided by BMO Harris Bank N.A. (the “Liquidity Provider”), under a Standby Certificate Purchase Agreement (the “Standby Certificate Purchase Agreement”), among the Liquidity Provider, the City, and the Authority; and WHEREAS, in connection with the Standby Certificate Purchase Agreement, the City, the Authority and the Liquidity Provider will enter into a Fee Letter Agreement (the “Fee Letter”); and
WHEREAS, staff recommends PNC Capital Markets LLC replace J.P. Morgan Securities LLC as the remarketing agent for the 2008 Certificates, and WHEREAS, the City proposes to execute a Remarketing Memorandum (the “Remarketing Memorandum”), relating to the 2008 Certificates, and to authorize the distribution of the Remarketing Memorandum to prospective and actual purchasers of the 2008 Certificates; and
WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the transactions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such transactions for the purpose, in the manner and upon the terms herein provided.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Modesto, as follows:
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Section 1. Findings. The City Council hereby specifically finds and determines that the actions authorized hereby constitute and are with respect to the public affairs of the City and that the statements, findings and determinations of the City set forth above and in the preambles of the documents approved herein are true and correct and that the consummation of the transactions contemplated therein shall result in significant public benefits to the City.

Section 2. Approval of the Standby Certificate Purchase Agreement and Fee Letter. The Standby Certificate Purchase Agreement and the Fee Letter proposed to be executed and entered into by the City, in the forms presented at this meeting and on file with the City Clerk, are hereby approved, and each of the City Manager and the Finance Director, acting singly, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Standby Certificate Purchase Agreement and the Fee Letter in substantially said forms, with such changes therein as such officer executing the Standby Certificate Purchase Agreement and the Fee Letter may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof.

Section 3. Approval of Remarketing Memorandum. The Remarketing Memorandum, in the form presented at this meeting and on file with the City Clerk, is hereby approved. Each of the City Manager and the Finance Director, acting singly, is hereby authorized and directed, for and in the name and on behalf of the City, to execute the Remarketing Memorandum in substantially said form, with such changes therein as such officer executing the Remarketing Memorandum may require or approve, such approval to be conclusively evidenced by the execution thereof. Each of the City Manager and the Finance Director, acting singly, is hereby authorized and directed to cause the Remarketing Memorandum, in substantially said form, with #33..
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such changes therein as such officer may require or approve, to be distributed to potential and actual purchasers of the 2008 Certificates.

Section 4. Attestations. The City Clerk is hereby authorized and directed to attest the signature of the City Manager and the Finance Director and to affix and attest the seal of the City, as may be required or appropriate in connection with the documents approved by this Resolution.

Section 5. Other Actions. The City Manager and the Finance Director, or their designees, 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 (including without limitation a custodian agreement) which they may deem necessary or desirable in order to consummate the transactions authorized hereby and to carry out, give effect to and comply with the terms and intent of this Resolution, the Standby Certificate Purchase Agreement, the Fee Letter and the Remarketing Memorandum; and all such actions heretofore taken by such officers are hereby ratified, confirmed and approved.

Section 6. Effective Date. This Resolution shall take effect immediately upon its passage.
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The foregoing resolution was introduced at a meeting of the City of Modesto held on the 11th day of April, 2023, by Councilmember _____________, who moved its adoption, which motion being duly seconded by Councilmember _____________, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: _________________________________

DIANE NAYARES-PEREZ, CMC
City Clerk
APPROVED AS TO FORM:

By:_________________________________
JOSE M. SANCHEZ,
City Attorney
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STANDBY CERTIFICATE PURCHASE AGREEMENT
among

MODESTO PUBLIC FINANCING AUTHORITY,

CITY OF MODESTO,
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
and
BMO HARRIS BANK N.A.

Dated as of June 1, 2023
Relating to
$47,625,000.00
original aggregate principal amount of
City of Modesto
Water Revenue Refunding Certificates of Participation, 2008 Series A #33..
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS...................................................................................................3

1.01 Definitions..........................................................................................................3

1.02 Incorporated of Certain Definitions by Reference...........................................13

1.03 Construction.....................................................................................................13 SECTION 2. PURCHASE COMMITMENT; FEES ............................................................13

2.01 Commitment to Purchase Certificates .............................................................13

2.02 Bank Certificates; Rights of Bank Certificateholders......................................14

2.03 Method of Purchasing......................................................................................14

2.04 Reduction and Termination of Commitment ...................................................15

2.05 Sale of Bank Certificates .................................................................................16

2.06 Fees ..................................................................................................................17

2.07 Compensation for Increased Costs, Capital Adequacy or Liquidity................17

2.08 Term-Out Payments; Increase in Amount of 2008 Payments .........................18

2.09 Interest Component of Draws ..........................................................................19

2.10 Bank Records...................................................................................................19 SECTION 3. BANK RATE...................................................................................................20

3.01 Bank Certificates to Bear Interest at Bank Rate ..............................................20

3.02 Payments..........................................................................................................21 SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY AND THE CITY..............................................................................................21

4.01 Representations of the Authority .....................................................................21

4.02 Representations of the City..............................................................................24 SECTION 5. COVENANTS OF THE AUTHORITY AND THE CITY .............................28

5.01 Covenants of the Authority..............................................................................28

5.02 Covenants of the City.......................................................................................32 SECTION 6. CONDITIONS PRECEDENT.........................................................................36

6.01 Conditions to Bank’s Entering Into Agreement...............................................36

6.02 Obligation to Purchase.....................................................................................39 SECTION 7. EVENTS OF DEFAULT; TERMINATION EVENTS AND
REMEDIES......................................................................................................39

7.01 Events of Default .............................................................................................39

7.02 Remedies..........................................................................................................41 #33..
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SECTION 8. MISCELLANEOUS ........................................................................................43

8.01 Other Matters ...................................................................................................43

8.02 Governing Law ................................................................................................44

8.03 Severability ......................................................................................................44

8.04 Counterparts.....................................................................................................44

8.05 Expenses ..........................................................................................................44

8.06 Indemnification................................................................................................45

8.07 Term of the Agreement....................................................................................45

8.08 Enforcement by Trustee; Third Party Beneficiaries ........................................45

8.09 Notice...............................................................................................................46

8.10 Obligations Absolute .......................................................................................47

8.11 Holidays ...........................................................................................................48

8.12 Survival............................................................................................................48

8.13 Liability of the Bank ........................................................................................48

8.14 Bank Information.............................................................................................48

8.15 Extension of Bank Purchase Period.................................................................49

8.16 One Agreement ................................................................................................49

8.01 Headings ..........................................................................................................49

8.02 Set-Off..............................................................................................................49

8.03 Waiver of Suretyship .......................................................................................50

8.04 Waiver of Jury Trial; Judicial Reference.........................................................50

8.05 Concerning the Trustee....................................................................................51

8.06 No Advisory or Fiduciary Relationship...........................................................51

8.07 Redaction .........................................................................................................51 Exhibits
Exhibit A................................Form of Notice of Bank Purchase (Liquidity Purchase) Exhibit B ................................Form of Notice of Bank Purchase (Mandatory Purchase) Exhibit C ................................Form of Request for Extension Exhibit D................................Form of Custodian Agreement #33..
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This STANDBY CERTIFICATE PURCHASE AGREEMENT dated as of June 1, 2023 among the MODESTO PUBLIC FINANCING AUTHORITY, a California joint exercise of powers entity (the “Authority”), the CITY OF MODESTO, a California municipal corporation and charter city (the “City”), THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as successor trustee (together with its successors, the “Trustee”) appointed under the hereinafter defined Trust Agreement, and BMO HARRIS BANK, N.A., a national banking association (including its successors, the “Bank”).

WITNESSETH:

WHEREAS, the Authority and the City have heretofore entered into a Master Installment Purchase Contract, dated as of November 1, 1997 (as more specifically defined herein, the “Master Contract”), as supplemented by the 1997 Supplemental Installment Purchase Contract, dated as of November 1, 1997 (as more specifically defined herein, the “1997 Supplemental Contract”), under and pursuant to which the Authority agreed to assist the City by refinancing certain additions, betterments, extensions and improvements to the Water Utility System of the City (the “1997 Project” as defined therein); and
WHEREAS, the City is obligated to make certain payments to the Authority under the 1997 Supplemental Contract (the “1997 Payments”), and all rights to receive such payments have been assigned by the Authority to State Street Bank and Trust Company of California, N.A, as succeeded by The Bank of New York Trust Company, N.A., as successor trustee for the owners of the Refunding Revenue Certificates of Participation (1997 Water Utility Refinancing Project); and
WHEREAS, the Authority and the City have heretofore entered into the 2006 Supplemental Installment Purchase Contract, dated as of November 1, 2006 (as more specifically defined herein, the “2006 Supplemental Contract”, under and pursuant to which the Authority agreed to assist the City by financing certain additions, betterments, extensions and improvements to the Water Utility System of the City (the “2006 Project” as defined therein); and WHEREAS, the City is obligated to make certain payments to the Authority under the 2006 Supplemental Contract (the “2006 Payments”), and all rights to receive such payments have been assigned by the Authority to The Bank of New York Trust Company, N.A., as successor trustee for the owners of the Water Revenue Certificates of Participation 2006 Series A; and WHEREAS, the Authority and the City, concurrently with the execution and delivery of a Trust Agreement dated as of May 1, 2008 (as more specifically defined herein, the “Original Trust Agreement”) between the Authority and the Trustee, executed and delivered a 2008 Supplemental Installment Purchase Contract dated as of May 1, 2008 (the “2008 Supplemental Contract” and collectively with the Master Contract, the 1997 Supplemental Contract, the 2006 Supplemental Contract and any other Supplemental Contract, and as more specifically defined herein, the “Contract”), under and pursuant to which the Authority agreed to assist the City in refinancing the 2006 Project as described in the 2008 Supplemental Contract (the “2008 Project” as defined therein); and
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WHEREAS, the City is obligated to make certain payments to the Authority under the 2008 Supplemental Contract (the “2008 Payments”), and all rights to receive such payments are being assigned by the Authority to The Bank of New York Mellon Trust Company, N.A., as successor trustee (the “Trustee”) for the owners of the Water Revenue Refunding Certificates of Participation, 2008 Series A (the “2008 Certificates”) pursuant to the Original Trust Agreement, as amended and restated by an Amended and Restated Trust Agreement, dated as of May 1, 2008, as amended and restated on July 14, 2011, and as amended by a First Supplemental Trust Agreement, dated as of [__________] 1, 2023 (as so amended and restated and as more specifically defined herein, the “Trust Agreement”), each between the Authority and the Trustee; and WHEREAS, the Authority and the City, concurrently with the execution and delivery of the Original Trust Agreement, executed and delivered a 2008 Supplemental Installment Purchase Contract dated as of May 1, 2008 (the “2008 Supplemental Contract” and collectively with the Master Contract, the 1997 Supplemental Contract, and the 2006 Supplemental Contract, the “Contract”), under and pursuant to which the Authority agreed to assist the City in refinancing the 2006 Project as described in the 2008 Supplemental Contract (the “2008 Project” as defined therein); and
WHEREAS, the payment of the principal of and interest on the Certificates (including Bank Certificates, as hereinafter defined) is insured by a financial guaranty insurance policy (together with any and all riders and endorsements thereto, including the Endorsement (as defined herein), the “Bond Insurance Policy”) issued by Assured Guaranty Corp., a Maryland-domiciled insurance company (the “Bond Insurer”), in favor of the holders of the Certificates (including the Bank); and
WHEREAS, the Certificates are subject to purchase from time to time at the option of the owner thereof and are required to be purchased in certain events; and in order to further assure the availability of funds for the payment of the purchase price therefor, the Authority has provided for the remarketing of such Certificates and, to the extent such remarketing may not be successful, for the purchase of such Certificates by the provider of a liquidity facility, such provider initially being Bank of America, N.A. pursuant to a Standby Certificate Purchase Agreement, dated as of May 1, 2008, by and among the Authority, the City and Bank of America, N.A. (the “Initial Liquidity Facility”); and
WHEREAS, the Authority and the City subsequently replaced the Initial Liquidity Facility with an irrevocable direct pay letter of credit issued by JPMorgan Chase Bank, National Association (the “Prior Bank”) on June 14, 2011, as extended from time to time (the “Prior Liquidity Facility”); and
WHEREAS, the Authority and the City have requested the Bank to enter to this Agreement to replace the Prior Liquidity Facility in order to further assure the availability of funds for the payment of the purchase price of the Certificates subject to purchase from time to time at the option of the owner thereof and required to be purchased in certain events; and WHEREAS, this Agreement will constitute an Alternate Liquidity Facility for purposes of the Contract and the Trust Agreement; and
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NOW, THEREFORE, in consideration of the respective agreements contained herein, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

1.01 Definitions. The following terms have the meanings indicated below or in the referenced Section of this Agreement, unless the context shall clearly indicate otherwise:
“Affiliate” means, with respect to any Person, any Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person. A Person shall be deemed to control another Person for the purposes of this definition if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise.
“Additional Payments” has the meaning assigned to that term in the 2008 Supplemental Contract.
“Agreement” means this Standby Certificate Purchase Agreement, as amended, modified and supplemented from time to time.
“Alternate Liquidity Facility” has the meaning assigned to that term in the Trust Agreement.
“Authority” has the meaning assigned to that term in the introductory paragraph. “Authorized Representative” has the meaning assigned to that term in the Trust Agreement.
“Available Commitment” means on any day the sum of the Available Principal Commitment and the Available Interest Commitment on such day. “Available Interest Commitment” means for each Weekly Rate Period $548,014.00, representing an amount equal to 35 days of interest on the Available Principal Commitment calculated at the assumed rate of interest of 12% per annum (on the basis of actual days elapsed and a 365-day year) and rounded up to the nearest dollar. The Available Interest Commitment shall increase or decrease concurrently and proportionately with each increase or decrease in the Available Principal Commitment. Notwithstanding the foregoing provisions of this defined term, in no event shall the Available Interest Commitment exceed $548,014.00.
“Available Principal Commitment” means initially $47,625,00.00 and thereafter means such amount adjusted from time to time as follows: (a) downward by the amount of any reduction or termination of the Available Principal Commitment pursuant to Section 2.04 hereof, (b) downward by the principal amount of any Certificates purchased by the Bank pursuant to Section 2.03 hereof; and (c) upward by the principal amount of any Certificates theretofore purchased by the Bank pursuant to Section 2.03 hereof, which #33..
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are remarketed pursuant to Section 2.05(b) hereof or are prepaid pursuant to the terms hereof and for which the Bank has received immediately available funds equal to the principal amount thereof and accrued interest thereon, or which cease to bear interest at the Bank Rate pursuant to Section 2.05(c) hereof; provided that after giving effect to such adjustment the Available Principal Commitment shall never exceed $47,625,000. Any adjustment pursuant to clause (a), (b) or (c) in this defined term shall occur simultaneously with the event requiring such adjustment.
“Bank” has the meaning assigned to that term in the introductory paragraph. “Bank Assignees” has the meaning assigned to that term in Section 8.01(c) hereof. “Bank Certificate” means each Certificate (whether or not such Certificate is at the time of determination owned by the Bank) purchased with funds provided by the Bank hereunder, until such Certificate is remarketed in accordance with Section 2.05(b) hereof, prepaid in accordance with the terms hereof or ceases to bear interest at the Bank Rate pursuant to Section 2.05(c) hereof.
“Bank Certificateholder” means (a) the Bank in its capacity as owner of Bank Certificates purchased pursuant to this Agreement and (b) any Bank Assignee to whom the Bank has sold Bank Certificates in accordance with the terms of this Agreement. “Bank Payment Account” shall have the meaning set forth in the Fee Letter Agreement.
“Bank Purchase Period” means the period from the Effective Date to and including the earliest of (a) the Stated Expiration Date then in effect; (b) the first Business Day following the date on which the Rate Period for all of the Certificates ceases to be a Weekly Rate Period; (c) the close of business of the Bank on the Business Day following the Substitution Date; (d) the Purchase Termination Date (except to the extent that purchases are permitted on the Termination Date pursuant to Section 7.02(b)); (e) the date on which no Certificates are Outstanding; and (f) the date on which the Available Commitment is terminated in whole pursuant to Section 2.04(b).
“Bank Rate” means on any day, (a) if such day occurs during the Bank Purchase Period but on or prior to the ninetieth day following the date on which such Bank Certificate was purchased by the Bank hereunder, a rate per annum equal to the Base Rate plus 1.00%; and (b) if such day occurs during the Bank Purchase Period but after the ninetieth day following the date on which such Bank Certificate was purchased by the Bank hereunder or if such day occurs after the Bank Purchase Period has terminated or expired, a rate per annum equal to the Base Rate plus 3.00%; provided that from and after the occurrence of an Event of Default, the Bank Rate shall mean the Default Rate; provided, further, that in no event shall the Bank Rate be less than the rate on the Certificates that are not Bank Certificates.
“Base Rate” means, for any day, the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.00% per annum.
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“Bond Insurance Policy” has the meaning assigned to that term in the recitals to this Agreement.
“Bond Insurer” has the meaning assigned to that term in the recitals to this Agreement.
“Bond Insurer Event of Insolvency” means the occurrence and continuance of one or more of the following events: (a) the issuance, under the laws of the state of incorporation or formation of the Bond Insurer, of an order of relief, rehabilitation, reorganization, conservation, liquidation or dissolution of the Bond Insurer; (b) the commencement by the Bond Insurer of a voluntary case or other proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect including, without limitation, the appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property; (c) the commencement of an involuntary case or other proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property, and such involuntary case or appointment remains undismissed and unstayed for a period of 90 consecutive days; (d) the consent of the Bond Insurer to any relief referred to in the preceding clause (c) in an involuntary case or other proceeding commenced against it; (e) the making by the Bond Insurer of a general assignment for the benefit of creditors; (f) the failure of the Bond Insurer to generally pay its debts as they become due or claims under any of its insurance policies as such claims are made; or (g) the board of directors or any senior officer of the Bond Insurer shall take any action to authorize any of the foregoing.
“Business Day” means a day that is not a Saturday, Sunday or legal holiday on which banking institutions in the State of California or in any state in which the office of the Remarketing Agent or the Trustee is located or at which Notice of Bank Purchases are to be presented and payments made by the Bank pursuant thereto are authorized or required to remain closed or a day on which the New York Stock Exchange is closed; provided, however, that the Bank shall not be deemed to have notice of any day that is a legal holiday on which banking institutions in the state in which the office of the Remarketing Agent or the Trustee is located are authorized or required to remain closed unless the Bank has received written notice thereof from the Authority, the City, the Remarketing Agent and/or the Trustee.
“Certificate Purchase Contract” means the Purchase Contract, dated May 29, 2008, by and between the Authority and Banc of America Securities LLC, as the underwriter of the Certificates.
“Certificates” has the meaning assigned to that term in the recitals to this Agreement and shall include, unless the context otherwise requires, all Bank Certificates. #33..
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“Change of Law” shall mean occurrence of any of the following: (a) the adoption or taking effect of any law, rule, regulation, statute, treaty, regulation, policy, guideline or directive, (b) any change in any law, rule, regulation, statute, treaty, regulation, policy, guideline or directive or in the interpretation, promulgation, implementation, administration or enforcement thereof by any governmental authority, court, central bank or comparable agency charged with the interpretation or administration thereof, (c) the making or issuance of any request, rule, ruling, guideline or directive (whether or not having the force of law) of any such authority, court, central bank or comparable agency, or (d) compliance by the Bank with any request or directive regarding capital adequacy or liquidity (whether or not having the force of law) of any such authority, court, central bank or comparable agency; provided that notwithstanding anything in this Agreement to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change of Law,” regardless of the date adopted, issued, promulgated, enacted or implemented. “City” has the meaning assigned to that term in the introductory paragraph. “Contract” means the Master Contract, as the same may be amended or supplemented from time to time, including as supplemented by the 1997 Supplemental Contract, the 2006 Supplemental Contract and the 2008 Supplemental Contract. “Custodian Agreement” means the Custodian Agreement to be entered into among the Bank, the City and the Trustee on or prior to the Effective Date, the form of which is attached hereto as Exhibit D.
“Debt” of any Person means at any date, without duplication, (a) all obligations of such person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (d) all obligations of such Person as lessee under capital leases; (e) all Debt of others secured by a lien on any asset of such Person, whether or not such Debt is assumed by such Person; and (f) all obligations, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other person including, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that with respect to the City, Debt shall exclude conduit, enterprise and other Debt that have no claim on the General Fund of the City other than obligations payable from the Revenue Fund. #33..
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“Defaulted Interest” means accrued interest payable on a Certificate, which was not paid when due under the terms of the Trust Agreement.
“Default Rate” means a rate per annum equal to the Base Rate plus 5.00% per annum.
“Differential Interest Amount” means, with respect to any Bank Certificate, the excess of (a) the interest which has accrued and could actually be paid on such Bank Certificate at the Bank Rate, as determined in accordance with Section 3.01 hereof, up to but excluding the Business Day on which such Bank Certificate is purchased from a Bank Certificateholder pursuant to Section 2.05(b) hereof, less (b) the interest accrued on such Certificate received by the Bank Certificateholder thereof as part of the Sale Price. “Dollars” and “$” means the lawful currency of the United States of America. “Effective Date” means the first date on which all of the conditions set forth in Section 6.01 have been satisfied or waived by the Bank. “Eligible Certificate” means any Certificate bearing interest at the Weekly Rate other than Bank Certificates and Certificates owned by, for the account of, or on behalf of, the Authority or the City.
“Endorsement” has the meaning assigned to that term in Section 2.08(c) hereof. “Environmental Laws” means any and all federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof
“Event of Default” has the meaning assigned to that term in Section 7.01 hereof. “Excess Interest Amount” has the meaning assigned to that term in Section 3.01(c) hereof.
“Existing Swap Agreement” means, collectively, the ISDA Master Agreement, the ISDA U.S. Municipal Counterparty Schedule to the Master Agreement, the ISDA Credit Support Annex and the Confirmation, each dated as of May 29, 2008, between the Applicant and Bank of America, N.A.
“Extended Bank Purchase Period” has the meaning assigned to that term in Section 8.15 hereof.
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“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Bank on such day on such transactions as determined by the Bank. Notwithstanding anything herein to the contrary, if the Federal Funds Rate as determined as provided above would be less than zero percent (0.0%), then the Federal Funds Rate shall be deemed to be zero percent (0.0%). “Fee Letter Agreement” means the Fee Letter Agreement dated June [__], 2023 among the Authority, the City and the Bank, as the same may be amended or supplemented from time to time.
“First Supplemental Trust Agreement” means the First Supplemental Trust Agreement dated as of [__________] 1, 2023 between the Authority and the Trustee. “Fitch” means Fitch Ratings and its successors.
“Gross Revenues” has the meaning assigned to that term in the Contract. “Indemnitee” has the meaning assigned to that term in Section 8.06(a) hereof. “Involuntary Insolvency Event” has the meaning assigned to that term in Section 7.02(c) hereof.
“Interest Component” has the meaning assigned to that term in Section 2.01 hereof. “Interest Payment Date” has the meaning assigned to that term in the Trust Agreement.
“Interest Payment Period” has the meaning assigned to that term in the Trust Agreement.
“Liquidity Payment Date” has the meaning assigned to that term in Section 3.01(a) hereof.
“Mandatory Purchase” means a mandatory purchase of all or a portion of the Certificates on any date on which the Certificates are subject to mandatory tender for purchase as described in subsections (iii), (iv), (v), (vi) and (vii) of the definition of “Mandatory Purchase Date” in the Trust Agreement, in each case, at a price equal to the principal amount thereof plus accrued interest thereon if the date of Mandatory Purchase is other than an Interest Payment Date for the Certificates that are subject to mandatory purchase.
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“Master Contract” means the Master Installment Purchase Contract, dated as of November 1, 1997, by and between the Authority and the City. “Maximum Interest Rate” means, with respect to Bank Certificates and all other payment obligations under this Agreement, the lower of (i) eighteen percent (18%) per annum and (ii) the highest rate permitted by law.
“Moody’s” means Moody’s Investors Service, Inc. and its successors. “1997 Supplemental Contract” means the 1997 Supplemental Installment Purchase Contract, dated as of November 1, 1997, by and between the Authority and the City, as the same may be amended or supplemented from time to time.
“Notice of Bank Purchase” means (a) in the case of a purchase of Eligible Certificates by the Bank as a result of an Optional Tender, a notice in the form of Exhibit A attached hereto and incorporated herein by this reference or (b) in the case of a purchase of Eligible Certificates by the Bank as a result of a Mandatory Purchase, a notice in the form of Exhibit B attached hereto and incorporated herein by this reference, in each case with blanks appropriately completed and executed by the Trustee. “Notice of Termination” has the meaning assigned to that term in Section 7.02(b) hereof.
“Optional Tender” means the tender of Certificates by the registered owner thereof in accordance with the applicable provisions of Section 3.01 of the Trust Agreement. “Original Trust Agreement” means the Trust Agreement, dated as of May 1, 2008, by and between the Authority and The Bank of New York Trust Company, N.A., as the same may be amended or supplemented from time to time.
“Other Event of Insolvency” means the occurrence and continuance of one or more of the following events: (a) the Authority or the City shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code (the “Bankruptcy Code”) or any other federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for itself or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take action for the purpose of effecting any of the foregoing; or (b) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Authority, the City or of a substantial part of the property of the Authority or the City, under the Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Authority, the City or for a substantial part of the property of the Authority or the City, and such proceeding or petition shall continue undismissed and unstayed for #33..
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60 days; or an order or decree for relief shall be entered against the Authority or the City under the Bankruptcy Code as now or hereafter in effect. “Outstanding” has the meaning assigned to that term in the Trust Agreement. “Participants” has the meaning assigned to that term in Section 8.01(c) hereof. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or a political subdivision or an agency or instrumentality thereof. “Potential Event of Default” means the occurrence of any event that, with the passage of time, the giving of notice, or both, would become an Event of Default. “Prime Rate” shall mean the rate of interest publicly announced from time to time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the Bank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank’s Prime Rate; provided, that if the Prime Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. “Prior Bank” has the meaning assigned to that term in the Whereas clauses above. “Prior Liquidity Facility” has the meaning assigned to that term in the Whereas clauses above.
“Purchase Date” means the date on which the Bank purchases Eligible Certificates following its receipt of a Notice of Bank Purchase.
“Purchase Price” means, with respect to any Eligible Certificate or portion thereof on a Purchase Date therefor, the unpaid principal amount thereof plus accrued but unpaid interest thereon, other than Defaulted Interest, to but excluding a Purchase Date, without premium; provided that if a Purchase Date is an Interest Payment Date, interest payable on such Bond on such Interest Payment Date shall not be taken into account in the computation of the Purchase Price.
“Purchase Termination Date” means the date on which the Bank is no longer required to purchase Eligible Certificates pursuant to Section 7.02(a), (b) or (c) hereof. “Rate Period” has the meaning assigned to that term in the Trust Agreement. “Rating Agencies” means Fitch, Moody’s and S&P.
“Related Documents” means the Fee Letter Agreement, the Certificates, the Trust Agreement, the Contract, the Custodian Agreement, the Remarketing Memorandum, the Bond Insurance Policy and the Remarketing Agreement.
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“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates. “Remarketing Agent” means J.P. Morgan Securities LLC, as Remarketing Agent, or any other firm which may at any time be substituted in its place as Remarketing Agent under the Trust Agreement.
“Remarketing Agreement” means the Remarketing Agreement, dated as of July 1, 2011, by and between the Authority and the Remarketing Agent, with respect to the Bonds, as the same may be amended or supplemented from time to time, or any similar agreement between the Authority and any successor Remarketing Agent. “Remarketing Memorandum” means the Remarketing Memorandum of the Authority, dated [__________], 2023, with respect to the Certificates, and any supplement and/or amendment thereto used with respect to the Certificates. “Request for Extension” has the meaning assigned to that term in Section 8.15 hereof.
“Rescission Notice” has the meaning assigned to that term in Section 7.02(c) hereof.
“Revenue Fund” has the meaning assigned to that term in the Contract. “Revenues” has the meaning assigned to that term in the Trust Agreement. “Sale Price” has the meaning assigned to that term in Section 2.05(b) hereof. “Sanctions” has the meaning assigned to that term in Section 4.01(r) hereof. “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies Inc., and any successor to such division.
“State” means the State of California.
“Stated Expiration Date” means the later of (a) June [__], 2026 and (b) the last day of the Extended Bank Purchase Period as extended from time to time pursuant to Section 8.15 hereof or, if any such day is not a Business Day, the next preceding Business Day to such day.
“Substitution Date” means the date of the acceptance by the Trustee of an Alternate Liquidity Facility.
“Swap” means any interest rate swap agreement, forward payment conversion agreement, futures or contracts providing for payment based on levels of, or changes in, interest rates or other indices, or contracts to exchange cash flows or a series of payments #33..
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or contracts, including, without limitation, interest rate floors or caps, options, puts or calls to hedge payment, rate, spread or similar exposure.
“Termination Date” has the meaning assigned to that term in Section 7.02(b) hereof.
“Termination Event” has the meaning assigned to that term in Section 7.02(a) hereof.
“Term-Out Conversion Date” means the earliest of (i) the ninety-first day following the date Bank Certificates are purchased and (ii) the Purchase Termination Date. “Term-Out Period” means the period commencing on the Term Loan Conversion Date and ending on the earliest of (a) the third anniversary of the Term Loan Conversion Date, (b) the third anniversary of the Stated Expiration Date, (c) the Substitution Date, (d) the date on which the Rate Period for all of the Certificates ceases to be a Weekly Rate Period; and (e) the date that the Available Commitment is permanently reduced to zero. “Term-Out Payments” means for each year during the Term-Out Period an amount equal to the sum of (i) (a) the quotient obtained by dividing the aggregate principal amount of all Bank Certificates that are Outstanding immediately following the termination of the Bank Purchase Period by five (5) and (b) the interest to accrue on the amount determined in accordance with clause (a) above during such year, assuming a per annum interest rate equal to the Maximum Interest Rate (based on a 365-day year and actual days elapsed), plus (ii) the principal and interest due with respect to all Certificates that are not Bank Certificates.
“Trust Agreement” means the Original Trust Agreement, as amended and restated by the Amended and Restated Trust Agreement, dated as of May 1, 2008, as amended and restated on July 14, 2011, between the Authority and the Trustee, and as amended by the First Supplemental Trust Agreement, and as the same may be further amended or supplemented from time to time.
“Trustee” means The Bank of New York Mellon Trust Company, N.A., as successor trustee and any successor thereto appointed from time to time to serve as trustee under the Trust Agreement.
“Trust Estate” means all, any amounts on deposit in the Parity Reserve Fund (as such term is defined in the Master Contract), any amounts on deposit in the 2008 Debt Service Fund, and any other amounts (including proceeds of the sale of the Certificates) held by the Trustee in any fund or account established under the Trust Agreement (other than amounts on deposit or the Purchase Fund (as such term is defined in the Trust Agreement), subject to the terms of the Master Contract and the Trust Agreement permitting the application of such amounts on the terms provided in such agreements. “2006 Supplemental Contract” means the 2006 Supplemental Installment Purchase Contract, dated as of November 1, 2006, by and between the Authority and the City, as the same may be amended or supplemented from time to time.
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“2008 Payments” has the meaning assigned to that term in the Whereas clauses above.
“2008 Project” has the meaning assigned to that term in the Whereas clauses above. “2008 Supplemental Contract” means the 2008 Supplemental Installment Purchase Contract, dated as of May 1, 2008, by and between the Authority and the City, as the same may be amended or supplemented from time to time.
“Water Utility System” has the meaning assigned to that term in the Contract. “Weekly Rate” has the meaning assigned to that term in the Trust Agreement. “Weekly Rate Period” has the meaning assigned to that term in the Trust Agreement.
“Written” or “in writing” means any form of written communication or a communication by means of e-mail or facsimile.

1.02 Incorporated of Certain Definitions by Reference. Each capitalized term used herein and not defined herein has the meaning provided therefor in the Trust Agreement.

1.03 Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Sections and Exhibits shall be construed to refer to Sections of, and Exhibits to, this Agreement.

SECTION 2. PURCHASE COMMITMENT; FEES

2.01 Commitment to Purchase Certificates. The Bank agrees, on the terms and conditions contained in this Agreement, at the request of the Trustee, to purchase from time to time during the Bank Purchase Period at the Purchase Price, with its own immediately available funds, Eligible Certificates tendered or deemed tendered for purchase pursuant to an Optional Tender or a Mandatory Tender and which, in either case, the Remarketing Agent has been unable to remarket. The aggregate principal amount of any Certificate purchased by the Bank on a Purchase Date shall be an authorized denomination applicable to Certificates bearing interest at the Weekly Rate, and in any case the aggregate principal amount of all Certificates purchased on the applicable Purchase Date shall not exceed the Available Principal Commitment on such date (calculated immediately before giving effect to any such purchase of Certificates by the Bank on #33..
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such date). The aggregate amount of the Purchase Price comprising interest on the Certificates (the “Interest Component”) purchased on a Purchase Date shall not exceed the lesser of (a) the Available Interest Commitment on such date and (b) the actual aggregate amount of interest accrued and unpaid on each such Certificate, other than Defaulted Interest, to but excluding a Purchase Date; provided that if a Purchase Date is an Interest Payment Date the amount described in this clause (b) shall be reduced by the amount of interest payable on each such Certificate on such Interest Payment Date.

2.02 Bank Certificates; Rights of Bank Certificateholders. Any Certificates purchased by the Bank pursuant to Section 2.01 shall thereupon constitute Bank Certificates and shall, from the date of such purchase and while they are Bank Certificates, bear interest at the Bank Rate and have other characteristics of Bank Certificates as set forth herein and in the Trust Agreement. Upon purchasing Bank Certificates, Bank Certificateholders shall be entitled to and, where necessary, shall be deemed assigned all rights and privileges accorded Certificateholders, except to the extent such rights and privileges conflict with this Agreement, in which case the terms of this Agreement shall prevail and govern. Upon purchasing Bank Certificates, Bank Certificateholders shall be recognized by the Authority, the Bond Insurer, the City and the Trustee as the true and lawful owners of such Bank Certificates, free from any claims, liens, security interests, equitable interests and other interests of the Authority and/or the City, except as such interests might exist under the terms of the Bank Certificates with respect to all owners of the Certificates.

2.03 Method of Purchasing. If the Trustee determines that the Bank is required to purchase Eligible Certificates during the Bank Purchase Period as a result of an Optional Tender, the Trustee shall deliver to the Bank a Notice of Bank Purchase in the form of Exhibit A. If the Trustee determines that the Bank is required to purchase Eligible Certificates during the Bank Purchase Period as a result of a Mandatory Purchase, the Trustee shall deliver to the Bank a Notice of Bank Purchase in the form of Exhibit B. Each Notice of Bank Purchase shall be executed by the Trustee and delivered to the Bank by facsimile (confirmed by telephone). If the Bank receives a Notice of Bank Purchase from the Trustee at or before 9:30 a.m. (California time) on a Business Day during the Bank Purchase Period, the Bank will, unless it determines that any applicable condition specified in Section 6.02 below is not satisfied, transfer not later than 11:30 a.m. (California time) on the same Business Day to the Trustee, in funds of the Bank to be available as specified in such Notice of Bank Purchase, an amount equal to the aggregate Purchase Price of such Certificates. If the Bank receives a Notice of Bank Purchase from the Trustee after 9:30 a.m. (California time) but before 4:00 p.m. (California time) on a Business Day during the Bank Purchase Period, the Bank will, unless it determines that any applicable condition specified in Section 6.02 below is not satisfied, transfer not later than 11:30 a.m. (California time) on the next Business Day to the Trustee, in funds of the Bank to be available as specified in such Notice of Bank Purchase, an amount equal to the aggregate Purchase Price of such Certificates.

The Trustee shall receive and hold in trust in non-commingled funds, (a) the Purchase Price advanced by the Bank hereunder until such amounts are made available to the Owners of such Certificates. Such monies held by the Trustee shall not be considered monies of the City or the Authority, and the City and the Authority shall not have any right, title or interest in or to such monies; no such monies shall be invested; and no Certificates purchased by the Trustee shall be deemed to have been purchased by, for or on behalf of the City or the Authority. Without limiting the generality of Section 8.13 hereof, the Bank shall not have any responsibility for, or incur any #33..
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liability in respect of any act, or any failure to act, by the Trustee which results in the failure of the Trustee (a) to credit the appropriate account with funds made available by the Bank pursuant to this Section or (b) to effect the purchase for the account of the Bank of Certificates with such funds pursuant to this Section or (c) deliver a completed Notice of Bank Purchase to the Bank on or prior to the expiration of the Bank Purchase Period.

The Certificates purchased with amounts made available hereunder shall be registered in the name of the Bank or its nominee and shall be held as Bank Certificates in custody by the Trustee in its capacity as custodian for the benefit of the Bank or such nominee as provided in the Custodian Agreement. Immediately following the purchase of Certificates by the Bank, the Trustee shall take such steps as necessary to assign the separate CUSIP number for Bank Certificates to such Bank Certificates and to make such Bank Certificates eligible for book-entry with DTC and the Authority and the City shall cause any such Bank Certificates to have any rating(s) by a nationally recognized securities rating agency required for the Bank to assign and pledge such Bank Certificates to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. Upon the sale of Bank Certificates or payment in full of such Certificates pursuant to the terms of this Agreement, the Bank Certificates shall be released by the Bank and the Trustee shall take such actions as may be necessary to return such Certificates to the CUSIP number assigned to the Certificates other than Bank Certificates.

Amounts made available hereunder on a Purchase Date that are not so used to purchase Certificates or which are not required by the Trustee to purchase undelivered Certificates will be returned to the Bank no later than 1:00 p.m. California time on the same Purchase Date. In the event the Trustee fails to return such funds by 1:00 p.m. California time on such date, the City shall pay the Bank as Additional Payments interest on such unused amount for each day until such funds are returned at a rate equal to the Bank’s cost of funds for one night overdrafts in New York, New York. For purposes of computing such interest, funds returned after 1:00 p.m. California time on a Business Day shall be deemed to have been returned on the following Business Day.

2.04 Reduction and Termination of Commitment.
(a) Mandatory Reduction and Termination of Commitment. Upon any prepayment, repayment or other payment pursuant to the Trust Agreement of all or any portion of the principal amount of the Certificates so that such Certificates shall cease to be Outstanding under the Trust Agreement or the conversion of a portion of the Certificates to a Rate Period other than a Weekly Rate Period, the aggregate Available Principal Commitment of the Bank shall automatically be reduced by the principal amount of such Certificates so prepaid, repaid or otherwise deemed paid or converted, and the Available Interest Commitment shall also be simultaneously reduced as provided in the definition thereof in Section 1.01 hereof. The Trustee shall notify the Bank within two Business Days of such prepayment, repayment or other payment or conversion. The Available Commitment shall automatically terminate on the last day of the Bank Purchase Period (except to the extent that purchases are permitted or required on the Termination Date pursuant to Section 7.02(b) hereof).
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Commitment in whole (but not in part) upon sixty (60) days written notice to the Bank at any time.

In the event the City so terminates this Agreement prior to the second anniversary of the execution and delivery of this Agreement, the City shall pay the Bank a fee (the “Termination Fee”) in an amount equal to the Commitment Fee payable pursuant to Section 2.06(a) that would have accrued had this Agreement been in effect for two full years (less any amounts then paid pursuant to Section 2.06(a) hereof). Notwithstanding the foregoing, no Termination Fee shall be payable in the event this Reimbursement Agreement is terminated due to (i) a downgrading of the Bank’s long-term ratings to below “BBB-”,”Baa3” and “BBB-”, or short-term ratings to below “A-1” or “P-1” or “F-1” by Moody’s, S&P or Fitch or (ii) the imposition by the Bank of any increased costs pursuant to Section 2.07 hereof.

2.05 Sale of Bank Certificates.
(a) Right to Sell Bank Certificates. The Bank shall not have the right to sell Bank Certificates to any Person other than: (i) Bank Assignees, provided that each Bank Assignee acknowledges that: (A) so long as such Bank Certificates remain as such, it has no right to tender such Bank Certificates for purchase and (B) the ratings otherwise applicable to the Certificates will not apply to the Bank Certificates purchased by such purchaser, (ii) the Remarketing Agent (or a purchaser identified by the Remarketing Agent), (iii) the Authority, (iv) the City or (v) an Alternate Liquidity Facility provider. The City and the Authority agree that any Bank Certificates sold by the Bank pursuant to this Section 2.05(a) shall, subject to Section 2.05(b), remain Bank Certificates in the hands of the purchaser thereof. Each Person that purchases Bank Certificates from the Bank pursuant to this Section 2.05(a) shall by his or its acceptance of such Bank Certificates be deemed to have agreed to sell such Bank Certificates only to (1) the Bank, (2) the Remarketing Agent (or a purchaser identified by the Remarketing Agent), (3) the Authority, (4) the City or (5) an Alternate Liquidity Facility provider.
(b) Sales by Remarketing Agent. In accordance with the Trust Agreement and subject to the following, all Bank Certificates shall be repurchased from each Bank Certificateholder on the date such Bank Certificates are successfully remarketed in accordance with the Trust Agreement, any such repurchase to be made from the proceeds of such remarketing and payment of the Differential Interest Amount as described below. Each Bank Certificateholder by its acceptance of Bank Certificates hereby authorizes the Remarketing Agent to sell Bank Certificates on behalf of such Bank Certificateholder pursuant to the Trust Agreement at a price equal to the principal amount thereof (plus unpaid accrued interest thereon to but excluding the date such Bank Certificates are to be sold pursuant to this Section 2.05(b) at the interest rate to be borne by the Certificates after such sale or, if less, the Bank Rate) (the “Sale Price”); provided that no Bank Certificateholder shall have any obligation to deliver Bank Certificates as directed by the Remarketing Agent or sell such Bank Certificates unless (i) the City has paid or has duly provided for the payment of the Differential Interest Amount to the Bank for the account of such Bank Certificateholder and (ii) such Bank Certificateholder has received one Business Day’s prior written notice of such sale. Any sale of a Bank Certificate pursuant to this Section 2.05(b) shall be without recourse to the seller and without representation or warranty of any kind. Each Bank Certificateholder by its acceptance of Bank Certificates agrees to deliver (but only upon receipt by the Bank of Dollars in the amount of the Sale Price and the Differential Interest Amount) to the Trustee each certificate representing a Bank Certificate sold by it pursuant to this Section 2.05(b), including without limitation certificates representing Bank Certificates which are deemed to have #33..
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been delivered in accordance with the provisions of the Trust Agreement. Notwithstanding the foregoing or anything else in this Agreement, each Bank Certificateholder shall have the right, by notice to the Remarketing Agent, to elect not to sell Bank Certificates or any portion thereof. (c) Right to Retain Certificates. After any sale of Bank Certificates by the Remarketing Agent pursuant to Section 2.05(b) and payment (or, in the case of the Differential Interest Amount accrued on such Bank Certificates, provision for payment thereof on the date of such sale in accordance with the Trust Agreement) to the Bank of the Sale Price, or any election by a Bank Certificateholder not to sell such Bank Certificates or any portion thereof through the Remarketing Agent pursuant to Section 2.05(b) hereof, such Bank Certificates so sold or as to which such election is made, shall from such sale date or upon such election cease to bear interest at the Bank Rate and shall bear interest at a rate calculated in accordance with the provisions applicable to such Certificates immediately prior to the Bank’s purchase thereof.

2.06 Fees.
(a) Commitment Fee. The Authority and the City (by payment of Additional Payments) shall pay to Bank a nonrefundable commitment fee at the times and in such amounts as set forth in Section 1.1 of the Fee Letter Agreement, the terms of which are incorporated herein by this reference as if fully set forth herein.
(b) Payment Dates. The commitment fee shall be due and payable as set forth in Section 1.2 of the Fee Letter Agreement, the terms of which are incorporated herein by this reference as if fully set forth herein.
(c) Other Fees. In addition, the Authority and the City (by payment of Additional Payments) shall pay to Bank upon the amendment or transfer of this Agreement and upon purchase of Eligible Certificates under this Agreement, fees and charges at the times and in such amounts as set forth in Section 1.3 of the Fee Letter Agreement, the terms of which are incorporated herein by this reference as if fully set forth herein.
(d) Calculation of Fees and Interest. All fees and interest payable under this Agreement shall be calculated as set forth in Section 1.4 of the Fee Letter Agreement, the terms of which are incorporated herein by this reference as if fully set forth herein. (e) Initial Costs and Expenses. The Authority and the City (by payment of Additional Payments) shall pay to the Bank any and all fees, charges and expenses as set forth in Section 1.5 of the Fee Letter Agreement, the terms of which are incorporated herein by this reference as if fully set forth herein.

2.07 Compensation for Increased Costs, Capital Adequacy or Liquidity. (a) If the Bank shall have determined that any Change of Law regarding capital adequacy or liquidity shall impose, modify or deem applicable any capital adequacy or liquidity or similar requirement (including, without limitation, a request or requirement that affects the manner in which the Bank allocates capital resources to its commitments), affects or would affect the amount of capital to be maintained by the Bank or has or would have the effect of reducing the rate of return on the capital of the Bank (or its parent) as a consequence of the Bank’s commitment #33..
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or obligations hereunder, including issuing, participating in or maintaining this Agreement, purchasing, owning, holding or remarketing Bank Certificates or any participation therein or any collateral therefor, to a level below that which the Bank would have achieved but for such adoption, change or compliance (taking into consideration the Bank’s policies with respect to capital adequacy or liquidity), then from time to time, within fifteen (15) days after written demand by the Bank made through the Bank, the Authority and the City (by payment of Additional Payments) shall pay to the Bank such additional amount or amounts as will compensate the Bank for such event.
(b) If the Bank shall have determined that any Change of Law:
(i) shall subject the Bank to any tax, duty or other charge with respect to its commitment or obligations under this Agreement, or shall change the basis of taxation of payments to the Bank of the Bank Certificates or in respect of any amounts due under this Agreement (except for changes in the rate of tax on the overall net income of the Bank imposed by any taxing jurisdiction in which the Bank's principal executive office is located and other than by reason of any amount hereunder not being tax-exempt income to the recipient); or
(ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), against assets of, deposits with or for the account of, or credit extended by, the Bank;
and the result of any of the foregoing is to increase the cost to the Bank of issuing this Agreement, its purchase of Eligible Certificates or holding any Bank Certificates, or to reduce the amount of any sum received or receivable by the Bank under this Agreement, by an amount deemed by the Bank to be material, then, within fifteen (15) days after written demand by the Bank made through the Bank, the Authority and the City (by payment of Additional Payments) agrees to pay or cause to be paid to the Bank such additional amount or amounts as will compensate the Bank for such increased cost or reduction.
(c) A certificate of the Bank claiming compensation under this Section 2.07 and setting forth the additional amount or amounts to be paid to it hereunder (accompanied by a statement specifying the reasons therefor) shall be conclusive in the absence of manifest error. In determining such amount, the Bank may use any reasonable averaging and attribution methods.

2.08 Term-Out Payments; Increase in Amount of 2008 Payments. (a) Subject to the following sentence, the City and the Authority shall increase the amount of the 2008 Payments payable under the 2008 Supplemental Contract so that all Bank Certificates are prepaid or purchased on the Term-Out Conversion Date. If on the Term-Out Conversion Date, no Event of Default of the type described in Section 7.01(a), (b), (c), (d), (g), (n) or (q) shall have occurred and be continuing, commencing on the Term-Out Conversion Date and until the last day of the Term-Out Period, the City and the Authority shall increase the amount of the monthly installments of 2008 Payments payable under the 2008 Supplemental Contract during #33..
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the Term-Out Period to one-twelfth (1/12) of the Term-Out Payments so that all Bank Certificates are prepaid or purchased by the last day of the Term-Out Period. (b) Subject to the following sentence, the Bank Certificates shall be subject to mandatory prepayment pursuant to Section 2.03(b) of the Trust Agreement and this Section 2.08, at a Prepayment Price (the “Prepayment Price”) equal to 100% of the principal amount of the Bank Certificates to be prepaid plus accrued interest at the Bank Rate to the prepayment date, on TermOut Conversion Date. If on the Term-Out Conversion Date, no Event of Default of the type described in Section 7.01(a), (b), (c), (d), (g), (n) or (q) shall have occurred and be continuing, the Authority and the City shall not be required to prepay or purchase Bank Certificates pursuant to Section 2.03(b) of the Trust Agreement and this Section 2.08 on the Term Loan Conversion Date but rather shall be required to prepay or purchase Bank Certificates pursuant to Section 2.03(b) of the Trust Agreement and this Section 2.08 on each Bank Certificate Prepayment Date (as defined below) so that all Bank Certificates are prepaid or purchased by the last day of the Term-Out Period. The term “Bank Certificate Prepayment Date” means the first Business Day of each April and October during the Term-Out Period, provided that the first Bank Certificate Prepayment Date shall be the first such date that is at least five (5) complete calendar months following the first Purchase Date.
(c) The City shall cause the Bond Insurer to insure payment of the Prepayment Price of the Bank Certificates required to be prepaid pursuant to Section 2.08(b) by endorsement of the Bond Insurance Policy, in form and substance satisfactory to the Bank (the “Endorsement”). (d) The insurance required by Section 2.08(c) is in addition to, and not by way of limitation of, the obligation of the Bond Insurer under its Bond Insurance Policy to insure timely payment of the principal of, interest on, and scheduled Prepayment Price of the Certificates (including Bank Certificates) in accordance with the terms of the Trust Agreement.

2.09 Interest Component of Draws. The Authority agrees to pay the component, if any, of each advance made by the Bank under this Agreement to purchase any Certificate which corresponds to accrued interest on such Certificate, together with interest on such component accruing at the Bank Rate from and including the date on which the Bank purchased such Certificate to but excluding the date on which such component (and accrued interest thereon) is paid in full.

2.10 Bank Records. All transactions relating to the Available Commitment and Bank Certificates including, without limitation, prepayments, repayments, interest charges and reductions in the amount of the Available Commitment shall be reflected in the books and records of the Bank, which records shall be conclusive and binding upon the Authority and the City absent manifest error. The Bank agrees, following its receipt of a written request of the City, to provide the City and the Authority with reasonable access during the Bank’s regular business hours to the Bank’s books and records related to the Available Commitment and Bank Certificates for the sole purpose of verifying the existence or lack of existence of manifest error in such books and records as they relate to the Available Commitment and Bank Certificates. #33..
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SECTION 3. BANK RATE

3.01 Bank Certificates to Bear Interest at Bank Rate.
(a) Bank Rate. Each Bank Certificate shall bear interest at the Bank Rate for the period commencing from the date that the Bank shall have purchased such Certificate (subject to Section 2.05(c) hereof) and continuing until such Certificate is paid in full or remarketed as provided in Section 2.05(b) hereof. Interest on Bank Certificates shall be payable (i) on the first Business Day of each calendar month, (ii) at maturity, (iii) upon prepayment or purchase by the Authority and (iv) on the date such Bank Certificates are remarketed as provided in Section 2.05(b) (each such date, a “Liquidity Payment Date”). The Bank shall give telephonic notice, confirmed in writing, to the City, the Authority and the Trustee with a copy to the Bond Insurer on the Business Day preceding each Liquidity Payment Date of the interest payment due on such date.

The failure of the Bank to give any notice shall not limit or otherwise affect the obligation of the Authority to pay interest on the Bank Certificates at the rates specified in this Section 3.01. (b) Default Rate. If the principal amount of any Bank Certificate, or any other obligation of the Authority or the City under this Agreement or the Bank Certificates (including, to the extent permitted by law, any interest payment required thereunder) is not paid when due (whether by acceleration, prepayment or otherwise), such overdue principal payment or other obligation shall bear interest from the date such principal amount or other obligation, as the case may be, was due until paid in full (after as well as before judgment) at a rate per annum (computed on the basis of a year of 365/366 days and actual days elapsed) equal to the Default Rate. Such interest shall be payable on demand. If at any time an Event of Default has occurred and is continuing, the principal amount of any Bank Certificate, or any other obligation of the Authority or the City under this Agreement or the Bank Certificates (including, to the extent permitted by law, any interest payment required thereunder), shall bear interest from the date such principal amount or other obligation, as the case may be, was due until paid in full (after as well as before judgment) at the Default Rate (computed on the basis of a year of 365/366 days and actual days elapsed). Such interest shall be payable on demand.
(c) Excess Interest Amount. If the amount of interest accrued in respect of any Bank Certificate for any day during a period ending on any Liquidity Payment Date exceeds the amount of interest that would have accrued for such day had interest for such day been calculated at the Maximum Interest Rate, then the amount of interest payable on such Bank Certificate for such day shall be calculated at the Maximum Interest Rate. The aggregate amount of interest, if any, accrued on Bank Certificates under Sections 3.01(a) and (b) for all periods ending on a Liquidity Payment Date in excess of the amount of interest actually paid for all such periods as a result of the preceding sentence shall constitute the “Excess Interest Amount.” If the Excess Interest Amount is a positive amount on any day when the Bank Rate is less than the Maximum Interest Rate, then for purposes of calculating the interest accrued and payable on all Bank Certificates outstanding on such day, interest shall accrue for such day at the Maximum Interest Rate instead of the Bank Rate and, upon payment of such interest on the applicable Liquidity Payment Date, the amount of such accrual difference shall be applied Dollar-for-Dollar to reduce the Excess Interest Amount until such time, if any, as the Excess Interest Amount is zero.
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3.02 Payments.
(a) Place of Payment, Etc. Except to the extent otherwise provided in the Trust Agreement with respect to payments on Bank Certificates, all payments hereunder shall be made to the Bank Payment Account prior to 10:00 a.m. California time on the date such payment is due and shall be made in immediately available funds.
(b) Withholding. All payments to the Bank under this Agreement and the Bank Certificates shall be made in Dollars and in immediately available and freely transferable funds at the place of payment without counterclaim, defense, set-off, condition or qualification, and free and clear of and without deduction or withholding for or by reason of any present or future taxes, levies, imposts, deductions, fees, assessments or charges of any nature whatsoever. In the event that the City is compelled by law to make any such deduction or withholding, the City shall nevertheless pay to the Bank such amounts as will result in the receipt by the Bank of the sum it would have received had not such deduction or withholding been required to be made. If requested, the Bank or any Bank Assignee, shall from time to time provide the Authority, the City, the Trustee and the United States Internal Revenue Service (to the extent such information and forms may be lawfully provided by the Bank or such Bank Assignee) with such information and forms as may be required by Treasury Regulations Section 1.1411 or any other such information and forms as may be necessary to establish that neither the Authority nor the City is subject to any withholding obligation under Section 1442 or other comparable provisions of the Code.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY

AND THE CITY

4.01 Representations of the Authority. The Authority makes the following representations and warranties to the Bank as of the date hereof, the Effective Date and as of each Purchase Date:
(a) Valid Existence. The Authority is a joint exercise of powers entity, duly organized and validly existing under the laws of the State and has the necessary power and authority to execute and deliver this Agreement and the Related Documents to which the Authority is a party, to perform its obligations hereunder and thereunder and to conduct the business of the Authority as presently conducted.
(b) Authorization and Validity. The execution, delivery and performance by the Authority of this Agreement and the Related Documents to which the Authority is a party have been duly authorized by proper proceedings of the Authority, and no further approval, authorization or consents are required by law or otherwise. This Agreement and such Related Documents constitute the legal, valid and binding obligations of the Authority enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium and other laws affecting creditors’ rights generally and principles of equity and public policy. (c) Compliance with Laws and Contracts. Neither the execution and delivery by the Authority of this Agreement and the Related Documents to which the Authority is a party, nor the consummation of the transactions herein and therein contemplated, nor compliance with the provisions hereof or thereof will (i) violate any law, rule, regulation, order, writ, judgment, #33..
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injunction, decree or award binding on the Authority or the Authority’s organizational documents; (ii) result in any material breach of or default under the provisions of any material indenture, instrument or agreement to which the Authority is a party or is subject, or by which it or its property is bound, or (iii) conflict with or result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement.
(d) Litigation. Except as disclosed in the Remarketing Memorandum, there is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending with service of process accomplished or, to the knowledge of the Authority after due inquiry, threatened against or affecting the Authority, the 2008 Project or any properties or rights of the Authority (i) wherein an unfavorable decision, ruling or finding would adversely affect (A) the Authority’s ability to perform its obligations under this Agreement and the other Related Documents to which the Authority is a party or (B) the validity of this Agreement, any of the Related Documents to which the Authority is a party or any other agreement or instrument to which the Authority is a party and which pertains to the 2008Project; or (ii) which in any way contests the existence, organization or powers of the Authority or the titles of the officers of the Authority to their respective offices.
(e) No Event of Default. No Event of Default or Potential Event of Default has occurred and is continuing.
(f) Title to 2008 Project. Upon the Effective Date, the City will own the 2008 Project free and clear of all liens and encumbrances other than those approved by the Bank. (g) Contract; 2008 Supplemental Contract. The Contract and the 2008 Supplemental Contract are in full force and effect. The Authority has not granted any waiver, indulgence or postponement of any of the City’s obligations under the Contract or the 2008 Supplemental Contract. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Contract or the 2008 Supplemental Contract. (h) Security. The payment of Bank Certificates is further secured by a Trust Estate.

The Trust Agreement creates a valid security interest in favor of the Trustee in the Trust Estate and, as of the Effective Date, all necessary action on the part of the Authority, the Trustee and the Bank has been taken as required (other than delivery of possession of after-acquired moneys, securities and instruments to the Trustee) to pledge and grant a valid security interest in the Trust Estate for the benefit of the Bank, the Bond Insurer and the Certificateholders under the Trust Agreement prior to any pledge, lien, assignment or security interest of any other creditors of the Authority. The Bank is a Liquidity Facility Provider (and the Prior Bank is no longer a Liquidity Facility Provider and the Bank) within the meaning of the Trust Agreement. This Agreement is an Alternate Liquidity Facility and therefore the Liquidity Facility (and the Prior Liquidity Facility is no longer an Alternate Liquidity Facility or the Liquidity Facility) within the meaning of the Trust Agreement, and this Agreement is a Reimbursement Agreement (and the Prior Liquidity Facility is no longer a Reimbursement Agreement) within the meaning of the Trust Agreement. There is no longer a Cancellation Agreement within the meaning of the Trust Agreement. #33..
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(i) Accurate and Complete Disclosure. All factual information certified by the Authority in writing to the Bank (including without limitation all information contained in, or made pursuant to, this Agreement and the Related Documents to which the Authority is a party) is, and all other such factual information hereafter certified by the Authority in writing to the Bank will be, to the knowledge of the authorized person making such certification after reasonable inquiry, accurate and complete in all material respects on the date as of which such information is certified. The Remarketing Memorandum, true copies of which have heretofore been delivered to the Bank, and each amendment or supplement thereto prepared subsequent to the Effective Date (a true copy of which shall be furnished to the Bank), do not and will not contain any untrue statement of a material fact and do not and will not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which made, not misleading, except no representation is made as to any information furnished by the Bond Insurer, the Trustee, DTC or the Bank expressly for inclusion therein.
(j) Certificates. Each Certificate will be duly issued under the Trust Agreement and entitled to the benefits thereof.
(k) Regulatory Approvals. On the Effective Date, each authorization, consent, approval, license or formal exemption from or filing, declaration or registration with, any court governmental agency or regulatory authority (federal, state or local), required in connection with the Authority’s execution and delivery of, and performance under, this Agreement and the Related Documents (and the documents contemplated thereby) to which the Authority is a party, or the issuance by the Authority of the Certificates in the manner and for the purpose contemplated by this Agreement and the Related Documents, has been obtained or made and is in full force and effect; provided, however, that no representation is made as to State blue sky laws. (l) Use of Proceeds. The proceeds of the Certificates will be used only as authorized in the Trust Agreement.
(m) Other Documents. This Agreement and each of the Related Documents to which the Authority is a party is in full force and effect, and the Authority hereby makes to the Bank each of the representations and warranties made by the Authority therein as if set forth at length herein.

None of this Agreement or the Related Documents has been amended or supplemented except by such amendments or supplements as have previously been delivered to the Bank. (n) Prospective Change in Law. To the best knowledge of the Authority (after due inquiry), except as otherwise disclosed in the Remarketing Memorandum, there is no amendment, or proposed amendment certified for placement on a statewide ballot, to the Constitution of the State or any published administrative interpretation of the Constitution of the State or any State law, or any legislation which has passed either house of the State legislature or is under consideration by any conference or similar committee, or any published judicial decision interpreting any of the foregoing, the effect of which is to materially adversely affect the ability of the Authority to perform its obligations under this Agreement or any of the Related Documents to which it is a party.
(o) Tax-Exempt Status. The Authority has not taken any action or omitted to take any action, and knows of no action taken or omitted to be taken by any other Person, which action, if #33..
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taken or omitted, would adversely affect the exclusion of interest on the Certificates from gross income for Federal income tax purposes or the exemption of such interest from the State’s personal income tax.
(p) No Other Defaults. The Authority is not in default on any Debt to any person or entity in excess of $500,000.
(q) No Immunity. The Authority is subject to liability for damages in contract and in tort in the manner and to the extent provided by the laws of the State. The Authority is subject to claims and to suit for money or damages in connection with or under this Agreement pursuant to and in accordance with the laws of the State applicable to public entities, including, but not limited to Part 3 of Division 3.6 of Title 1 of the Government Code of the State of California. The Authority is a “local public entity” as defined in Section 900.4 of the Government Code of the State of California. To the extent the Authority has or hereafter may acquire under any applicable law any right to immunity from set-off or legal proceedings on the grounds of sovereignty or otherwise, the Authority hereby waives, to the extent permitted by law, such rights to immunity for itself in respect of its obligations arising with or under this Agreement or any Related Document. (r) Usury; Maximum Rate. The terms of this Agreement, the Fee Letter Agreement and the Related Documents regarding the calculation and payment of interest and fees do not violate any applicable usury laws. The Authority is authorized by Section 5922 of the California Government Code to enter into this Agreement and the Fee Letter Agreement and the transactions contemplated hereby and thereby. The obligations of the Authority hereunder and under the Fee Letter Agreement and the Contract are not subject to any maximum interest rate imposed by law. (s) Government Sanctions. Neither the Authority nor, to the knowledge of the Authority, any of its Related Parties, is an individual or entity or Person currently the subject of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union, Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor is the Authority located, organized or resident in a country or territory that is the subject of Sanctions. (t) Incorporation by Reference. The Authority hereby makes to the Bank the same representations and warranties made by the Authority in each Related Document to which it is a party, which representations and warranties, together with the related definitions of terms contained therein, are incorporated herein by this reference with the same effect as if each and every such representation and warranty and definition were set forth herein in its entirety. No amendment to or waiver of such representations, warranties or definitions made pursuant to the relevant Related Documents shall be effective to amend such representations and warranties and definitions as incorporated by reference herein without the prior written consent of the Bank.

4.02 Representations of the City. The City makes the following representations and warranties to the Bank as of the date hereof, the Effective Date and as of each Purchase Date:
(a) Valid Existence. The City is a charter city and municipal corporation, duly organized and validly existing under its charter and the Constitution of the State and has the #33..
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necessary power and authority to execute and deliver this Agreement and the Related Documents to which the City is a party and to perform its obligations hereunder and thereunder. (b) Authorization and Validity. The execution, delivery and performance by the City of this Agreement and the Related Documents to which the City is a party have been duly authorized by all proper proceedings of the City, and no further approval, authorization or consents are required by law or otherwise. This Agreement and such Related Documents constitute the legal, valid and binding obligations of the City enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium and other laws affecting creditors’ rights generally and principles of equity and public policy.
(c) Compliance with Laws and Contracts. Neither the execution and delivery by the City of this Agreement and the Related Documents to which the City is a party, nor the consummation of the transactions herein and therein contemplated, nor compliance with the provisions hereof or thereof will (i) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the City or the City’s charter, (ii) result in any material breach of, or default under the provisions of any material indenture, instrument or agreement to which the City is a party or is subject, or by which it or its property is bound, or (iii) conflict with or result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement.
(d) Litigation. Except as disclosed in the Remarketing Memorandum, there is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending with service of process accomplished or, to the knowledge of the City after due inquiry, threatened against or affecting the City, the 2008 Project or any properties or rights of the City (i) wherein an unfavorable decision, ruling or finding would adversely affect (A) the City’s ability to perform its obligations under this Agreement and the Related Documents to which the City is a party or (B) the validity of this Agreement, any of the Related Documents to which the City is a party or any other agreement or instrument to which the City is a party and which pertains to the 2008 Project; or (ii) which in any way contests the existence, organization or powers of the City or the titles of the officers of the City to their respective offices. (e) No Event of Default. No Event of Default or Potential Event of Default has occurred and is continuing.
(f) Financial Statements. The audited statements of revenues, expenses and changes in fund balances and changes in financial position of the City for the most recently completed fiscal year as heretofore delivered to the Bank pursuant to Section 5.02(h)(i)(A) or 6.01(b)(xvi) hereof, including balance sheets as of June 30 of such fiscal year, and statements of revenue and expense as of June 30 of such fiscal year, all examined and reported on by independent public accountants, prepared by the City, correctly and fairly present the financial condition of the City as of said date and the results of the operations of the City for such period, respectively, and have been prepared in accordance with generally accepted accounting principles consistently applied except as stated in the notes thereto. Since June 30 of such fiscal year, there has been no material adverse change in the financial condition, operations or prospects of the City or its ability to perform its obligations under this Agreement or any Related Document. #33..
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(g) Master Contract; 2008 Supplemental Contract. The Master Contract and the 2008 Supplemental Contract are in full force and effect. The City has not been granted any waiver, indulgence or postponement of any of the City’s obligations under the Master Contract or the 2008 Supplemental Contract. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Master Contract or the 2008 Supplemental Contract. (h) Accurate and Complete Disclosure. All factual information certified by the City in writing to the Bank (including without limitation all information contained in, or made pursuant to, this Agreement and the Related Documents to which the City is a party) is, and all other such factual information hereafter certified by the City in writing to the Bank will be, to the knowledge of the authorized person making such certification after reasonable inquiry, accurate and complete in all material respects on the date as of which such information is certified. The Remarketing Memorandum, true copies of which have heretofore been delivered to the Bank, and each Remarketing Memorandum pertaining to the Certificates (including any amendments or supplements) prepared subsequent to the Effective Date (a true copy of which shall be furnished to the Bank prior to the distribution thereof) do not and will not contain any untrue statement of a material fact and do not and will not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which made, not misleading, except no representation is made as to any information furnished by the Bond Insurer, the Trustee, DTC or the Bank expressly for inclusion therein.
(i) Regulatory Approvals. Each authorization, consent, approval, license or formal exemption from or filing, declaration or registration with, any court governmental agency or regulatory authority (federal, state or local), required in connection with the City’s execution and delivery of, and performance under, this Agreement and each of the Related Documents to which the City is a party has been obtained or made and is in full force and effect; provided, however, that no representation is made as to State blue sky laws. (j) Other Documents. This Agreement and each of the Related Documents to which the City is a party is in full force and effect, and the City hereby makes to the Bank each of the representations and warranties made by the City therein as if set forth at length herein. None of this Agreement or the Related Documents has been amended or supplemented except by such amendments or supplements as have previously been delivered to the Bank. (k) Prospective Change in Law. To the best knowledge of the City (after due inquiry), except as otherwise disclosed in the Remarketing Memorandum, there is no amendment, or proposed amendment certified for placement on a statewide ballot, to the Constitution of the State or any published administrative interpretation of the Constitution of the State or any State law, or any legislation which has passed either house of the State legislature or is under consideration by any conference or similar committee, or any published judicial decision interpreting any of the foregoing, the effect of which is to materially adversely affect the ability of the City to perform its obligations under this Agreement or any of the Related Documents to which it is a party. (l) Tax-Exempt Status. The City has not taken any action or omitted to take any action, and knows of no action taken or omitted to be taken by any other Person, which action, if taken or omitted, would adversely affect the exclusion of interest on the Certificates from gross income for #33..
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Federal income tax purposes or the exemption of such interest from the State’s personal income tax.
(m) No Other Defaults. The City is not in default on any debt to any Person or entity in excess of $500,000 (measured in the case of any Swap, by the amount of any settlement amount that would be payable by the City if such Swap were terminated as of such date). (n) No Immunity. The City is subject to liability for damages in contract and in tort in the manner and to the extent provided by the laws of the State. The City is subject to claims and to suit for money or damages in connection with or under this Agreement pursuant to and in accordance with the laws of the State applicable to public entities, including, but not limited to Part 3 of Division 3.6 of Title 1 of the Government Code of the State of California. The City is a “local public entity” as defined in Section 900.4 of the Government Code of the State of California.

To the extent the City has or hereafter may acquire under any applicable law any right to immunity from set-off or legal proceedings on the grounds of sovereignty or otherwise, the City hereby waives, to the extent permitted by law, such rights to immunity for itself in respect of its obligations arising with or under this Agreement or any Related Document. (o) Usury; Maximum Rate. The terms of this Agreement, the Fee Letter Agreement and the Related Documents regarding the calculation and payment of interest and fees do not violate any applicable usury laws. The City is authorized by Section 5922 of the California Government Code to enter into this Agreement and the Fee Letter Agreement and the transactions contemplated hereby and thereby. The obligations of the City hereunder and under the Fee Letter Agreement and the Contract are not subject to any maximum interest rate imposed by law. (p) Parity Obligations. The obligations under this agreement constitute Parity Obligations of the City under the Master Contract, secured by a valid pledge of the Gross Revenues of the Revenue Fund on a parity with all other Parity Obligations and are subject to the limitations set forth in Section 7.01 of the Master Contract. There are no obligations of the City outstanding secured by Gross Revenues that are senior in right of payment to the Parity Obligations (including the 2008 Payments). Except for early termination payments under the Existing Swap Agreement that are insured by the Bond Insurer, the City is not a party to any Swap that contains termination payments that are Parity Obligations.
(q) Insurance. The City currently maintains insurance of such type and in such amounts or in excess of such amounts as are customarily carried by, and insures against such risks as are customarily insured against by, businesses of like type, size and character to the City and of such type and in such amounts required by the Contract. (r) Government Sanctions. Neither the City nor, to the knowledge of the City, any of its Related Parties, is an individual or entity or Person currently the subject of any Sanctions, nor is the City located, organized or resident in a country or territory that is the subject of Sanctions. (s) Incorporation by Reference. The City hereby makes to the Bank the same representations and warranties made by the City in each Related Document to which it is a party, which representations and warranties, together with the related definitions of terms contained therein, are incorporated herein by this reference with the same effect as if each and every such #33..
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representation and warranty and definition were set forth herein in its entirety. No amendment to or waiver of such representations, warranties or definitions made pursuant to the relevant Related Documents shall be effective to amend such representations and warranties and definitions as incorporated by reference herein without the prior written consent of the Bank.

SECTION 5. COVENANTS OF THE AUTHORITY AND THE CITY

5.01 Covenants of the Authority. During the term of this Agreement, and until the obligations of the Authority and the City to the Bank hereunder are paid in full, including full payment of the Bank Certificates, and the Bank has no further commitment hereunder, unless the Bank shall otherwise consent in writing, the Authority covenants and agrees as follows:
(a) Notice of Default. As soon as practicable but in any event not more than five (5) Business Days after the Authority shall have obtained knowledge of the occurrence of an Event of Default or Potential Event of Default provide to the Bank the written statement of an Authorized Representative setting forth the details of each such Event of Default or Potential Event of Default and the action, if any, which the Authority proposes to take with respect thereto. (b) Compliance With Laws. The Authority shall comply with all laws, rules and regulations, and with all final orders, writs, judgments, injunctions, decrees or awards to which it may be subject: provided, however, that the Authority may contest the validity or application thereof and appeal or otherwise seek relief therefrom, and exercise any and all of the rights and remedies which it may have with regard thereto, so long as such acts do not affect the Authority’s power and authority to execute and deliver this Agreement, to perform its obligations and pay all amounts payable by it hereunder, or to execute and deliver this Agreement or the Related Documents and to perform its obligations hereunder and thereunder. (c) Use of Proceeds. The Authority shall (i) cause the proceeds from purchases of Certificates made hereunder to be used solely to pay the Purchase Price of such Certificates as more fully described in Section 2.01 hereof and (ii) use the proceeds of the Certificates for the purpose set forth in the Trust Agreement.
(d) Related Obligations. The Authority shall promptly pay all amounts payable by it hereunder and under the Related Documents according to the terms hereof or thereof and shall duly perform each of its obligations under this Agreement and the other Related Documents to which it is a party. The Authority shall use its best efforts to cause the Bond Insurer at all times to comply with the Bond Insurance Policy, and the Trustee and the Remarketing Agent at all times to comply with the terms of the Related Documents to which they are a party. (e) Financial Statements. The Authority shall provide to the Bank copies of all financial statements and other information of the Authority, if any, that it is required to provide to the Bond Insurer concurrently with providing the same to the Bond Insurer. (f) Inspection Rights. At any reasonable time and from time to time the Authority shall permit the Bank or any agents or representatives thereof to examine and make copies of the records and books of account related to the Trust Estate and the transactions contemplated by this Agreement and the Related Documents, to visit its properties and to discuss its affairs, finances and accounts with any of its officers and independent accountants. #33..
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(g) Amendments. The Authority shall not amend, modify, terminate or grant, or permit the amendment, modification, termination or grant of, any waiver under, or consent to, or permit or suffer to occur any action or omission which results in, or is equivalent to, an amendment, termination, modification, or grant of a waiver under the Bond Insurance Policy or any other Related Document without the prior written consent of the Bank, provided that such consent shall not be required if the Bank notifies the Authority in writing that the Bank, in its sole discretion, has determined that any such amendment, modification or waiver does not affect its rights, duties or obligations.
(h) Remarketing Memorandum. The Authority shall not refer to the Bank in any official statement (including the Remarketing Memorandum) or make any changes in reference to the Bank in any official statement (including the Remarketing Memorandum) without the Bank’s prior written consent thereto, which the Bank shall not unreasonably withhold or delay based upon customary business practices at the time such consent is requested. (i) Voluntary Prepayment. Without the prior written consent of the Bank, the Authority shall not voluntarily prepay pursuant to the Trust Agreement any Certificates (other than Bank Certificates) issued under the Trust Agreement prior to prepaying the Bank Certificates in full.
(j) Conversion. The Authority shall promptly furnish, or cause to be furnished, to the Bank, notice of any proposed conversion of the Rate Period on the Certificates to an interest rate period other than a Weekly Rate Period.
(k) Certain Notices. The Authority shall furnish to the Bank a copy of any notice, certification, demand or other writing or communication given by the Bond Insurer to the Authority or by the Authority to the Bond Insurer under or in connection with the Certificates or any of the Related Documents, in each case promptly after the receipt or giving of the same. The Authority shall give the Bank prompt notice of any action, suit or proceeding known to it at law or in equity or by or before any governmental instrumentality, entity or other agency which, if adversely determined, would materially impair the ability of the Authority to carry out its obligations under this Agreement, the Related Documents to which it is a party or any other document, instrument or agreement required hereunder or thereunder, or would materially and adversely affect its assets or financial condition. The Authority shall promptly give written notice to the Bank of (i) any material dispute which may exist between the Authority on the one hand and the Bond Insurer, the Trustee or the Remarketing Agent on the other hand or any dispute in connection with any transaction contemplated under this Agreement or any Related Document, or (ii) any matter or event which may result in a material adverse change in the Authority’s financial condition or operations.
(l) Existence. The Authority shall maintain its existence as a joint exercise of powers authority, duly organized and validly existing under its charter and the Constitution of the State and its rights, franchises and privileges material to the conduct of its business and shall not, without the prior written consent of the Bank, initiate proceedings to reorganize, merge or consolidate with or into any Person, wind up, liquidate or dissolve its affairs (or suffer any liquidation or dissolution) or convert, sell, assign, transfer, lease or otherwise dispose of (or agree to do any of the foregoing #33..
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at any future time), whether in one transaction or a series of transactions, all or substantially all of its property or assets.
(m) Bond Insurance Policy. Except as provided in Section 5.01(r), the Authority shall at all times maintain the Bond Insurance Policy with respect to the Certificates. The Authority shall take no action that could reasonably be expected to impair the ability of the Trustee to present claims for payment under, and in accordance with, the terms of the Bond Insurance Policy. The Authority shall not, without the prior written consent of the Bank, cause or permit the Bond Insurance Policy to be surrendered, canceled or terminated. (n) Liquidity. The Authority agrees to use its best efforts to obtain an Alternate Liquidity Facility to replace this Agreement in the event (i) the Bank shall decide not to extend the Stated Expiration Date (such replacement to occur on or before the then current Stated Expiration Date), (ii) the Bank shall furnish a Notice of Termination pursuant to Section 7.02(b) hereof to the Trustee, or (iii) a mandatory purchase of Certificates shall have been effected with any funds made available hereunder, unless the Bank shall have been immediately reimbursed therefor by the proceeds of the remarketing of the Certificates. The Authority agrees that any Alternate Liquidity Facility will require, as a condition to the effectiveness of the Alternate Liquidity Facility, that the Authority, the City or the issuer of the Alternate Liquidity Facility, as the case may be, will provide immediately available funds, on the date of such termination or provision, which funds, when taken together with funds available to the Bank under the Trust Agreement, will be sufficient to ensure the payment of all Bank Certificates then outstanding (at par plus accrued and unpaid interest thereon at the Bank Rate) and all other amounts due to the Bank hereunder, including, without limitation, payment of any fees due hereunder and interest accrued thereon and payment of any Differential Interest Amount.
(o) Appointment of Successors. The Authority shall not, without the prior written consent of the Bank, which consent shall not be unreasonably withheld, appoint a successor Trustee or Remarketing Agent.
(p) Incorporation of Certain Covenants. The covenants of the Authority set forth in the Trust Agreement, the Master Contract and the 2008 Supplemental Contract are hereby incorporated by reference in this Agreement for the benefit of the Bank. The Authority further confirms to and agrees with the Bank that the Trust Agreement has been made and was entered into for the express benefit of the holder of any Certificates and shall constitute a contract among the Authority, the Trustee and the Bank, in its capacities hereunder as the “Liquidity Facility Provider” and as holder of any Certificates that are Bank Certificates. (q) Liens, Etc. The Authority shall not create or suffer to exist any lien upon or with respect to any of the Trust Estate.
(r) Rating of Bond Insurer’s Obligations. If the ratings assigned by both Moody’s and S&P to the claims paying ability of the Bond Insurer shall, for any uninterrupted period of thirty (30) days drop below: (i) in the case of Moody’s, a financial strength rating of A1 (or its equivalent); or (ii) in the case of S&P, a financial strength rating of AA (or its equivalent) (a suspension or withdrawal of a rating shall be treated as “below” the stated rating for purposes of the foregoing), the Authority shall use its best efforts to (including soliciting the assistance of the #33..
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City to) (x) replace the Bond Insurer with a bond insurer rated “A1” by Moody’s and “AA” by S&P or obtain additional insurance or other credit enhancement in respect of the payment of principal and interest on the Certificates (including Bank Certificates) on terms comparable to the Bond Insurance Policy or as the Bank may otherwise consent and in form and substance and from an insurer or other issuer satisfactory to the Bank, (y) convert the Certificates to a rate not covered by this Agreement and terminate this Agreement or (z) obtain an Alternate Liquidity Facility. (s) Further Assurances. The Authority shall execute and deliver to the Bank all such documents, consents and instruments and do all such other acts and things as may be reasonably necessary or required by the Bank to enable the Bank to exercise and enforce its rights under the Related Documents and the Related Documents and to realize thereon, and record and file and rerecord and re-file all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Bank to validate, preserve and protect the position of the Bank under the Related Documents. (t) Government Sanctions. The Authority shall not, directly or indirectly, use the proceeds from purchases of Certificates made hereunder or any other credit provided under this Agreement, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any manner that will result in a violation by any Person (including any Person participating in the transactions contemplated by this Agreement, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(u) Additional Covenants Regarding Remarketing Agent. The Authority shall at all times cause a Remarketing Agent acceptable to the Bank to be in place and at all times have in place a Remarketing Agreement with respect thereto acceptable to the Bank. [Upon any replacement of the Remarketing Agent, whether upon resignation or removal,] the Authority shall cause the Remarketing Agreement [with respect to such successor Remarketing Agent] to at all times provide that (a) the Remarketing Agent shall use its best efforts to remarket the Bonds (including without limitation Bank Certificates) at rates up to and including the maximum rate permitted under the Trust Agreement without regard to the rate paid to the Bank with respect to Bank Certificates; (b) if at any time the Remarketing Agent shall fail to remarket the Bonds for a period of thirty (30) consecutive calendar days or shall otherwise fail to perform its duties under the Remarketing Agreement, the Authority shall, at the direction of the Bank, appoint a successor remarketing agent acceptable to the Bank; (c) the Remarketing Agent must give at least 60 days’ written notice prior to resigning; and (d) the Bank must be a third-party beneficiary of the Remarketing Agreement.
(v) Maintenance of Tax Exempt Status of the Certificates. The Authority shall not take any action or omit to take any action which, if taken or omitted, would adversely affect the exclusion of interest on the Certificates from gross income for purposes of federal income taxation or the exemption of such interest from State income taxes. (w) Sovereign Immunity. To the fullest extent permitted by law, the Authority agrees not to assert the defense of sovereign immunity, if available, in any proceeding to enforce any of #33..
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the obligations of the Authority hereunder or under any Related Document in any federal or state court of competent jurisdiction.

5.02 Covenants of the City. During the term of this Agreement, and until the obligations of the Authority and the City to the Bank hereunder are paid in full, including full payment of the Bank Certificates, and the Bank has no further commitment hereunder, unless the Bank shall otherwise consent in writing, the City covenants and agrees as follows:
(a) Notice of Default. As soon as practicable but in any event not more than five (5) Business Days after an Authorized Representative of the City shall have obtained knowledge of the occurrence of an Event of Default or Potential Event of Default provide to the Bank the written statement of an Authorized City Representative setting forth the details of each such Event of Default or Potential Event of Default and the action, if any, which the City proposes to take with respect thereto.
(b) Compliance With Laws. The City shall comply with all laws, rules and regulations, and with all final orders, writs, judgments, injunctions, decrees or awards to which it may be subject; provided, however, that the City may contest the validity or application thereof and appeal or otherwise seek relief therefrom, and exercise any and all of the rights and remedies which it may have with regard thereto, so long as such acts do not affect the City’s power and authority to execute and deliver this Agreement, to perform its obligations and pay all amounts payable by it hereunder, or to execute and deliver this Agreement or the Related Documents to which it is a party and to perform its obligations hereunder or thereunder. (c) Related Obligations. The City shall duly perform each of its obligations under this Agreement and the other Related Documents to which it is a party. The City shall use its best efforts to cause the Bond Insurer at all times to comply with the Bond Insurance Policy, and the Trustee and the Remarketing Agent at all times to comply with the terms of the Related Documents to which they are a party.
(d) Inspection Rights. At any reasonable time and from time to time the City shall permit the Bank or any agents or representatives thereof to examine and make copies of the records and books of account related to the transactions contemplated by this Agreement and the Related Documents, to visit its properties and to discuss its affairs, finances and accounts with any of its officers and independent accountants.
(e) Amendments. The City shall not amend, modify, terminate or grant, or permit the amendment, modification, termination or grant of, any waiver under, or consent to, or permit or suffer to occur any action or omission which results in, or is equivalent to, an amendment, termination, modification, or grant of a waiver under the Bond Insurance Policy or any other Related Document without the prior written consent of the Bank; provided that such consent shall not be required if the Bank notifies the City in writing that the Bank, in its sole discretion, has determined that any such amendment, modification or waiver does not affect its rights, duties or obligations; and provided further that nothing herein shall prevent the City from incurring additional Parity Obligations under the Master Contract in accordance with its terms. #33..
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(f) Remarketing Memorandum. The City shall not refer to the Bank in any official statement (including the Remarketing Memorandum) or make any changes in reference to the Bank in any official statement (including the Remarketing Memorandum) without the Bank’s prior written consent thereto, which the Bank shall not unreasonably withhold or delay based upon customary business practices at the time such consent is requested. (g) Voluntary Prepayment. Without the prior written consent of the Bank, the City shall not permit the prepayment pursuant to the Trust Agreement of any Certificates (other than Bank Certificates) prior to prepaying the Bank Certificates in full. (h) Certain Notices; Financial Statements. The City shall provide or cause to be provided to the Bank copies of:
(i) Financial Statements. The City shall provide the following financial information and statements in form and content acceptable to the Bank, and such additional information as requested by the Bank from time to time:
(A) Within 270 days of the City’s fiscal year end, the City’s annual financial statements, including statements of revenue and expense for the City’s Water Utility System as of June 30 of each year, certified and dated by an authorized financial officer of the City. These financial statements must be audited (with an unqualified opinion, using the accounting standards then applicable to the City) by a Certified Public Accountant.
(B) The City shall, promptly upon its approval and upon publication of the annual budget of the City each year, deliver to the Bank a copy of such budget and promptly after the adoption thereof.
(C) Promptly, upon sending or receipt, copies of any management letters and correspondence relating to management letters, sent or received by the City to or from the City’s auditor, or, if no management letter is prepared, a letter from such auditor stating that no deficiencies were noted that would otherwise be addressed in a management letter.
(D) Together with the annual financial statements of the City delivered pursuant to Section 5.02 (i)(A), a certificate as to whether there existed as of the date of such financial statements and whether there exists as of the date of the certificate, any default under this Agreement and, if any such default exists, specifying the nature thereof and the action the City is taking and proposes to take with respect thereto.
(E) A copy of the annual report of the City, if any, which is delivered in accordance with the City’s “continuing disclosure certificate” related to the Certificates at the time it is delivered thereunder.
(ii) Promptly, notice of any action, suit or proceeding known to it at law or in equity or by or before any governmental instrumentality, entity or other agency for any uninsured claim which, if adversely determined, could result in a judgment against the City #33..
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of $500,000 or more against the Revenue Fund, or would materially and adversely affect the City’s ability to pay its obligations under this Agreement. (iii) Promptly, notice of (A) any material dispute which may exist between the City on the one hand and the Bond Insurer, the Remarketing Agent, the Trustee or the Custodian on the other hand or any dispute in connection with any transaction contemplated under this Agreement or any Related Document, (B) any matter or event which may result in a material adverse change in the City’s ability to pay its obligations under this Agreement, (C) any inquiry by the Internal Revenue Service or the Securities and Exchange Commission, (D) any amendment to any Related Document, and (E) the resignation or removal of the Remarketing Agent, the Trustee or the Custodian; (iv) Any notice, certification, demand or other writing or communication given by the Bond Insurer to the City or by the City to the Bond Insurer under or in connection with the Certificates or any of the Related Documents, in each case promptly after the receipt or giving of the same;
(v) As soon as practicable after the sale by the City of any securities payable from the Revenue Fund with respect to which an offering memorandum or official statement was prepared, such offering memorandum or official statement; and (vi) Such additional information concerning the Revenue Fund, the Water Utility System, the Gross Revenues, the Related Documents, the City or the Authority, as requested by the Bank from time to time.
(i) Existence. The City shall maintain its existence as a charter city, duly organized and validly existing under its charter and the Constitution of the State and its rights, franchises and privileges material to the conduct of its business and shall not, without the prior written consent of the Bank, initiate proceedings to reorganize, merge or consolidate with or into any Person, wind up, liquidate or dissolve its affairs (or suffer any liquidation or dissolution) or convert, sell, assign, transfer, lease or otherwise dispose of (or agree to do any of the foregoing at any future time), whether in one transaction or a series of transactions, all or substantially all of its property or assets. (j) Incorporation of Certain Covenants. The covenants of the City set forth in the Master Contract (including without limitation Sections 3.01 and 3.02 thereof) are hereby incorporated by reference in this Agreement for the benefit of the Bank. (k) Liens, Etc. The City shall not issue any obligation secured by Gross Revenues that is senior in right of payment to the Parity Obligations (including the 2008 Payments). The City shall not enter into any Swap with termination payments that are Parity Obligations. (l) Insurance. The City shall maintain at all times the insurance required by Section 4.08 of the Master Contract.
(m) Maintenance of 2008 Project. Without limiting the generality of Section 4.06 of the Master Contract, the City shall maintain and preserve the 2008 Project in good working order and condition, making all repairs or replacements as necessary. #33..
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(n) Rate Covenant. The City shall comply with the rate covenant set forth in Section 4.12 of the Master Contract.
(o) Further Assurances. The City shall execute and deliver to the Bank all such documents, consents and instruments and do all such other acts and things as may be reasonably necessary or required by the Bank to enable the Bank to exercise and enforce its rights under the Related Documents and the Related Documents and to realize thereon, and record and file and rerecord and re-file all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Bank to validate, preserve and protect the position of the Bank under the Related Documents. (p) Additional Rights. In the event that the Authority or the City shall enter into or otherwise consent to any credit agreement, reimbursement agreement, bond purchase agreement, liquidity agreement or other agreement or instrument (or any amendment, supplement or modification thereto) pursuant to which a financial institution or financial institutions (other than the Authority or the City) (each, a “Lender”) undertakes to make loans or advances or extend credit or liquidity to the Authority and/or the City secured by Gross Revenues (each, a “Bank Agreement”), which Bank Agreement contains (i) covenants that are more restrictive on the part of the City or the Authority than those contained in this Agreement, (ii) events of default not included in this Agreement (other than additional events of default for which it is an immediate termination or suspension of the obligations of the Lender), (iii) events of default which are included in this Agreement but which are more favorable to the Lender (e.g., shorter cure periods) than those contained in this Agreement, and/or (iv) collateral in addition to a pledge of Gross Revenues (collectively, the “Additional Rights”), such Additional Rights shall automatically be deemed to be incorporated into this Agreement and the Bank shall have the benefits of such Additional Rights. Upon entering into or consenting to any Bank Agreement, the Authority and the City shall promptly enter into an amendment to this Agreement to include such Additional Rights, provided that the Bank shall maintain the benefit of such Additional Rights even if the Authority and/or the City fails to provide such amendment. If the Authority and the City shall amend the Bank Agreement such that it no longer provides for such Additional Rights, then, without the consent of the Bank, this Agreement shall automatically no longer contain the Additional Rights and the Bank shall no longer have the benefits of any of the Additional Rights. (q) Government Sanctions. The City shall not, directly or indirectly, use the proceeds from purchases of Certificates made hereunder or any other credit provided under this Agreement, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any manner that will result in a violation by any Person (including any Person participating in the transactions contemplated by this Agreement, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(r) Maintenance of Tax Exempt Status of the Certificates. The City shall not take any action or omit to take any action which, if taken or omitted, would adversely affect the exclusion of interest on the Certificates from gross income for purposes of federal income taxation or the exemption of such interest from State income taxes.
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(s) Sovereign Immunity. To the fullest extent permitted by law, the City agrees not to assert the defense of sovereign immunity, if available, in any proceeding to enforce any of the obligations of the City hereunder or under any Related Document in any federal or state court of competent jurisdiction.

SECTION 6. CONDITIONS PRECEDENT

6.01 Conditions to Bank’s Entering Into Agreement. It shall be a condition precedent to the Bank’s entering into this Agreement that all corporate and other proceedings taken in connection with the transactions contemplated hereby and all documents incident thereto including the Related Documents and the Bond Insurance Policy shall be in form and substance satisfactory to the Bank and that the conditions enumerated in this Section 6.01 have been fulfilled to the satisfaction of the Bank. Delivery by the Bank of fully executed signature pages to this Agreement shall constitute acknowledgment and acceptance by the Bank that all such conditions have been met or waived.
(a) Representations. On the Effective Date (and after giving effect to the issuance of the Certificates and the effectiveness hereof), (i) there shall exist no Event of Default or Potential Event of Default or Involuntary Insolvency Event, (ii) all representations and warranties made by the Authority or the City herein or in any of the Related Documents to which it is a party shall be true and correct with the same effect as though such representations and warranties had been made at and as of such time and (iii) each of this Agreement and the Related Documents to which the Authority or the City is a party, as amended (if applicable), is in full force and effect and has not been amended, modified or changed.
(b) Supporting Documents. On or prior to the Effective Date, the Bank shall have received, in form and substance satisfactory to the Bank, the following:
(i) (A) True and complete executed originals of this Agreement, the Fee Letter Agreement, the Custodian Agreement and the First Supplemental Trust Agreement, and true and complete certified copies of the other Related Documents, (B) a specimen of the executed Bond Insurance Policy and an executed original of the Endorsement, (C) a copy of the Remarketing Memorandum and (D) a specimen Certificate; (ii) Certified copies of the resolutions of the Authority authorizing this Agreement, the Fee Letter Agreement, the First Supplemental Trust Agreement and the Related Documents to which the Authority is a party and the issuance of the Certificates, certified on the Effective Date by an Authorized Representative and certified copies of the Authority’s joint exercise of powers agreement, notice of a joint powers agreement filed with the Secretary of State and roster of public agencies filing and acknowledgement from the California Secretary of State;
(iii) Signature and incumbency certificates, dated the Effective Date and in form and substance satisfactory to the Bank, of the signatories of the Authority executing this Agreement, the Fee Letter Agreement and the First Supplemental Trust Agreement; (iv) A certificate of an Authorized Representative, dated the Effective Date and Date and in form and substance satisfactory to the Bank, making the representations set #33..
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forth in Section 6.01(a) with respect to the Authority and covering such other matters as the Bank may reasonably request;
(v) Certified copies of the resolutions of the City authorizing this Agreement, the Fee Letter Agreement, the Custodian Agreement and the Related Documents to which the City is a party, approving the issuance of the Certificates and approving distribution of the Remarketing Memorandum, certified on the Effective Date by an Authorized Representative;
(vi) Signature and incumbency certificates, dated the Effective Date and in form and substance satisfactory to the Bank, of the signatories of the City executing this Agreement, the Fee Letter Agreement and the Custodian Agreement; (vii) A certificate of an Authorized Representative, dated the Effective Date and in form and substance satisfactory to the Bank, making the representations set forth in Section 6.01(a) with respect to the City and covering such other matters as the Bank may reasonably request;
(viii) Executed copies of all legal opinions, certificates, reports and other documents rendered or delivered in connection with the issuance of the Certificates, the Remarketing Memorandum, the delivery of this Agreement, the Fee Letter Agreement, the Custodian Agreement and the First Supplemental Trust Agreement and the delivery of the Related Documents and any other documents which the Bank may reasonably request evidencing that all necessary action (including, without limitation, adoption of resolutions) required to be taken by the Authority and the City in connection with the authorization, execution, issuance, delivery and performance of such documents and any other document required to be delivered by the Authority or the City pursuant to or in connection with this Agreement, the Fee Letter Agreement, the Custodian Agreement, the First Supplemental Trust Agreement, the Remarketing Memorandum or the transactions contemplated hereby or thereby, has been taken;
(ix) Executed legal opinions or reliance letters, as applicable, dated the Effective Date, addressed to the Bank and in form and substance satisfactory to the Bank, (A) of counsel to the Bond Insurer, permitting the Bank to rely on its opinion rendered at the time the Bond Insurance Policy was originally issued, addressing the enforceability of the Endorsement and covering such other matters as the Bank may reasonably request; (C) of counsel to the City, to the effect set forth in Section 4.02(a)-(d), inclusive, Section 4.02(i) and covering such other matters as the Bank may reasonably request; (D) of counsel to the Trustee, addressing the enforceability of this Agreement, the Custodian Agreement and the Trust Agreement (including as amended by the First Supplemental Trust Agreement) and covering such matters as the Bank may reasonably request; and (E) of Special Counsel, permitting the Bank to rely on its opinion rendered at the time the Certificates were originally issued;
(x) Evidence that the Bank Certificates have been assigned a CUSIP number that is unique and distinct from the CUSIP number assigned to Certificates other than Bank Certificates;
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(xi) Evidence that a long-term unenhanced rating has been assigned to the Bank Certificates by a nationally recognized securities rating agency sufficient to permit the Bank to assign and pledge such Bank Certificates to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank;
(xii) Signature and incumbency certificates, dated the Effective Date and in form and substance satisfactory to the Bank, of the signatories of the Trustee executing this Agreement, the Custodian Agreement and the First Supplemental Trust Agreement; (xiii) Evidence that the conditions precedent to the delivery of this Agreement as an Alternate Liquidity Facility under Section 3.11 of the Trust Agreement have been satisfied, including a Favorable Opinion of Special Counsel upon which the Bank is permitted to rely;
(xiv) Except for state “blue sky” laws, true and correct copies of any and all governmental approvals necessary for the City and the Authority to enter into this Agreement, the Fee Letter Agreement, the Custodian Agreement and the First Supplemental Trust Agreement and the distribution of the Remarketing Memorandum and such approvals necessary at the Effective Date for the transactions contemplated hereby and thereby, or if no governmental approvals are required, a certificate of an Authorized Representative of the City to the effect that no such approvals are necessary; (xv) Evidence that the City has received all consents and other approvals from creditors necessary for the City to execute, deliver and perform this Agreement, the Fee Letter Agreement, the Custodian Agreement and the Related Documents to which it is a party, to authorize the distribution of the Remarketing Memorandum and to authorize the City to obtain the issuance of this Agreement;
(xvi) Review and approval by the Bank of the City’s financial condition; (xvii) Review and approval of the City’s adopted budget for the 2022-2023 fiscal year; and
(xviii) Such further documentation, certificates or opinions as the Bank may reasonably request in connection with the matters arising under this Agreement. (c) Certain Payments. The Bank shall be reasonably satisfied that payment will be made promptly after demand therefor of the fees and expenses of counsel to the Bank as provided in Sections 2.06(e) and 8.05 hereof and the Fee Letter Agreement. (d) Ratings. The Bank shall have received satisfactory evidence that the Certificates have been assigned long-term ratings of “A1” by Moody’s and “AA” by S&P. (e) Legal Matters. All other legal matters pertaining to the execution and delivery of this Agreement, the Fee Letter Agreement, the Custodian Agreement, the First Supplemental Trust #33..
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Agreement, the Remarketing Memorandum and the other Related Documents shall be reasonably satisfactory to the Bank and its counsel.

6.02 Obligation to Purchase. The obligation of the Bank to purchase any of the Certificates hereunder on a Purchase Date is subject to the satisfaction of the following conditions on such date:
(a) No Termination Event. No Termination Event shall have occurred. (b) No Suspension or Termination. The obligation of the Bank to purchase Certificates hereunder shall not have been suspended or terminated pursuant to Section 7.02(c) hereof (c) Notices of Purchase. The Bank shall have received the required Notice of Bank Purchase with respect to such purchase provided for in Section 2.03 hereof.

SECTION 7. EVENTS OF DEFAULT; TERMINATION EVENTS AND REMEDIES

7.01 Events of Default. Each of the following events shall constitute an “Event of Default” hereunder:
(a) any principal or interest due on the Certificates is not paid by the Authority when due and such principal or interest is not paid by the Bond Insurer when, as and in the amounts required to be paid pursuant to the terms of the Bond Insurance Policy; or (b) a Bond Insurer Event of Insolvency shall have occurred; or (c) (i) any material provision of the Bond Insurance Policy at any time for any reason ceases to be valid and binding on the Bond Insurer in accordance with the terms of the Bond Insurance Policy or is declared or ruled to be null and void by a court or other governmental agency of appropriate jurisdiction; or (ii) the Bond Insurer shall (A) in writing to the Trustee claim that the Bond Insurance Policy with respect to the payment of principal or interest on the Bonds is not valid and binding on the Bond Insurer, (B) repudiate in writing the obligations of the Bond Insurer under the Bond Insurance Policy with respect to payment of principal of or interest due on the Certificates, or (C) initiate legal proceedings seeking an adjudication that the Bond Insurance Policy, with respect to the payment of principal or interest on the Bonds, is not valid and binding on the Bond Insurer; or
(d) the Bond Insurer shall default in any payment or payments of amounts payable by it under any insurance policy or policies (other than the Bond Insurance Policy) when due and such default shall continue for a period of thirty (30) days; (it being understood by the Bank that default, for the purposes of this paragraph, shall not mean a situation whereby the Bond Insurer contests in good faith its liability under any such policy or policies in light of the claim or claims made thereunder); or
(e) any material representation or warranty made by the Authority or the City under or in connection with this Agreement or in any Related Document shall prove to be untrue in any material respect on the date as of which it was made; or #33..
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(f) any Other Event of Insolvency shall have occurred; or (g) (i) nonpayment of any fees due to the Bank hereunder pursuant to Section 2.06(a), if such failure to pay when due shall continue for ten (10) Business Days after the City, the Authority and the Bond Insurer have received written notice thereof from the Bank; or (ii) nonpayment of any other amounts payable to the Bank under this Agreement or under any of the Related Documents and such failure is not cured within 20 days after the City, the Authority and the Bond Insurer have received written notice thereof from the Bank; or (h) the breach by the Authority or the City of any of the terms or provisions of Section 5.01(c)(i) (in respect of proceeds from the purchases of Certificates hereunder), (g), (i), (j), (1), (m), the second sentence of (n), (o) or (q) hereof or 5.02(e), (g), (i), (k) or (p) hereof; or (i) the Authority shall default in the performance or observance of any other material covenant or agreement contained (or incorporated by reference) in this Agreement and such default shall continue unremedied for a period of thirty (30) days after the Authority has received written notice thereof from the Bank; or
(j) the City shall default in the performance or observance of any other material covenant or agreement contained (or incorporated by reference) in this Agreement and such default shall continue unremedied for a period of thirty (30) days after the City has received written notice thereof from the Bank; or
(k) any provision of this Agreement or any of the Related Documents ceases to be valid and binding against the Authority or the City or shall be declared null and void or the Authority or the City repudiates its obligations under this Agreement or any of the Related Documents or the pledge and assignment pursuant to this Agreement and the Related Documents shall for any reason cease to be fully enforceable with the priority required hereunder and thereunder; or (l) the occurrence of any “event of default” under any of the Related Documents which is not otherwise described in this Section 7.01, other than the failure of the Bank to provide funds for the purchase of Eligible Certificates when required by the terms and conditions of this Agreement; or
(m) the Trustee ceases to have an effective security interest in the Trust Estate prior to any lien, pledge, assignment or security interest of any creditors of the City or the Authority; or (n) (i) S&P and Moody’s shall suspend or withdraw the financial strength or claims paying ability rating of the Bond Insurer for credit related reasons or shall reduce such rating below BBB- in the case of S&P and Baa3 in the case of Moody’s, or (ii) the long term claims-paying or financial strength rating of the Bond Insurer is lowered below Aa3 and AA- by each of Moody’s, and S&P, respectively; or
(o) the City shall default in any payment of principal of or premium, if any, or interest on any of its Debts in excess of $500,000 and such default shall continue beyond the expiration of the applicable grace period, if any, or the City shall fail to perform any other agreement, term or condition contained in any agreement under which any obligation for the payment of $500,000 or #33..
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more is created or secured, which shall permit or result in the declaring due and payable of such obligation prior to the date on which it would otherwise have become due and payable; or (p) a final judgment or order for the payment of money for an uninsured claim in excess of $500,000 shall have been rendered against the City and such judgment or order shall not have been satisfied, stayed or bonded pending appeal within a period of thirty (30) days from the date on which it was first so rendered; or
(q) any cancellation, termination, replacement, amendment, replacement or other modification of the Bond Insurance Policy or substitution of the Bond Insurer occurs without the prior written consent of the Bank; or
(r) the long-term, unenhanced rating of the Revenue Fund shall be withdrawn or suspended or otherwise unavailable for credit-related reasons or reduced below Baa1 in the case of Moody’s, BBB+ in the case of S&P or BBB+ in the case of Fitch; provided that in the event of split ratings, the default will be determined by reference to the lowest rating; or (s) a moratorium shall have been declared with respect to the payment of the debts of the Authority or the City; or
(t) any of the funds or accounts established pursuant to the Trust Agreement or the Contract or any funds or accounts on deposit, or otherwise to the credit of, such funds or accounts shall become subject to any stay, writ, judgment, warrant of attachment, execution or similar process by any of the creditors of the City or the Authority and such stay, writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or stayed within thirty (30) days after its issue or levy; or
(u) an event shall have occurred that in the opinion of the Bank has a material adverse effect on the financial condition, operations or prospects of the City or its ability to perform its obligations under this Agreement or any Related Document.

7.02 Remedies.
(a) In the case of an Event of Default specified in Section 7.01(a), 7.01(b), 7.01(c)(i),

7.01(d), 7.01(n)(i) or 7.01(q) hereof (each, a “Termination Event”), the Available Commitment and the obligation of the Bank to purchase Certificates shall immediately terminate without notice or demand, and thereafter the Bank shall be under no obligation to purchase Certificates. Promptly after the Bank receives written notice of such Termination Event, the Bank shall give written notice of the same to the Trustee, the Authority, the City, the Rating Agencies and the Remarketing Agent; provided, that the Bank shall incur no liability or responsibility whatsoever by reason of its failure to give such notice and such failure shall in no way affect the termination of the Available Commitment and of the Bank’s obligation to purchase Eligible Certificates pursuant to this Agreement.
(b) Upon the occurrence and during the continuance of an Event of Default specified in Section 7.01(g)(i) or 7.01(n)(ii) hereof, the Bank may terminate the Available Commitment by giving written notice (a “Notice of Termination”) to the City, the Trustee, the Remarketing Agent and the Bond Insurer, specifying the date on which at 3:00 p.m. California time the Available #33..
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Commitment shall terminate (the “Termination Date”), which shall be not less than thirty (30) days from the date of receipt of such notice by the Trustee, and after the Termination Date the Bank shall be under no further obligation to purchase Certificates hereunder other than Certificates which are the subject of the Notice of Bank Purchase delivered by the Trustee in accordance with Section 2.03 hereof and received by the Bank on or prior to the Termination Date. (c) In the case of (i) the occurrence of an Event of Default of the type specified in Section 7.01(c)(ii) hereof or (ii) the commencement of an involuntary case or other involuntary proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property (an “Involuntary Insolvency Event”), the Bank’s obligation to purchase Eligible Certificates hereunder shall immediately be suspended without further action on the part of any Person. Upon such a suspension, the Bank shall give written notice thereof to the City, the Trustee, the Remarketing Agent and the Bond Insurer; provided, however, that the failure of the Bank to give such notice shall not affect the validity of such suspension. The obligation of the Bank to purchase Eligible Certificates shall be suspended until either (x) the Bank delivers a written notice to the Trustee rescinding the automatic suspension of its obligation to purchase Eligible Certificates under this Agreement (a “Rescission Notice”) or, (y)(1) in the case of a suspension event of the type described in Section 7.01(c)(ii) hereof, a final non-appealable order of a court having jurisdiction in the premises shall be entered declaring that all material contested provisions of the Bond Insurance Policy are upheld in their entirety or (2) in the case of an Involuntary Insolvency Event, a court having jurisdiction in the premises shall dismiss or stay such involuntary case, proceeding or appointment within 60 days. In the event a final non-appealable order is entered declaring any material provision of the Bond Insurance Policy to be null and void, or declaring that the Bond Insurer does not have any further liability or obligation under the Bond Insurance Policy or in the event an Involuntary Insolvency Event is not dismissed or stayed within 60 days by a court having jurisdiction in the premises, then the obligation of the Bank to purchase Eligible Certificates shall immediately terminate without any further action by any Person. In the event a final non-appealable order is entered declaring that all material contested provisions of the Bond Insurance Policy are upheld in their entirety or in the event a court having jurisdiction in the premises shall dismiss or stay any Involuntary Insolvency Event within 60 days, the obligation of the Bank to purchase Eligible Certificates shall be automatically reinstated and the terms of this Agreement will continue in full force and effect (unless the Bank Purchase Period shall have otherwise expired or terminated) as if there had been no such suspension. Notwithstanding the foregoing, if the Bank has not delivered a Rescission Notice to the Trustee and if, upon the earlier of (a) the last day of the Bank Purchase Period or (b)(i) in the case of the occurrence of an Event of Default of the type described in Section 7.01(c)(ii) hereof, the date which is three years after the effective date of suspension of the obligation of the Bank to purchase Eligible Certificates, litigation is still pending and a judgment regarding the validity of the Bond Insurance Policy has not been obtained or (ii) in the case of the occurrence of an Involuntary Insolvency Event, the date which is 60 days after the commencement of the involuntary case, proceeding or appointment, such involuntary case, proceeding or appointment has not been dismissed or stayed, then the Available Commitment and the obligation of the Bank to purchase Eligible Certificates shall at such time terminate without notice or demand and thereafter the Bank shall be under no further obligation to purchase Eligible Certificates.
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(d) In addition to the rights and remedies set forth in Section 7.02(a), (b) and (c) hereof, in the case of any Event of Default, upon the election of the Bank: (i) all amounts payable hereunder (other than payments of principal and interest on Bank Certificates) shall upon notice to the City become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Authority and the City, and (ii) the Bank shall have all the rights and remedies available to it under this Agreement, the Related Documents or otherwise pursuant to law or equity other than acceleration of the Certificates or termination of its obligation to purchase Certificates.

SECTION 8. MISCELLANEOUS

8.01 Other Matters.
(a) No failure or delay on the part of the Bank in exercising any right, power or privilege hereunder and no course of dealing shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that the Bank would otherwise have. No notice to or demand on the Authority, the City or any other party hereto in any case shall entitle the Authority, the City or such other party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Bank to any other or further action in any circumstances without notice or demand. (b) No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto; provided that the provisions of Sections 2.06, 2.07, 2.08, 3.01, 6.02, 7, 8.01(b) and 8.07 and the following defined terms: Available Commitment, Available Interest Commitment, Available Principal Commitment, Bank Purchase Period, Bank Rate, Bond Insurer Event of Insolvency, Bond Insurer Rating Level and Maximum Interest Rate may be changed, waived, discharged or terminated by instruments in writing signed by the Bank, the Authority and the City with the consent of the Bond Insurer. The City shall give notice to Moody’s, S&P and Fitch of any amendments to this Agreement. (c) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that neither the Authority nor the City may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Bank. The Bank shall have the right at any time to sell or assign all or part of its rights (but not its obligations) hereunder, under the Related Documents and/or in and to Bank Certificates owned by the Bank to any commercial bank or institutional investor (herein, the “Bank Assignees”) without the consent of or notice to the Authority or the City; provided, however, that no such sale or assignment shall relieve the Bank from any of its obligations under this Agreement (including its obligation to purchase Eligible Certificates in accordance with the terms of this Agreement) and the Authority, the City, the Trustee and the Remarketing Agent may deal exclusively with the Bank for all purposes of this Agreement. The Bank shall also have the right at any time to grant or sell participation interests in all or part of its rights and obligations hereunder, under the Related Documents and/or in and to Bank Certificates owned by the Bank to any Person (herein, the “Participants”) without the consent of or notice to the Authority or the City; provided that no participation shall relieve the Bank from any of its obligations under this #33..
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Agreement (including its obligation to purchase Eligible Certificates in accordance with the terms of this Agreement with its own funds). If participation is sold or the loan is assigned, the purchaser will have the benefit of Sections 2.07, 3.02(b), 8.05 and 8.06 hereof. The Bank may disclose to any Bank Assignees, prospective Bank Assignees, participants or prospective participants any information or other data or material in the Bank’s possession relating to this Agreement, any Related Document, the Bond Insurer, the City and the Authority, without the consent of or notice to the Bond Insurer, the City or the Authority. If the Bank seeks to assign its obligations to any Bank Assignee and such assignment would relieve the Bank of its obligation to purchase any portion of Eligible Certificates pursuant to this Agreement with its own funds, the Bank shall obtain prior written confirmation from the rating agencies that the rating on the Bonds will not be lowered or withdrawn as a result of such assignment. The Bank may collaterally assign and pledge all or any portion of the obligations owing to it hereunder or under the other Related Documents to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned obligations made by the Authority or the City to the Bank in accordance with the terms of this Agreement shall satisfy the obligations of the Authority or the City, respectively, hereunder in respect of such assigned obligation to the extent of such payment.

8.02 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.

8.03 Severability. If any provision of this Agreement shall be held or deemed to be or shall in fact be illegal, inoperative or unenforceable the same shall not affect any other provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever.

8.04 Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument. This Agreement may be delivered by the exchange of signed signature pages by facsimile transmission or by attaching a pdf copy to an email, and any printed or copied version of any signature page so delivered shall have the same force and effect as an originally signed version of such signature page.

8.05 Expenses. The City shall pay counsel to the Bank fees and expenses and shall reimburse counsel to the Bank for its reasonable out-of-pocket expenses, in each case, in connection with the negotiation, execution and delivery of this Agreement and the Related Documents. The City shall also pay on demand (a) all reasonable out-of-pocket expenses of the Bank, including reasonable fees and expenses of counsel retained by the Bank in connection with any waiver or consent hereunder, under the Certificates or under any Related Documents or any amendment hereof or thereof and (b) all costs and expenses incurred by the Bank (including fees and expenses of counsel and other experts retained by the Bank) in connection with the enforcement, attempted enforcement or preservation of any rights or remedies under this Agreement, the Related Documents and any other documents delivered hereunder or thereunder, whether or not suit is filed and whether or not a Potential Event of Default or an Event of Default or an Involuntary Insolvency Event exists (including all such costs and expenses incurred during any “workout” or restructuring in respect of this Agreement, the Bond Insurance Policy or the #33..
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Certificates and during any legal proceeding, including any proceeding under any debtor relief law).

8.06 Indemnification.
(a) To the extent permitted by law, the City agrees to indemnify and hold harmless the Bank, each Bank Assignee, each Participant and each of their respective officers, directors, employees and their agents (each, an “Indemnitee”) from and against any and all claims, damages, penalties, actions, losses, liabilities, judgments, suits and reasonable costs or expenses (including, without limitation, reasonable attorneys’ fees and expenses) whatsoever which an Indemnitee may incur (or which may be claimed against an Indemnitee by any person or entity whatsoever) by reason of or in connection with (i) the offering, sale, remarketing or resale of the Certificates (including, without limitation, by reason of any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in this Agreement, the Related Documents or the Remarketing Memorandum (other than in connection with the description of the Bank therein and any other information provided by the Bank for inclusion therein), or in any supplement or amendment thereof, or the omission or alleged omission to state therein a material fact necessary to make such statements, in the light of the circumstances in which they are or were made, not misleading); (ii) the validity, sufficiency or genuineness of this Agreement (other than a failure thereof resulting from any invalidity on the part of the Bank), the Related Documents or the Remarketing Memorandum; or (iii) the execution and delivery of this Agreement (other than by the Bank), or the making or the failure to make purchases of Certificates under this Agreement; provided that the City shall not be required to indemnify any Indemnitee for any losses, claims, damages, liabilities, costs and expenses to the extent, that there has been a final, nonappealable determination by a court of competent jurisdiction that such losses, claims, damages, liabilities, costs and expenses were caused by the willful misconduct or gross negligence of such Indemnitee. (b) To the extent permitted by law, the City agrees to indemnify and hold each Indemnitee harmless (on a net after-tax basis) from any present or future claim or liability for stamp, transfer, documentary, excise or other similar tax and any penalties or interest with respect thereto, which may be assessed, levied or collected by any jurisdiction in connection with the execution, delivery and performance of, or any payment made under, this Agreement, the Certificates and the other Related Documents, or any amendment thereto.

8.07 Term of the Agreement. The obligation of the Bank to purchase Certificates under this Agreement shall terminate on the last day of the Bank Purchase Period (as it may be extended pursuant to Section 8.15 hereof). Except for the City’s obligations to indemnify the Bank and each Indemnitee as provided in Section 8.06 and except as provided in Section 8.12, this Agreement shall terminate when (a) the Bank Purchase Period (as it may be extended pursuant to Section 8.15 hereof) shall have expired or terminated and (b) the principal of and interest on all Certificates purchased by the Bank hereunder and all other amounts owing to the Bank hereunder shall have been paid in full.

8.08 Enforcement by Trustee; Third Party Beneficiaries. The Bank agrees that the Trustee may enforce the provisions of this Agreement on behalf of the Certificateholders against the Bank. The Bank further agrees that if any provision of this Agreement shall be held or deemed to be or shall in fact be illegal, inoperative or unenforceable, as between the Bank and the City and #33..
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the Authority, the same shall not affect any other provisions herein contained or render the same invalid, inoperative or unenforceable as between the Bank and the Trustee, nor shall the same affect the Bank’s rights and remedies hereunder, including, under certain circumstances, causing the mandatory tender of Certificates or terminating the obligation of the Bank to purchase Certificates as expressly provided herein. The Trustee and the Bond Insurer are each hereby made an express third party beneficiary.

8.09 Notice. Any notice, demand, direction, request or other instrument authorized or required by this Agreement to be given to or filed with the Authority, the City, the Remarketing Agent, the Trustee, the Bank or the Bond Insurer, shall be deemed or have been sufficiently given or filed for all purposes, if any, when delivered by hand or when sent by registered mail, return receipt requested, postage prepaid, and if given by telecopy or telegraphic means shall be deemed given when transmitted (receipt confirmed):

If to the Authority:

Modesto Public Financing Authority
c/o City of Modesto
City Hall
1010 Tenth Street, Suite 5200
Modesto, California 95354
Attention: Director of Finance;
If to the City:

City of Modesto
City Hall
1010 Tenth Street, Suite 5200
Modesto, California 95354
Attention: Director of Finance
If to the Bank:

To the addresses set forth in the Fee Letter Agreement. #33..
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If to the Bond Insurer:

Assured Guaranty Corp.
1325 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
With a copy to:

Risk Management Department — Public Finance Surveillance Telephone: (212) 974-0100
Facsimile: (212) 581-3268
If to the Remarketing Agent:

To the address for notices set forth in the Remarketing Agreement.

If to the Trustee or any Rating Agency:

To the address for notices set forth in the Trust Agreement.

8.10 Obligations Absolute. The obligations of the Authority and the City under this Agreement shall be primary, absolute, independent, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances:
(a) Any lack of validity or enforceability of this Agreement or the Related Documents; (b) Any amendment or waiver of or any consent to or departure from all or any of the Related Documents or this Agreement;
(c) Any exchange, release or non-perfection of any collateral or any release or amendment or waiver of or consent to departure from any guaranty and insurance documents; (d) The existence of any claim, set-off, defense, or other right which the Authority or the City may have at any time against the Authority, the City, the Trustee, the Remarketing Agent, the Bond Insurer, the Bank (other than the defense of the payment to the Bank in accordance with the terms of this Agreement) or any other person or entity, whether in connection with this Agreement, the Related Documents or any unrelated transactions; (e) Any certificate, notice or any other document presented under this Agreement proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (f) Any other circumstances or happening whatsoever, whether or not similar to any of the foregoing.
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Notwithstanding the foregoing, all liability of the City under this Agreement shall be limited obligations of the City payable solely from Gross Revenues on a parity with other Parity Obligations.

8.11 Holidays. Except as otherwise provided herein, whenever any payment or action to be made or taken hereunder shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action.

8.12 Survival. All representations, warranties, covenants and agreements of the Authority and the City contained in this Agreement as amended or supplemented from time to time or made in writing in connection herewith shall survive the execution and delivery hereof and the purchase of Certificates by the Bank hereunder and shall continue in full force and effect until payment in full of all the obligations of the Authority and the City hereunder, it being understood that the agreements, obligations and liabilities of the City found in Sections 2.06, 2.07, 3.02(b),

8.05 and 8.06 hereof shall survive the termination of this Agreement, the Fee Letter Agreement and the Contract and the Authority’s and the City’s obligations hereunder and thereunder and the payment in full of all 2008 Payments and Additional Payments.

8.13 Liability of the Bank. The Authority and the City agree that none of the Bank, its officers, directors, employees and their agents shall have any liability or responsibility for the acts or omissions of either the Trustee or the Remarketing Agent in respect of its use of this Agreement or any amounts made available by the Bank hereunder. The Bank, its officers, directors, employees and their agents shall have no responsibility for, nor incur any liability in respect of, any act, or any failure to act, by the Trustee or the Remarketing Agent which results in the failure of the Trustee to effect the purchase of Eligible Certificates for the account of the Bank with funds provided by the Bank pursuant to Section 2.03 hereof or to comply with the applicable provisions of the Trust Agreement. Neither the Bank nor any of its officers or directors shall be liable or responsible for: (a) the use which may be made of this Agreement or any amounts made available by the Bank hereunder or for any acts or omissions of the Trustee or the Remarketing Agent in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon, even if such documents should in fact prove to be in any or all respect invalid, insufficient, fraudulent or forged; or (c) any other circumstances whatsoever in making or failing to make payment under this Agreement, other than, in the case of the Bank, other than any direct, as opposed to consequential, special, punitive, exemplary or indirect damages suffered by the Authority or the City which the Authority and the City proves were caused by the Bank’s gross negligence or willful failure to purchase Eligible Certificates when required under the terms and conditions of this Agreement.

8.14 Bank Information. The Bank hereby consents to the use of the information concerning the Bank and this Agreement contained in the Remarketing Memorandum under the caption “STANDBY PURCHASE AGREEMENT- The Bank.” The Bank shall, upon the written request, provide the Authority with the Bank’s most recent disclosure information for inclusion in official statements.
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8.15 Extension of Bank Purchase Period. Upon the City’s written request in the form attached hereto as Exhibit C (a “Request for Extension”) and the Bank’s agreement thereto, the then current Stated Expiration Date may be extended to a later date (the period from the then current Stated Expiration Date to such new Stated Expiration Date is hereinafter referred to as the “Extended Bank Purchase Period”). The City may submit no more than one Request for Extension for a minimum of one year and a maximum of three years. The City shall not submit a Request for Extension any earlier than the 120th day, or any later than the 90th day, prior to the then current Stated Expiration Date. The Bank has no obligation to agree to any Request for Extension. If the Bank, in its sole discretion, agrees to a Request for Extension, the Bank shall promptly give written notice of the election to extend to the City (with a copy to the Trustee, the Remarketing Agent and the Bond Insurer); provided, however, that if the Bank fails for any reason or no reason to give such written notice within 60 days of its receipt of a Request for Extension, the Bank shall be deemed to have denied such Request for Extension. At the time of any extension, the Bank may, in its sole discretion, renegotiate terms and conditions of this Agreement, including the duration of the extended term, the commitment fees and the Bank Rate. Any extension shall not become effective unless the Bond Insurer shall have consented thereto; provided, however, that in no event shall the Bond Insurer’s consent be required (i) if the Bond Insurer is in default under the Bond Insurance Policy or (ii) for any change in the rate upon which the commitment fee described in Section 2.06 is calculated.

8.16 One Agreement. This Agreement, the Fee Letter Agreement and any related security or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements among the Authority, the City, the Trustee and the Bank concerning this credit; (b) replace any prior oral or written agreements between or among the Bank and the Authority, the City and/or the Trustee concerning this credit; and (c) are intended by the Authority, the City, the Trustee and the Bank as the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and the Fee Letter Agreement and any other Related Documents, this Agreement and the Fee Letter Agreement will prevail.

8.01 Headings. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement.

8.02 Set-Off. Upon the occurrence and during the continuance of any Event of Default the Bank and each of its affiliates are hereby authorized at any time and from time to time, without notice to the Authority or the City (any such notice being expressly waived by the Authority and the City) and to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisions or final) at any time held and other indebtedness at any time owing by the Bank or any of its affiliates, except in connection with the Bank’s obligation to purchase Eligible Certificates under this Agreement as herein provided, to or for the credit or the account of the Authority or the City against any and all of the obligations of the Authority and the City now or hereafter existing under this Agreement, irrespective of whether or not the Bank shall #33..
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have made any demand hereunder and although such obligations may not have matured. The rights of the Bank and each of its affiliates under this Section are in addition to other rights and remedies which the Bank and each of its affiliates may have including, without limitation, other rights of set-off. For such purpose, the Bank and each of its affiliates shall have, and the Authority and the City each hereby grants to the Bank and each of its affiliates, a first lien on and security interest in such deposits or indebtedness held or maintained by the Bank or any of its affiliates and the proceeds thereof.

8.03 Waiver of Suretyship. The Authority, City and the Bank intend that the obligations of the Authority and the City under this Agreement constitute direct obligations of the Authority and the City, respectively, and not obligations in the nature of a guaranty or a surety. Nevertheless, should it ever be deemed that the Authority’s or the City’s obligations hereunder are in the nature of a guarantor or surety, then the Authority and the City expressly waive any and all rights of subrogation, reimbursement, indemnification and contribution and any other rights and defenses under applicable suretyship or similar laws now or hereafter in effect, including without limitation Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code. The Authority and the City, respectively, agree that the Bank may enforce this Agreement without the necessity of resorting to or exhausting any security or collateral, and the Authority and the City waive the right to require the Bank to proceed against the other co-obligor to exercise any right or remedy under this Agreement or to pursue any other remedy, or to enforce any other right.

Further, should it ever be deemed that the Authority’s or the City’s obligations hereunder are in the nature of a guarantor or surety and the Authority’s or the City’s obligations hereunder are secured by real property, then each of the Authority and the City, respectively, waives all rights and defenses that it may have because the other co-obligor’s Obligations hereunder are secured by real property. This means, among other things: (1) the Bank may collect from either the Authority or the City without first foreclosing on any real or personal property collateral pledged by the other co-obligor; (2) if the Bank forecloses on any real property collateral pledged by the other coobligor, (A) the amount of the obligation may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price and (B) the Bank may collect from the Authority or the City even if the Bank, by foreclosing on the real property collateral, has destroyed any right the Authority or the City, as applicable, may have to collect from the other co-obligor. This is an unconditional and irrevocable waiver of any rights and defenses the Authority or the City may have because the other co-obligor’s Obligations hereunder are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.

In addition, each of the Authority and the City, respectively, waives all rights and defenses arising out of an election of remedies by the Bank, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the Authority’s or the City’s, as applicable, rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise.

8.04 Waiver of Jury Trial; Judicial Reference.
(a) TO THE FULL EXTENT PERMITTED BY LAW, THE AUTHORITY AND THE

CITY EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY FOR ANY

CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO #33..
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THIS AGREEMENT, ANY RELATED DOCUMENT OR ANY OTHER DOCUMENT

DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR THE TRANSACTIONS

CONTEMPLATED HEREBY OR THEREBY OR IN ANY ACTION, PROCEEDING OR

OTHER LITIGATION OF ANY TYPE BROUGHT BY THE AUTHORITY OR THE CITY

AGAINST THE BANK OR ANY BANK-RELATED PERSON, PARTICIPANT OR

ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE AUTHORITY AND THE CITY FURTHER AGREES, TO THE

FULLEST EXTENT PERMITTED BY LAW, THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT JURY. WITHOUT LIMITING

THE FOREGOING, TO THE EXTENT PERMITTED BY LAW, EACH OF THE AUTHORITY

AND THE CITY FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED

BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER

PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE

VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, ANY RELATED DOCUMENT

OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL

APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENT AND ANY OTHER DOCUMENTS DELIVERED IN CONNECTION THEREWITH.
(b) In the event the waiver of jury trial as set forth in subsection (a) of this Section shall be declared void or unenforceable, each of the Authority and the City agrees to refer the dispute to a judicial referee in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure.

8.05 Concerning the Trustee. The Trustee is executing this Agreement solely in its capacity as Trustee under the Trust Agreement.

8.06 No Advisory or Fiduciary Relationship. The Authority and the City each acknowledges and agrees that: (i) the transaction contemplated by this Agreement is an arm’s length, commercial transaction among the Authority, the City and the Bank in which the Bank is acting solely as a principal and is not acting as a municipal advisor, financial advisor or fiduciary to the Authority or the City; (ii) the Bank has not assumed any advisory or fiduciary responsibility to the Authority or the City with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether the Bank has provided other services or is currently providing other services to the Authority or the City on other matters); (iii) the only obligations the Bank has to the Authority or the City with respect to the transaction contemplated hereby expressly are set forth in this Agreement; and (iv) the Authority and the City each has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate.

8.07 Redaction. In the event on or subsequent to the Effective Date the City or the Authority delivers or causes to be delivered to the Remarketing Agent for delivery to the Municipal Securities Rulemaking Board, or directly to the Municipal Securities Rulemaking Board, in either instance pursuant to Rule G-34 (“CUSIP Numbers, New Issue, and Market Information Requirements”), a copy of this Agreement (including without limitation any amendments hereto or thereto), the City and the Authority shall only provide or cause to be provided a copy of this #33..
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Agreement (including without limitation any amendments hereto or thereto), in the form provided by the Bank, that redacts such confidential information contained in this Agreement (including without limitation any amendments hereto) which could be used in a fraudulent manner, such as any VRDO liquidity bank routing or account numbers, staff names and contact information and fees assessed by the Bank, which redaction is consistent with MSRB Notice 2011-17 (February 23, 2011) and the City and the Authority shall not provide or cause to be provided a copy of the Fee Letter Agreement. The Bank shall provide such redacted copy of this Agreement (including without limitation any amendments hereto) upon request by the City or the Authority. The City and the Authority shall cause the Remarketing Agent to deliver only such redacted copy of this Agreement (including without limitation any amendments hereto), in the form provided by the Bank, and shall not permit delivery of a copy of the Fee Letter Agreement, to the Municipal Securities Rulemaking Board pursuant to said Rule G-34. #33..
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Signature Page
Standby Certificate Purchase Agreement
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement, effective as of the day and year first above written.

MODESTO PUBLIC FINANCING AUTHORITY
By:

Name:

Title:

CITY OF MODESTO
By:

Name:

Title:

Approved as to Form
Jose M. Sanchez
City Attorney
By:

City Attorney
Federal law requires the Bank to provide the following notice. This notice is not part of the foregoing agreement or instrument and may not be altered. Please read the notice carefully.

USA PATRIOT ACT NOTICE. Federal law requires all financial institutions to obtain, verify and record information that identifies each Person who opens an account or obtains a loan.

The Bank will ask for the Authority’s and the City’s legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Authority, the City, guarantors or other related Persons. #33..
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Signature Page
Standby Certificate Purchase Agreement
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THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as successor trustee
By:

Name:

Title:

BMO HARRIS BANK N.A.

By:

Name:

Title:
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EXHIBIT A

FORM OF NOTICE OF BANK PURCHASE
(LIQUIDITY PURCHASE)
BMO Harris Bank N.A.
[__________]
[__________]
[__________]
Attention: [__________]
Telephone: [__________]
Telecopy: [__________]
Re: City of Modesto Financing Authority Water Revenue Certificates of Participation, 2008 Series A
The undersigned, a duly authorized officer of The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), hereby certifies to BMO Harris Bank N.A. (the “Bank”), in accordance with the Standby Certificate Purchase Agreement, dated as of June 1, 2023 (as amended, modified and supplemented through the date hereof, the “Standby Certificate Purchase Agreement”), among the City of Modesto Financing Authority, the City of Modesto, The Bank of New York Mellon Trust Company, N.A., as successor trustee and the Bank (all capitalized terms herein having the meanings ascribed thereto in the Standby Certificate Purchase Agreement), that:

1. Eligible Certificates have been tendered for purchase pursuant to Section 3.01 of the Trust Agreement.

2. Insufficient moneys are available for such purchase pursuant to Section 3.03(b) of the Trust Agreement.

3. [(a)] The total principal amount of the Eligible Certificates referred to above is $[___________], which amount does not exceed the Available Principal Commitment.
[(b)] Accrued but unpaid interest on such Eligible Certificates (other than Defaulted Interest), computed in accordance with the terms of the Certificates and the Trust Agreement, as of the date of delivery hereof to the Bank is $[__________], which amount does not exceed the Available Interest Commitment.]1

4. The Eligible Certificates referred to above are being delivered to the Bank for purchase pursuant to the Standby Certificate Purchase Agreement on the date hereof 1 If the Certificates are to be purchased on an Interest Payment Date, this amount will exclude the interest payable on such date.

If exclusion results in no interest, delete (b).
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for an aggregate purchase price of $[__________],2 which amount does not exceed the Available Commitment.

5. Upon completion of purchase, the Trustee will cause the Certificate to be assigned the separate CUSIP number for Bank Certificates and made eligible for bookentry with DTC and to register such Certificates for the benefit of the Bank in accordance with the procedures of DTC in effect as such time, or, if the Certificates are then certificated, to register the Certificate in the name of the Bank, or if a Certificate is not delivered and the Certificates are not in book-entry form, to issue a new Certificate in replacement of the undelivered Certificate, in the name of the Bank or if directed in writing by the Bank its nominee or designee on the Certificate register, and the Trustee will hold such Certificates (or new Certificates) in accordance with the terms of the Custodian Agreement.

6. The Purchase Date is [____________], and the wire instructions for payment of the Purchase Price are as follows: [insert payment instructions.] IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of Bank Purchase as of the [____] day of [_________], [____].

THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.,
as Trustee
By:

Title:
2 Insert the sum of principal and accrued interest shown in paragraphs 3(a) and (b). #33..
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EXHIBIT B

FORM OF NOTICE OF BANK PURCHASE
(MANDATORY PURCHASE)
BMO Harris Bank N.A.
[__________]
[__________]
[__________]
Attention: [__________]
Telephone: [__________]
Telecopy: [__________]
Re: City of Modesto Financing Authority Water Revenue Certificates of Participation, 2008 Series A
The undersigned, a duly authorized officer of The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), hereby certifies to BMO Harris Bank N.A. (the “Bank”), in accordance with the Standby Certificate Purchase Agreement, dated as of June 1, 2023 (as amended, modified and supplemented through the date hereof, the “Standby Certificate Purchase Agreement”), among the City of Modesto Financing Authority, the City of Modesto, The Bank of New York Mellon Trust Company, N.A., as successor trustee and the Bank (all capitalized terms herein having the meanings ascribed thereto in the Standby Certificate Purchase Agreement), that:

1. Eligible Certificates have been tendered or deemed tendered for mandatory purchase as described in subsections (iii), (iv), (v), (vi) or (vii) of the definition of “Mandatory Purchase Date” in the Trust Agreement pursuant to Section 3.02 of the Trust Agreement.

2. Insufficient moneys from remarketing proceeds are available for such purchase pursuant to Section 3.04 of the Trust Agreement.

3. [(a)] The total principal amount of the Eligible Certificates referred to above is $[__________], which amount does not exceed the Available Principal Commitment.
[(b)] Accrued but unpaid interest on such Eligible Certificates (other than Defaulted Interest), computed in accordance with the terms of the Certificates and the Trust Agreement, as of the date of delivery hereof to the Bank is $[__________]3, which amount does not exceed the Available Commitment.

4. The Eligible Certificates referred to above are being delivered to the Bank for purchase pursuant to the Standby Certificate Purchase Agreement on the date hereof for an aggregate purchase price of $[__________]4, which amount does not exceed the Available Commitment.
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6. The Purchase Date is [_________], and the wire instructions for payment of the Purchase Price are as follows: [insert payment instructions.] IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of Bank Purchase as of the [_____] day of [_____], [_____].

THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.,
as Trustee
By:

Title:
_________________________
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3 If the Certificates are to be purchased on an Interest Payment Date, this amount will exclude the interest payable on such date. If exclusion results in no interest, delete (b). 4 Insert the sum of principal and accrued interest shown in paragraphs 3(a) and (b). #33..
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EXHIBIT C

FORM OF REQUEST FOR EXTENSION
[Date]
BMO Harris Bank N.A.
[__________]
[__________]
[__________]
Attention: [__________]
Telephone: [__________]
Telecopy: [__________]
Ladies and Gentlemen:

Reference is made to the Standby Certificate Purchase Agreement, dated as of June 1, 2023 (as amended, modified and supplemented through the date hereof, the “Agreement”), among the Modesto Public Financing Authority, the City of Modesto, The Bank of New York Mellon Trust Company, N.A., as successor trustee and BMO Harris Bank N.A. Capitalized terms not otherwise defined herein have the meanings set forth in the Agreement.

The City hereby requests, pursuant to Section 8.15 of the Agreement, that the Stated Expiration Date with respect to the Agreement as of the date hereof be extended by [__________] to [__________].

The City hereby certifies that, as of the date hereof:

1. The outstanding principal amount of the Certificates is $[__________].

2. [Except as described below,] [N]o Potential Event of Default or Event of Default has occurred and is continuing.

3. [Except as described below,] [T]he representations and warranties of the Authority and the City as set forth in Section 4 of the Agreement are true and correct as though made on the date hereof.

If you agree to extend the Stated Expiration Date, you are required to provide written notice thereof to the City (with a copy to the Trustee, the Remarketing Agent and the Certificate Insurer).

If you fail to notify the City of your decision within 30 days, you shall be deemed to have rejected such request.

Very truly yours,
By:

Title:
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EXHIBIT D

FORM OF CUSTODIAN AGREEMENT
CUSTODIAN AGREEMENT, dated as of June 1, 2023 (as the same may be amended, modified and supplemented from time to time, this “Agreement”), BMO HARRIS BANK N.A. (the “Bank”), CITY OF MODESTO (the “City”) and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (the “Custodian”), as custodian for the Bank.

WITNESSETH:

WHEREAS, the Bank has entered into that certain Standby Certificate Purchase Agreement, dated as of June 1, 2023 (the “Standby Certificate Purchase Agreement”; all terms capitalized herein and not defined herein shall have the meaning ascribed to them in the Standby Certificate Purchase Agreement), among the Bank, the City, The Bank of New York Mellon Trust Company, N.A., as successor trustee and the Modesto Public Financing Authority (the “Authority”);
WHEREAS, pursuant to the terms of the Standby Certificate Purchase Agreement the Bank has agreed to purchase from time to time Eligible Certificates tendered or deemed tendered for purchase in accordance with the terms of the Trust Agreement; WHEREAS, it is a condition precedent, among others, to the effectiveness of the Standby Certificate Purchase Agreement that the City and Custodian shall have executed and delivered this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions of this Agreement, and other good and valuable consideration, the parties hereto do hereby agree as follows:

1. Appointment and Acceptance.
(a) The Bank hereby appoints The Bank of New York Mellon Trust Company, N.A. to act as agent, bailee and custodian (“Custodian”) for the exclusive benefit of the Bank with respect to Bank Certificates. The Bank of New York Mellon Trust Company, N.A. hereby accepts such appointment and agrees to maintain and hold all Bank Certificates at any time delivered to it as agent, bailee or custodian for the exclusive benefit of the Bank in accordance with the terms of this Agreement.
(b) The Custodian acknowledges and agrees that it is acting and will act with respect to Bank Certificates at the direction of the Bank for the exclusive benefit of the Bank and is not and shall not at any time be subject in any manner or to any extent to the direction or control of the City or the Authority with respect to such Bank Certificates. The Custodian agrees to act in strict accordance with this Agreement and in accordance with any lawful written instructions from the Bank delivered to the Custodian from time to time pursuant hereto. Under no circumstances shall the Custodian deliver possession of the Bank Certificates to, or cause Bank Certificates to be registered in the name of, the City, the Authority, the Remarketing Agent or any Person other than #33..
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the Bank except in accordance with the express terms of this Agreement or otherwise upon the lawful written instructions of the Bank.
(c) The Custodian may rely and shall be protected in acting upon any document believed by it to be genuine and to have been signed or presented by the proper party or parties.

The Custodian shall not be liable for any error in judgment made in good faith by its responsible officers, employees and agents unless the Custodian, its responsible officers, employees or agents were negligent or engaged in willful misconduct. Anything herein to the contrary notwithstanding, the Custodian shall have no liability hereunder for any act or omission except as shall result from its gross negligence or willful misconduct.

2. Receipt of the Bank Certificates. The Custodian agrees to receive and hold Bank Certificates in custody for the Bank. Immediately upon the Custodian’s receipt of Bank Certificates, the Custodian shall (a) promptly give telephonic notice to the Bank that it has received such Bank Certificates and (b) within 2 Business Days following such receipt, send or cause to be sent to the Bank, (i) a copy of the transfer journal entry for such Bank Certificates identifying the principal amount of such Bank Certificates and (ii) confirmation that the Bank or its nominee has been registered as the owner of such Bank Certificates. If the Certificates are in book-entry, the Custodian shall cause the Certificate to be assigned the separate CUSIP number for Bank Certificates and made eligible for book-entry with DTC and shall register such Certificates for the benefit of the Bank in accordance with the procedures of DTC in effect as such time.

3. Payments with respect to the Certificates. If, while this Agreement is in effect, the Custodian shall become entitled to receive or shall receive any payment in respect of any Bank Certificates, the Custodian agrees to accept the same as the Bank’s agent and to hold the same in trust on behalf of the Bank and to deliver the same forthwith to the Bank in accordance with the payment instructions provided to the Custodian from time to time by the Bank in writing (any such payment instructions to remain effective until the Custodian receives written instructions from the Bank to the contrary).

4. Release of Bank Certificates.
(a) Upon the remarketing of any Bank Certificates, the Bank shall as soon as practicable after receipt of written notice thereof from the Remarketing Agent on a Business Day instruct the Custodian by telephone (promptly confirmed in writing) to deliver to the Trustee on the same Business Day, against receipt of the purchase price (which purchase price shall consist of the sum of the principal amount of such Bank Certificates and any accrued but unpaid interest with respect thereto, at the rate borne by Certificates, from the prior Interest Payment Date through but excluding the date such Bank Certificates are remarketed, Bank Certificates in a principal amount equal to the principal amount so remarketed.
(b) In order to facilitate the transfer of Bank Certificates, the Bank agrees to deliver to the Custodian from time to time upon the written request of the Custodian, instruments of transfer duly endorsed in blank by the Bank.

5. No Disposition, Etc. Except as provided in Section 4 above, without the prior written consent of the Bank, the Custodian agrees that it will not sell, assign, transfer, exchange or #33..
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otherwise dispose of, or grant any option with respect to, Bank Certificates, and will not create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance or take any other action with respect to Bank Certificates, or any interest therein, or any proceeds thereof.

6. Information Regarding Bank Certificates. The Custodian shall deliver to the Bank at the Bank’s request such information as may be in the possession of the Custodian with respect to Bank Certificates.

7. Standard of Care. The Custodian agrees that it will perform its duties hereunder in accordance with the express terms of this Agreement. The Custodian shall perform such duties and only such duties as set forth herein. The Custodian shall not be liable to the Bank except for gross negligence or willful misconduct in the performance of its obligations under this Agreement. The Bank shall indemnify the Custodian for and hold it harmless against any and all liability arising out of the performance of its obligations under the Agreement except for any liability arising out of the gross negligence or willful misconduct of the Custodian. The terms of this paragraph shall survive the termination of this Agreement, the Fee Letter Agreement and the Contract and the Authority’s and the City’s obligations hereunder and thereunder and the payment in full of all 2008 Payments and Additional Payments..

8. Removal or Resignation. The Bank may, at any time, effective immediately, and with or without cause, remove and discharge the Custodian from the performance of the Custodian’s duties under this Agreement by written notice to the Custodian with a copy to the City and the Trustee. Upon the effective date of any such termination, the Custodian shall deliver all Bank Certificates then in its custody to any successor custodian to be held in accordance with this Agreement or any other document executed by such successor custodian or, if the Bank has not designated a successor custodian, to the Bank.

9. Insurance. The Custodian, at its own expense, shall maintain and keep in full force and effect at all times during the existence of this Agreement: (a) fidelity insurance, (b) theft of documents insurance, (c) forgery insurance, and (d) errors and omissions insurance (which may be maintained by self-insurance). All such insurance shall be in amounts, with standard coverage and subject to deductibles, that are customary for insurance typically maintained by a bank or other financial institution acting as custodian.

10. Payment of Expenses. The City acknowledges and agrees that the transactions contemplated by this Agreement are for the benefit of the City and the City agrees to pay or cause to be paid all reasonable out-of-pocket fees, costs disbursements, taxes and expenses (including, without limitation, the reasonable attorney’s fees) incurred by the Custodian in connection with the performance by the Custodian of its obligations hereunder.

11. Further Assurances. The Custodian and the City each agree that at any time upon the written request of the Bank and at the expense of such requested party, such party will execute and deliver or cause to be executed and delivered any and all such further documents and do any and all such further acts and things as the Bank may reasonably request in order to effect the purposes of this Agreement.
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12. Availability of Documents. The Custodian agrees to keep and to cause its agents to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available upon reasonable prior notice for inspection by the Bank, its agents, accountants, attorneys and auditors.

13. Originals and Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and which counterparts shall constitute and be one and the same instrument.

14. Notices. Except as otherwise expressly provided in this Agreement, all notices shall be in writing, and delivered personally or by certified or registered United States mail, postage prepaid, or by expedited mail or courier, return receipt requested, charges prepaid, addressed to the respective party at the address set forth below:

If to the Bank: BMO Harris Bank N.A.
[__________]
[__________]
[__________]
Attention: [__________]
Telephone: [__________]
Telecopy: [__________]
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
550 Kearny Street, Suite 600
San Francisco, California 94108
Attention: Corporate Trust Dept.

Telephone: (415) 263-2418
Facsimile: (415) 399-1647
If to the City: City of Modesto
Finance Department
City Hall
101 Tenth Street, Suite 5200
Modesto, California 95353
Attention: Director of Finance
Any party may change the address to which notices are to be sent by giving written notice of such change to the other parties hereto.

15. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
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16. Waivers, Amendments. None of the terms or provisions of this Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by each of the Bank, the City and the Custodian. This Agreement and all obligations of the Custodian and the City hereunder shall be binding upon their respective successors and assigns and shall, together with the rights and remedies of the Bank hereunder, inure to the benefit of the Bank and its successors and assigns.

17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND

CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered on the day and year first above written.

BMO HARRIS BANK N.A.

By:

Name:

Title:

CITY OF MODESTO
By:

Name:

Title:

Approved as to Form
Jose M. Sanchez
City Attorney
By:

City Attorney

THE BANK OF NEW YORK TRUST
COMPANY, N.A.,
in its capacity as Custodian
By:

Name:

Title:
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Norton Rose Fulbright US LLP draft 3/21/23
NRF/134942511.2

FIRST SUPPLEMENTAL TRUST AGREEMENT
between

MODESTO PUBLIC FINANCING AUTHORITY
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
Dated as of [_____] 1, 2023
Relating to

WATER REFUNDING REVENUE CERTIFICATES OF PARTICIPATION
2008 SERIES A

EVIDENCING AND REPRESENTING PROPORTIONATE INTERESTS
OF THE OWNERS THEREOF IN 2008 PAYMENTS TO BE MADE BY THE

CITY OF MODESTO
TO THE

MODESTO PUBLIC FINANCING AUTHORITY
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ...........................................................................................................1 SECTION 1.1. Definitions and Rules of Construction .................................................1 ARTICLE II AMENDMENTS TO EXISTING TRUST AGREEMENT .....................................2 SECTION 2.1. Amendments to Section 1.01 (Definitions) ..........................................2 SECTION 2.2. Amendments to Section 3.04 (Source of Funds for Purchase of 2008 Certificates in Daily Mode, Weekly Mode, Flexible
Mode, or Term Rate Mode)..................................................................4 SECTION 2.3. Amendments to Section 3.05 (Delivery of Certificates in Daily Mode, Weekly Mode, Flexible Mode or Term Rate Mode).................4 SECTION 2.4. Amendments to Section 3.09(a) (Establishment of 2008 Purchase Fund – Remarketing Proceeds Account)...............................4 SECTION 2.5. Amendments to Section 3.11(b) (Liquidity Facility; Alternate Liquidity Facility).................................................................................4 SECTION 2.6. Amendments to Section 3.13 (Duties of Remarketing Agent).............5 SECTION 2.7. Amendments to Section 4.03(a) (Establishment and Maintenance of Accounts for Use of Money in the 2008 Debt Service Fund – 2008 Interest Account) ................................................5 SECTION 2.8. Amendments to Section 4.03(b) (Establishment and Maintenance of Accounts for Use of Money in the 2008 Debt Service Fund – 2008 Principal Account)..............................................6 SECTION 2.9. Amendments to Section 4.04 (Parity Reserve Fund)............................7 SECTION 2.10. Amendments to Section 4.08 (2008 Liquidity Facility Payment Account; Payment of Principal and Interest and Mandatory Purchase Price of the 2008 Certificates)...............................................8 SECTION 2.11. Amendments to Section 8.07 (Control of Remedies by Credit Enhancement Provider or Liquidity Facility Provider) ........................8 SECTION 2.12. Amendments to Section 9.01 (Discharge of Trust Agreement) ...........8 SECTION 2.13. Amendments to Section 10.01 (Payment Under the 2008 Certificate Insurance Policy) ................................................................9 SECTION 2.14. Amendments to Section 10.04 (Modification, Cancellation, Termination or Substitution of 2008 Certificate Insurance Policy).................................................................................................12 SECTION 2.15. Amendments to Section 10.05 (Additional Provisions with respect to Rights of the Bank) ............................................................12 SECTION 2.16. Amendments to Section 11.01 (Benefits of this Trust Agreement Limited to Parties)............................................................12 #33..
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TABLE OF CONTENTS
(continued)
Page
134942511.2 -iiARTICLE III MISCELLANEOUS ..............................................................................................12 SECTION 3.1. Effectiveness of this First Supplement ...............................................12 SECTION 3.2. Execution in Counterparts ..................................................................12 SECTION 3.3. Headings .............................................................................................13 #33..
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FIRST SUPPLEMENTAL TRUST AGREEMENT
THIS FIRST SUPPLEMENTAL TRUST AGREEMENT, dated as of [____] 1, 2023 (this “First Supplement”), amending and supplementing the Amended and Restated Trust Agreement, dated as of May 1, 2008 (the “Existing Trust Agreement” and, together with the First Supplement, the “Trust Agreement”), is by and between MODESTO PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as successor trustee (the “Trustee”); W I T N E S S E T H:

WHEREAS, as a result of the expiration of the direct-pay letter of credit (the “JPM Letter of Credit”) from JPMorgan Chase Bank, N.A. (the “Bank”), the Authority and the City have elected to replace the JPM Letter of Credit with an Alternate Liquidity Facility in the form of a standby certificate purchase agreement (the “Standby Certificate Purchase Agreement”) effective on the Substitution Date (as defined in the Trust Agreement), thereby triggering a mandatory tender of the 2008 Certificates in whole on the Substitution Date; and WHEREAS, the Standby Certificate Purchase Agreement constitutes an Alternate Liquidity Facility for purposes of the Contract (as defined in the Trust Agreement) and this Trust Agreement; and
WHEREAS, the Existing Trust Agreement is being amended and supplemented as of the Substitution Date pursuant to this Trust Agreement, in order to modify provisions relating to the JPM Letter of Credit and the Standby Certificate Purchase Agreement; and WHEREAS, Section 7.01 of the Existing Trust Agreement permits any amendments of the Existing Trust Agreement, with the prior written consent of the 2008 Certificate Insurer (as defined in the Trust Agreement), but without the consent of the Owners, if effective upon the remarketing of the 2008 Certificates following mandatory tender of the 2008 Certificates; and NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants herein, and for other valuable consideration, the parties hereto do hereby covenant and agree, as follows:

ARTICLE I

DEFINITIONS
SECTION 1.1. Definitions and Rules of Construction. Unless the context otherwise requires, the capitalized terms used in this First Supplement shall have the meanings specified in the Existing Trust Agreement.
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ARTICLE II

AMENDMENTS TO EXISTING TRUST AGREEMENT
SECTION 2.1. Amendments to Section 1.01 (Definitions).
(a) The following defined terms are deleted:
“Assigned Rights to Interest,” “Bank,” “Cancellation Date,” “Control Event,” “Replacement Liquidity Facility,” “Subrogated Certificate” and “2008 Liquidity Facility Payment Account.”
(b) The defined term “Alternate Liquidity Facility” is amended to read (deletions stricken):
“Alternate Liquidity Facility” means a letter of credit (including, without limitation, the Replacement Liquidity Facility), line of credit, surety bond, standby purchase agreement or other security or liquidity instrument, as the case may be, approved by the 2008 Certificate Insurer and issued in accordance with the terms hereof with respect to the 2008 Certificates as a replacement or substitute for any Liquidity Facility then in effect.
(c) The defined term “Credit Enhancement” is amended to read (deletions stricken):
“Credit Enhancement” means the 2008 Certificate Insurance Policy issued by the 2008 Certificate Insurer. In case a letter of credit is provided as a Liquidity Facility, such letter of credit will also be considered a Credit Enhancement and its issuer, a Credit Enhancement Provider, if such letter of credit is a direct-pay letter of credit that provides for the payment of the principal of, and interest with respect to, the 2008 Certificates as they become due.
(d) The defined term “Credit Enhancement Provider” is amended to read:
“Credit Enhancement Provider” means the 2008 Certificate Insurer. (e) Clause (a) of the defined term “Insurer Indenture Event of Default” is amended to read (deletions stricken):
(a) any principal or interest evidenced by the 2008 Certificates (including Liquidity Provider Certificates or Subrogated Certificates) is not paid by the 2008 Certificate Insurer when, as, and in the amounts required to be paid pursuant to the terms of the 2008 Certificate Insurance Policy; or
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(f) The defined term “Liquidity Facility” is amended to read (deletions stricken):
“Liquidity Facility” means, as of any time, the Initial Liquidity Facility, the Replacement Liquidity Facility or an Alternate Liquidity Facility, as applicable, which provides for the payment of the purchase price of the 2008 Certificates upon the tender thereof in the event remarketing proceeds are insufficient therefor. (g) The defined term “Liquidity Facility Provider” is amended to read (additions underlined and deletions stricken):
“Liquidity Facility Provider” means, with respect to the Initial Liquidity Facility, the Initial Liquidity Facility Provider Replacement Liquidity Facility, the Bank, and with respect to any Alternate Liquidity Facility for the 2008 Certificates, a bank, insurance company, pension fund or other financial institution acceptable to the 2008 Certificate Insurer.
(h) The defined term “Mandatory Purchase Date” is amended to read (additions underlined and deletions stricken):
“Mandatory Purchase Date” means: (i) with respect to a Flexible Rate Certificate, the first Business Day following the last day of each Flexible Rate Period with respect to such Flexible Rate Certificate; (ii) for the 2008 Certificates in a Term Rate Mode, the first Business Day following the last day of each Term Rate Period for such 2008 Certificates; (iii) any Mode Change Date; (iv) any Substitution Date; (v) the fifth Business Day prior to an Expiration Date; (vi) the date specified by the Trustee following the occurrence of an event of default with respect to the Liquidity Facility or under the related Reimbursement Agreement which requires or gives the Liquidity Facility Provider the option to terminate the Liquidity Facility upon notice and requires that all Outstanding 2008 Certificates secured by such Liquidity Facility be tendered for purchase, which date shall be a Business Day not less than 7 days after the Trustee’s receipt of notice of such event of default from the applicable Liquidity Facility Provider and in no event later than the Business Day preceding the termination date specified in the notice of event of default delivered to the Trustee by such Liquidity Facility Provider; and (vii) for the 2008 Certificates in a Daily Mode or a Weekly Mode, any Business Day specified by the Authority in a notice delivered to the Trustee and consented to by the Liquidity Facility Provider, which Mandatory Purchase Date shall be not less than twenty (20) days after the Trustee’s receipt of such notice from the Authority, and (viii) the Business Day prior to the Cancellation Date.
(i) Clause (11) of the defined term “Permitted Investments” is amended to read (deletions stricken):
(11) Other investments approved in writing by the 2008 Certificate Insurer (or, if a Control Event has occurred, the Bank); and
(j) The defined term “Reimbursement Agreement” is amended to read (deletions stricken):
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“Reimbursement Agreement” means any reimbursement agreement, credit agreement, line of credit agreement, standby purchase agreement or other agreement, between a Credit Enhancement Provider or a Liquidity Facility Provider, as applicable, and the Authority and/or the City, as the same may be amended from time to time pursuant to its terms, including the Reimbursement Agreement, dated as of July 1, 2011, by and between the City and the Bank.
(k) The defined term “Remarketing Agent” is amended to read:
“Remarketing Agent” means each Person selected by the Authority to act as remarketing agent for the 2008 Certificates pursuant to Section 3.12 hereof and approved by the 2008 Certificate Insurer (or, if a Control Event has occurred, the Bank).

SECTION 2.2. Amendments to Section 3.04 (Source of Funds for Purchase of 2008 Certificates in Daily Mode, Weekly Mode, Flexible Mode, or Term Rate Mode). The final paragraph of Section 3.04 is deleted.

SECTION 2.3. Amendments to Section 3.05 (Delivery of Certificates in Daily Mode, Weekly Mode, Flexible Mode or Term Rate Mode). Clause (b) of Section 3.04 is amended to read (deletions stricken):
(b) Each 2008 Certificate purchased by the Trustee with moneys described in Section 3.04(b) hereof or purchased from proceeds from the 2008 Liquidity Facility Payment Account shall be registered immediately in the name of the applicable Liquidity Facility Provider or its nominee (which may be the Securities Depository) as provided in Section 2.1 l(d), if any, on or before 3:00 p.m. New York City time. The Trustee shall not release any Liquidity Provider Certificates unless the Trustee shall have received evidence that the Liquidity Facility has been reinstated to an amount equal to the principal amount of unremarketed 2008 Certificates, including Liquidity Provider Certificates, plus interest at the Maximum Rate for the number of days required under the Liquidity Facility.

SECTION 2.4. Amendments to Section 3.09(a) (Establishment of 2008 Purchase Fund – Remarketing Proceeds Account). Section 3.09(a) is amended to read (additions underlined):
(a) Remarketing Proceeds Account. Upon receipt of the proceeds of a remarketing of any 2008 Certificate (including Liquidity Provider Certificates) on the date such 2008 Certificate is to be purchased, the Trustee shall deposit such remarketing proceeds in the Remarketing Proceeds Account, such remarketing proceeds to be applied to the payment of the Purchase Price of such 2008 Certificate. The Authority shall not have any right, title or interest in any of the funds held on deposit in any Remarketing Proceeds Account nor any remarketing proceeds held for any period of time by any Remarketing Agent.

SECTION 2.5. Amendments to Section 3.11(b) (Liquidity Facility; Alternate Liquidity Facility). Section 3.11(b) is amended to read (deletions stricken):
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(b) If a Liquidity Facility is in effect with respect to the 2008 Certificates, on each date on which a 2008 Certificate is to be purchased, the Trustee, by demand given by Electronic means before 12:30 p.m. New York City time, shall draw on the applicable Liquidity Facility in accordance with the terms thereof so as to receive thereunder by 2:30 p.m. New York City time on such date an amount, in immediately available funds, sufficient, together with the proceeds of the remarketing of such 2008 Certificates on such date, to enable the Trustee to pay the Purchase Price in connection therewith. The proceeds of such draw shall be paid to the Trustee, who shall deposit said proceeds in the applicable Liquidity Facility Account pursuant to Section 3.09(b) hereof or, in the case of the Replacement Liquidity Facility, the 2008 Liquidity Facility Payment Account.

SECTION 2.6. Amendments to Section 3.13 (Duties of Remarketing Agent). The final paragraph of Section 3.13 is amended to read (additional underlined and deletions stricken):

Notwithstanding any provision of this Trust Agreement to the contrary, if there shall have occurred and be continuing (i) a Control Event and no other Credit Enhancement Provider Failure or Liquidity Facility Provider Failure, the Remarketing Agent shall continue remarketing 2008 Certificates or (ii) a Control Event and either another either a Credit Enhancement Provider Failure or a Liquidity Facility Provider Failure, the Remarketing Agent shall not be required to remarket 2008 Certificates.

SECTION 2.7. Amendments to Section 4.03(a) (Establishment and Maintenance of Accounts for Use of Money in the 2008 Debt Service Fund – 2008 Interest Account). Section

4.03(a) is amended to read (additions underlined and deletions stricken):
(a) 2008 Interest Account. On the Delivery Date, the Trustee shall deposit in the 2008 Interest Account any Payment Agreement Receipts relating to the 2008 Interest Rate Swap Agreement which the City has directed under the 2008 Interest Rate Swap Agreement to be transferred to the Trustee for deposit in the 2008 Interest Account and any amounts transferred to the Trustee pursuant to Section 2.03 of the 2008 Supplemental Contract for the payment of payments due under the 2008 Interest Rate Swap Agreement.

On the Business Day immediately preceding each Interest Payment Date, the Trustee shall set aside from the 2008 Debt Service Fund and deposit in the 2008 Interest Account that amount of money which is equal to the amount of interest evidenced and represented by the 2008 Certificates (including Liquidity Provider Certificates) becoming due and payable on each such Interest Payment Date, unless such amounts are required to be used to reimburse the Bank pursuant to clause (c) below. The Trustee will also apply amounts on deposit in the 2008 Fees Subaccount to pay on behalf of the City, the Payment Agreement Payments required to be paid under the 2008 Interest Rate Swap Agreement and to pay the Remarketing Agent fees as the same shall become due on each due date therefor until such 2008 Fees Subaccount shall be depleted (expected to be on or about November 29, 2008). Investment earnings on amounts on deposit in the 2008 Fees Subaccount shall be transferred to the City for deposit in the Revenue Fund.

No deposit need be made in the 2008 Interest Account if the amount contained therein (exclusive of amounts transferred for the payment of amounts due under the 2008 Interest Rate Swap Agreement) is at least equal to the aggregate amount of interest #33..
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evidenced and represented by the 2008 Certificates (including Liquidity Provider Certificates) becoming due and payable on such Interest Payment Date.

Except as otherwise provided herein, all money in the 2008 Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest (including accrued interest evidenced and represented by any 2008 Certificates purchased or prepaid prior to their respective Certificate Payment Date) with respect to the 2008 Certificates (including Liquidity Provider Certificates) as it shall become due and payable, or for reimbursing the Bank and paying the Payment Agreement Payments due under the 2008 Interest Rate Swap Agreement as they shall become due and payable. The Trustee shall be under no obligation to calculate the amount of Payment Agreement Payments due under the 2008 Interest Rate Swap Agreement and shall be entitled to rely conclusively on the information received by it with respect to the amount of the Payment Agreement Payments due and owing by the City.

SECTION 2.8. Amendments to Section 4.03(b) (Establishment and Maintenance of Accounts for Use of Money in the 2008 Debt Service Fund – 2008 Principal Account). (a) Section 4.03(b) is amended to read (additions underlined and deletions stricken):
(b) 2008 Principal Account. On the Business Day immediately preceding each October 1, commencing on October 1, 2008, the Trustee shall set aside from the 2008 Debt Service Fund and deposit in the 2008 Principal Subaccount an amount of money equal to the principal amount evidenced and represented by the Outstanding Serial Certificates with a Certificate Payment Date of such October 1, and in the 2008 Sinking Fund Subaccount in the 2008 Principal Account the amount of all Sinking Fund Payments required to be made on such October 1.

Amounts to be applied to (i) the optional prepayment of the principal component of the 2008 Certificates pursuant to Section 2.03(c) hereof and (ii) to the mandatory prepayment of the principal component of Liquidity Provider Certificates pursuant to Section 2.03(b) shall be deposited in the 2008 Prepayment Subaccount of the 2008 Principal Account. All money in the 2008 Prepayment Subaccount shall be used and withdrawn by the Trustee for the purpose of paying such prepayments on the respective prepayment dates.

No deposit need be made in the 2008 Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal evidenced and represented by the Outstanding Serial Certificates with a Certificate Payment Date of such October 1 and the amount contained in the 2008 Sinking Fund Subaccount therein is at least equal to the aggregate amount of all Sinking Fund Payments required to be made on such October 1.

All money in the 2008 Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the Serial Certificates as they shall become due and payable, whether at their respective Certificate Payment Dates or on prior prepayment, Liquidity Provider Certificates as they #33..
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shall become due and payable at their respective Certificate Payment Dates, and all money in the 2008 Sinking Fund Subaccount of the 2008 Principal Account shall be used and withdrawn by the Trustee only to purchase or to prepay or to pay Term Certificates, and with respect to the 2008 Sinking Fund Subaccount, on each Sinking Fund Payment date, the Trustee shall apply the Sinking Fund Payment required on that date to the prepayment (or payment at Certificate Payment Date, as the case may be) of the Term Certificates upon the notice and in the manner provided in Article II; provided, that at any time prior to giving such notice of such prepayment, the Trustee may, upon the Written Request of the Authority and receipt of moneys sufficient therefor, purchase for cancellation Term Certificates in accordance with Section 2.03(a) hereof, and provided further that so long as the Liquidity Facility is in place, amounts in the 2008 Principal Account shall be used as provided in clause (c) below.
(b) Section 4.03(c) is deleted.

SECTION 2.9. Amendments to Section 4.04 (Parity Reserve Fund). (a) The first paragraph of Section 4.04 is amended to read (additions underlined and deletions stricken):

The Parity Reserve Fund created pursuant to Section 3.04 of the 1997 Trust Agreement is hereby continued. The Trustee hereby agrees and covenants to maintain the Parity Reserve Fund so long as the Contract has not been discharged in accordance with its terms or any 2008 Certificates remain Outstanding hereunder. Amounts on deposit in the Parity Reserve Fund are pledged to the payment of the 1997 Certificates, the 2008 Certificates (including Liquidity Provider Certificates and Subrogated Certificates) and any other obligations hereafter issued in connection with a Supplemental Contract and shall be applied only for such purposes as hereinafter provided. The Trustee shall deposit in the Parity Reserve Fund from the proceeds of the 2008 Certificates, the amount specified in Section 2.12, such amount being sufficient to cause the balance on deposit in or credited to the Parity Reserve Fund, to be equal to the Reserve Fund Requirement upon delivery of the 2008 Certificates. The Trustee shall deposit in the Parity Reserve Fund such other amounts transferred to the Trustee by the City pursuant to Section 2.04(b)(2) of the Contract, as directed by the Authority in a Written Request of the Authority. Moneys on deposit in the Parity Reserve Fund shall be transferred by the Trustee to the 2008 Debt Service Fund to pay principal and interest evidenced and represented by the 2008 Certificates (including Liquidity Provider Certificates) on any Interest Payment Date or to reimburse the Liquidity Facility Provider for any unreimbursed drawing made under the Liquidity Facility to pay such principal and interest on any such Interest Payment Date in the event amounts on deposit herein are insufficient for such purposes. The Trustee shall also, from such amounts on deposit in the Parity Reserve Fund, transfer or cause to be transferred to any applicable debt service fund established under the 1997 Trust Agreement and under any other trust agreement under which any obligations are issued in connection with a Supplemental Contract, without preference or priority between transfers made pursuant to this sentence and the preceding sentence, and in the event of any insufficiency of such moneys ratably without discrimination or preference, that sum or sums, if any, equal to the amount required to be #33..
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deposited therein pursuant to such trust agreement under which any obligations are issued in connection with a Supplemental Contract. All investments in the Parity Reserve Fund shall (notwithstanding anything in the 1997 Trust Agreement to the contrary) be valued on or before October 1 of each year at the lesser of the cost or market value thereof.

Following such valuation, any moneys on deposit in the Parity Reserve Fund representing an excess of the Reserve Fund Requirement will be transferred by the Trustee to the City for deposit in the Revenue Fund. The Trustee may create such subaccounts in the Parity Reserve Fund as may be necessary or convenient for the purposes of this Section 4.04. (b) The final paragraph of Section 4.04 is deleted.

SECTION 2.10. Amendments to Section 4.08 (2008 Liquidity Facility Payment Account; Payment of Principal and Interest and Mandatory Purchase Price of the 2008 Certificates). Section 4.08 is deleted.

SECTION 2.11. Amendments to Section 8.07 (Control of Remedies by Credit Enhancement Provider or Liquidity Facility Provider). Section 8.07 is amended to read:

Provided that the Credit Enhancement remains in effect, notwithstanding anything in this Trust Agreement to the contrary, the Credit Enhancement Provider shall have the right to direct all remedies upon the occurrence of an Event of Default. If the Credit Enhancement is no longer in effect or a default has occurred with respect to the Credit Enhancement, and the Liquidity Facility is in effect, the Liquidity Facility Provider shall have the right to direct all remedies upon the occurrence of an Event of Default.

Notwithstanding the foregoing, if the Credit Enhancement is no longer in effect or a default has occurred with respect to the Credit Enhancement, if a Liquidity Facility is in effect and the Liquidity Facility Provider thereof has failed to honor its payment obligations under the Liquidity Facility in respect of the purchase price of Certificates upon tender thereof, fifty-one percent (51%) of the Certificate holders of the Certificates enhanced by such Liquidity Facility (excluding Certificates owned by the City and Liquidity Provider Certificates), shall have the right at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of such payment obligations; provided that such direction shall be in accordance with applicable law.

SECTION 2.12. Amendments to Section 9.01 (Discharge of Trust Agreement). (a) The first paragraph of Section 9.01 is amended to read (additions underlined and deletions stricken):

When the obligations of the City under the Contract shall cease pursuant to Article VI of the Contract (except for the right of the Trustee and the obligation of the City to have the money and Federal Securities mentioned therein applied to the payment of 2008 Payments as therein set forth) and (i) the 2008 Certificates are in Fixed Rate Mode at the time moneys or Federal Securities are deposited, (ii) the deposit of money and Federal Securities is sufficient to pay the 2008 Certificates at the Maximum Rate to #33..
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the earlier of the first possible tender or redemption date, (iii) the City shall have received a Rating Confirmation Notice on any 2008 Certificate that shall remain Outstanding following such redemption, and (iv) all other sums payable hereunder, including to the 2008 Certificate Insurer and the Liquidity Facility Provider Bank, have been paid, then and in such case the obligations created by this Trust Agreement shall thereupon cease, terminate and become void except for the right of the Owners and the obligation of the Trustee to apply such moneys and Federal Securities to the payment of the 2008 Certificates as herein set forth and the right of the Trustee to collect any fees or expenses due hereunder and the Trustee shall tum over to the City, as an overpayment of 2008 Payments, all balances remaining in any other funds or accounts other than moneys and Federal Securities held for the payment of the 2008 Certificates at maturity or on prepayment, which moneys and Federal Securities shall continue to be held by the Trustee in trust for the benefit of the Owners and shall be applied by the Trustee to the payment, when due, of the principal and interest and premium if any represented by the 2008 Certificates, and after such payment, this Trust Agreement shall become void. (b) The third paragraph of Section 9.01 is amended to read (deletions stricken):

In connection with any defeasance of any of the 2008 Certificates pursuant to this Article, the 2008 Certificate Insurer (or, if a Control Event has occurred, the Bank) shall receive (i) a Favorable Opinion of Special Counsel and (ii) an escrow agreement and an Opinion of Counsel regarding the validity and enforceability of the escrow agreement, such escrow agreement shall provide that: (1) any substitution of securities shall require a verification by an independent certified public accountant and the prior written consent of the 2008 Certificate Insurer; (2) the Authority will not exercise any optional redemption of the 2008 Certificates secured by the escrow agreement or any other redemption other than mandatory sinking fund redemptions unless (a) the right to make any such redemption has been expressly reserved in the escrow agreement and such reservation has been disclosed in detail in the official statement for the refunding obligations, and (b) as a condition of any such redemption there shall be provided to the 2008 Certificate Insurer (or, if a Control Event has occurred, the Bank) a verification of an independent certified public accountant as to the sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following such redemption; and (3) the Authority shall not amend the escrow agreement or enter into a forward purchase agreement or other agreement with respect to rights in the escrow without the prior written consent of the 2008 Certificate Insurer (or, if a Control Event has occurred, the Bank).

SECTION 2.13. Amendments to Section 10.01 (Payment Under the 2008 Certificate Insurance Policy).
(a) Clause (a) of Section 10.01 is amended to read (additions underlined and deletions stricken):

In the event that, on the second Business Day, and again on the Business Day, prior to an interest payment date for the 2008 Certificates the Trustee has not received sufficient moneys to pay all of the principal and interest with respect to the 2008 Certificates (including amounts required to reimburse the Bank for the payment of such #33..
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principal and interest) due on the second following, or following, Business Day, as the case may be, Business Day, the Trustee shall promptly on such Business Day moneys are not received, notify the 2008 Certificate Insurer or its designee on the same Business Day by telephone, electronic mail or facsimile, confirmed in writing by registered or certified mail of the amount of the deficiency, the obligations which such deficiency is applicable and whether such obligations will be deficient as to principal or interest or both. If the deficiency is cured in whole or in part prior to or on the interest payment date, the Trustee shall so notify the 2008 Certificate Insurer or its designee. (b) Clause (c) of Section 10.01 is amended to read (deletions stricken):
(c) The Trustee shall provide the 2008 Certificate Insurer and any fiscal agent with a list of registered owners of the 2008 Certificates entitled to receive principal or interest payments from the 2008 Certificate Insurer under the terms of the 2008 Certificate Insurance Policy, and shall make arrangements with the 2008 Certificate Insurer, the fiscal agent or another designee of the 2008 Certificate Insurer to (i) mail checks or drafts to the registered owners of the 2008 Certificates (including the Bank) entitled to receive full or partial interest payments from the 2008 Certificate Insurer and (ii) pay principal upon the 2008 Certificates surrendered to the 2008 Certificate Insurer, the fiscal agent or another designee of the 2008 Certificate Insurer by the registered owners of the 2008 Certificates (including the Bank) entitled to receive full or partial principal payments from the 2008 Certificate Insurer.
(c) Clause (d) of Section 10.01 is amended to read (deletions stricken):
(d) The Trustee shall, at the time it provides notice to the 2008 Certificate Insurer of any deficiency pursuant to clause (a) above, notify registered owners of the 2008 Certificates (including the Bank) entitled to receive the payment of principal or interest thereon from the 2008 Certificate Insurer (i) as to such deficiency and its entitlement to receive principal or interest, as applicable, (ii) that the 2008 Certificate Insurer will remit to them all or a part of the interest payments due on the related payment date upon proof of its entitlement thereto and delivery to the 2008 Certificate Insurer or any fiscal agent, in form satisfactory to the 2008 Certificate Insurer, of an appropriate assignment of the registered owner’s right to payment, (iii) that, if they are entitled to receive partial payment of principal from the 2008 Certificate Insurer, they must surrender the related the 2008 Certificates for payment first to the Trustee, which will note on such the 2008 Certificates the portion of the principal paid by the Trustee and second to the 2008 Certificate Insurer or its designee, together with an appropriate assignment, in form satisfactory to the 2008 Certificate Insurer, to permit ownership of the 2008 Certificates to be registered in the name of the 2008 Certificate Insurer, which will then pay the unpaid portion of principal, and (iv) that, if they are entitled to receive full payment of principal from the 2008 Certificate Insurer, they must surrender the 2008 Certificates for payment to the 2008 Certificate Insurer or its designee, rather than the Trustee, together with the an appropriate assignment, in form satisfactory to the 2008 Certificate Insurer, to permit ownership of the 2008 Certificates to be registered in the name of the 2008 Certificate Insurer.
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(d) Clause (e) of Section 10.01 is amended to read (deletions stricken):
(e) In addition, if the Trustee has written notice that any Owner of a 2008 Certificate (including the Bank) has been required to disgorge payments of principal or interest with respect to the 2008 Certificates to the City or its trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a voidable preference to such Owner within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the 2008 Certificate Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail.
(e) The introductory clause of clause (f) of Section 10.01 is amended to read (additions underlined and deletions stricken):
(f) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Owners of the 2008 Certificates (including the Bank) as follows:
(f) Clause (g) of Section 10.01 is amended to read (deletions stricken):
(g) In the event that the Trustee shall have made a claim under the 2008 Certificate Insurance Policy with respect to principal and/or interest due on any payment date with respect to the 2008 Certificates and the Bank shall have paid on such payment date a draw made by the Trustee on the Bank’s Credit Enhancement for such principal and/or interest, then, notwithstanding anything to the contrary, the amount paid by the 2008 Certificate Insurer with respect to the 2008 Certificates (the “Held Amount”) on such payment date pursuant to such claim under the 2008 Certificate Insurance Policy shall be held uninvested by the Trustee until the Trustee shall have received notice from the 2008 Certificate Insurer that: (A) the Bank has directed the 2008 Certificate Insurer to reimburse the Bank for such draw pursuant to the Reimbursement Agreement between the Bank and the City, in which case the Trustee shall immediately pay the Held Amount to the Bank; or (B) the Bank has failed to direct the 2008 Certificate Insurer to reimburse the Bank for such draw within the time period set forth in the Reimbursement Agreement between the Bank and the City, in which case the Trustee shall immediately return the Held Amount to the 2008 Certificate Insurer. If the Held Amount is returned to the 2008 Certificate Insurer, the Authority shall pay interest at the Reimbursement Rate on such Held Amount from the date paid by the 2008 Certificate Insurer until such return to the 2008 Certificate Insurer. Payments with respect to claims for interest and principal with respect to the 2008 Certificates disbursed by the Trustee from proceeds of the 2008 Certificate Insurance Policy shall not be considered to discharge the obligation of the Authority with respect to such 2008 Certificates, and the 2008 Certificate Insurer shall become the Owner of such unpaid 2008 Certificates and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this Section 10.01 or otherwise.

References to 2008 Certificates in this Section 10.01 include Liquidity Provider Certificates.
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SECTION 2.14. Amendments to Section 10.04 (Modification, Cancellation, Termination or Substitution of 2008 Certificate Insurance Policy). Section 10.04 is amended to read (additions underlined and deletions stricken):

The Authority shall not consent to the surrender, cancellation, termination, amendment or modification in any material respect of the 2008 Certificate Insurance Policy by the 2008 Certificate Insurer, or to the substitution of a different Credit Enhancement for the 2008 Certificate Insurance Policy, unless the Authority and the Trustee shall have received the consent of the Liquidity Facility Provider Bank, and the Authority and the Trustee shall consent to any such surrender, cancellation, termination, amendment or modification of the 2008 Certificate Insurance Policy by the 2008 Certificate Insurer if so directed by the Bank within seven days of receiving such direction. If, upon receipt of such consent or direction from the Liquidity Facility Provider Bank, the 2008 Certificate Insurance Policy is so surrendered, cancelled, terminated, amended or modified in any material respect by the 2008 Certificate Insurer, or a different Credit Enhancement is so substituted for the 2008 Certificate Insurance Policy, the 2008 Certificates shall be subject to mandatory tender.

SECTION 2.15. Amendments to Section 10.05 (Additional Provisions with respect to Rights of the Bank). Section 10.05 is deleted.

SECTION 2.16. Amendments to Section 11.01 (Benefits of this Trust Agreement Limited to Parties) . Section 11.01 is amended to read (additions underlined and deletions stricken):

Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the Trustee, the 2008 Certificate Insurer, the Liquidity Facility Provider Bank and the Owners any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Trustee, the 2008 Certificate Insurer, the Liquidity Facility Provider Bank and the Owners. The 2008 Certificate Insurer and the Liquidity Facility Provider Bank shall be third-party beneficiaries of this Trust Agreement.

ARTICLE III

MISCELLANEOUS
SECTION 3.1. Effectiveness of this First Supplement. This First Amendment shall be effective with the prior written consent of the 2008 Certificate Insurer, but without the consent of the Owners, upon the remarketing of the 2008 Certificates following the first mandatory tender of the 2008 Certificates following the date of execution and delivery of this First Amendment.

SECTION 3.2. Execution in Counterparts. This First Supplement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement.
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SECTION 3.3. Headings . The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely of reference and shall not affect the meaning, construction or effect of this First Supplement. [Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this First Supplement as of the date and year first above written.

THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.,
as Trustee
By:

Authorized Officer

MODESTO PUBLIC FINANCING

AUTHORITY
By:

Auditor and Treasurer
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FEE LETTER AGREEMENT
June [__], 2023
City of Modesto
1010 Tenth Street, Suite 5200
Modesto, California 95354
Modesto Public Financing Authority
c/o City of Modesto
1010 Tenth Street, Suite 5200
Modesto, California 95354
Re: City of Modesto Water Refunding Revenue Certificates of Participation, 2008 Series A
Ladies and Gentlemen:

Reference is hereby made to that certain Standby Certificate Purchase Agreement, dated as of June 1, 2023 (as the same may be amended or supplemented from time to time, the “Agreement”), among the Modesto Public Financing Authority (the “Authority”), the City of Modesto (the “City”), [The Bank of New York Mellon Trust Company, N.A.], as successor trustee and BMO Harris Bank N.A. (the “Bank”), supporting the above-referenced Certificates.

Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement.

Certain provisions of the Agreement make reference to a Fee Letter Agreement, dated June [__], 2023 (this “Fee Letter Agreement”) among the Authority, the City and the Bank, as the same may be amended or supplemented from time to time. This is the Fee Letter Agreement referenced in the Agreement, and the terms hereof are incorporated by reference into the Agreement as if fully set forth therein. The Authority, the City and the Bank hereby agree that the Effective Date shall be the date hereof.

In consideration for the issuance of the Agreement pursuant to the terms of the Agreement, the parties hereto agree as follows:

ARTICLE I. FEES AND PAYMENTS.

Section 1.1. Commitment Fee. The Authority and the City (by payment of Additional Payments) hereby agree to pay or cause to be paid to the Bank a nonrefundable commitment fee (the “Commitment Fee”) payable semiannually in arrears for each semiannual period from and after the Effective Date (or, in the case of the first semiannual period, the semiannual period from the Effective Date through September 30, 2023), equal to (i) the Commitment Fee Rate multiplied by #33..
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(ii) the Available Commitment for each day during such semiannual period commencing on the first day of such semiannual period (or, in the case of the first semiannual period, the Effective Date) and ending on the last calendar day of such semiannual period. As used above, “Commitment Fee Rate” shall mean ___% per annum, increased one time per level by the percentage points indicated below for each level below the A2/A/A level through or to which the current rating assigned to any long-term, unenhanced rating of the Revenue Fund by Moody’s.

S&P or Fitch falls:

Rating
(Moody’s/S&P/Fitch)
Percentage Point
Increase
A2/A/A or higher ___%
A3/A-/A- ___%
Baa1/BBB+/BBB+ ___%
In the event that (x) the long-term, unenhanced ratings assigned to the Revenue Fund shall be withdrawn or suspended or otherwise unavailable for credit-related reasons or reduced below Baa1 by Moody’s, BBB+ by S&P or BBB+ by Fitch or (y) upon the occurrence of an Event of Default, the then current Commitment Fee Rate based on the table above will be increased by an additional 1.50% per annum. In the event of split ratings, the Commitment Rate will be based on the level that includes the lowest such rating. All such fee increases shall be cumulative.

Section 1.2. Payment Dates. The Commitment Fee shall be paid semiannually in arrears for the preceding semiannual period on the first Business Day of each April and October, commencing on October 1, 2023, and on the last day of the Bank Purchase Period.

Section 1.3. Other Fees. In addition, the Authority and City (by payment of Additional Payments) shall pay to Bank upon each transfer of the Agreement in accordance with its terms to any successor Trustee, a transfer fee of $2,500 and upon each amendment of the Agreement, this Fee Letter Agreement or any of the other Related Documents, an amendment fee in a minimum amount equal to $5,000 to be determined by the Bank at the time thereof, plus the fees and expenses of counsel to the Bank in connection therewith.

Section 1.4. Calculation of Fees and Interest. All fees payable hereunder shall be nonrefundable and shall be calculated on the basis of a 365/366-day year and actual days elapsed, including the Effective Date and the last day of the Bank Purchase Period. All interest payable under the Agreement shall be calculated on the basis of a 365/366-day year and actual days elapsed.

Section 1.5. Initial Costs and Expenses. The Authority and the City (by payment of Additional Payments) shall pay to the Bank any and all reasonable fees, charges and expenses, payable or incurred by the Bank (consisting solely of the fees and expenses of counsel to the Bank) in connection with the preparation, due diligence and execution and delivery of the Agreement and the Custodian Agreement, together with interest on such amounts from the date such payment is due until paid at a rate per annum equal to the Default Rate, and agrees to save #33..
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the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such fees and expenses. The obligations and liabilities under this Section 1.5 shall survive the termination of this Fee Letter Agreement, the Agreement and the Contract and the Authority’s and the City’s obligations hereunder and thereunder and the payment in full of all 2008 Payments and Additional Payments.

Section 1.6. Bank Payment Account. “Bank Payment Account” shall mean the following account of the Bank, or such other account as may be subsequently designated by the Bank in writing to the City, the Authority and the Trustee:
[Insert]
ARTICLE II NOTICES.

Any notice, demand, direction, request or other instrument authorized or required by the Agreement to be given to or filed with the Authority, the City, the Remarketing Agent, the Trustee, the Bank or the Bond Insurer, shall be deemed or have been sufficiently given or filed for all purposes, if any, when delivered by hand or when sent by registered mail, return receipt requested, postage prepaid, and if given by telecopy or telegraphic means shall be deemed given when transmitted (receipt confirmed):

If to the Bank:

If with respect to purchases under the Agreement, to:

BMO Harris Bank N.A.
[__________]
[__________]
Attention: [__________]
Telephone: ([___]) [___]-[____]
Facsimile: ([___]) [___]-[____]
Email: [__________]
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with a copy to:

BMO Harris Bank N.A.
[__________]
[__________]
Attention: [__________]
Telephone: ([___]) [___]-[____]
Facsimile: ([___]) [___]-[____]
Email: [__________]
If with respect to all other matters, to:

BMO Harris Bank N.A.
[__________]
[__________]
Attention: [__________]
Telephone: ([___]) [___]-[____]
Facsimile: ([___]) [___]-[____]
Email: [__________]
ARTICLE III MISCELLANEOUS.

Section 2.1. Other Matters. No provision of this Fee Letter Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto. No failure or delay on the part of the Bank in exercising any right, power or privilege hereunder and no course of dealing shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that the Bank would otherwise have. No notice to or demand on the Authority, the City or any other party hereto in any case shall entitle the Authority, the City or such other party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Bank to any other or further action in any circumstances without notice or demand.

Section 2.2. Governing Law. This Fee Letter Agreement shall be governed by, and construed in accordance with, the laws of the State of California.

Section 2.3. Severability. If any provision of this Fee Letter Agreement shall be held or deemed to be or shall in fact be illegal, inoperative or unenforceable the same shall not affect any other provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever.

Section 2.4. Counterparts. This Fee Letter Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument. This Fee Letter Agreement may be delivered by the exchange of signed signature pages by facsimile transmission or by attaching a pdf copy to an #33..
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email, and any printed or copied version of any signature page so delivered shall have the same force and effect as an originally signed version of such signature page.

Section 2.5. One Agreement. This Agreement, the Fee Letter Agreement and any related security or other agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements among the Authority, the Bank, the City and the Trustee with respect to the subject matter hereof; (b) replace any prior oral or written agreements between or among the Bank and the Authority, the City and/or the Trustee concerning the subject matter hereof; and (c) are intended by the Authority, the City, the Trustee and the Bank as the final, complete and exclusive statement of the terms agreed to by them with respect to the subject matter hereof. In the event of any conflict between this Fee Letter Agreement and the Agreement and any other Related Documents, this Fee Letter Agreement will prevail. This Fee Letter Agreement and the Agreement shall be construed as one agreement among the City, the Authority, the Trustee and the Bank and shall be governed by the provisions of the Agreement. [The remainder of this page intentionally left blank]
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If the foregoing accurately reflects our agreement, please indicate the same by signing in the space provided below.

Very truly yours,
BMO HARRIS BANK N.A.

By ____________________________________
Its __________________________________
Accepted and Agreed to:

CITY OF MODESTO
By _________________________________
Its_______________________________
Attest:

By _________________________________
Its City Clerk
Approved as to Form:

By _________________________________
Its_______________________________

MODESTO PUBLIC FINANCING

AUTHORITY
By _________________________________
Its_______________________________
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Norton Rose Fulbright US LLP draft 3/21/23
134895681.5
REMARKETING MEMORANDUM DATED ___________, 2023
NOT A NEW ISSUE—BOOK-ENTRY ONLY RATING: Moody’s “[__]/[__]” S&P “[__]/[__]”
(See “RATINGS” herein.)
On the date of original delivery of the 2008 Certificates, Sidley Austin LLP, San Francisco, California, (“Original Special Counsel”), rendered its opinion to the effect that, based on then-existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain covenants in the documents pertaining to the 2008 Certificates and requirements of the Internal Revenue Code of 1986, as amended (the “Code”), interest with respect to the Certificates was not includable in the gross income of the owners of the 2008 Certificates for federal income tax purposes. In the further opinion of Original Special Counsel, interest with respect to the 2008 Certificates was not treated as an item of tax preference in calculating the federal alternative minimum taxable income of individuals and corporations. Interest with respect to the 2008 Certificates, however, was included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liability. In the further opinion of Original Special Counsel, interest with respect to the 2008 Certificates was exempt from personal income taxes imposed by the State of California. See “TAX MATTERS” herein. The opinion of Original Special Counsel has not been updated subsequent to the date of delivery of the 2008 Certificates or as of the date of this Remarketing Memorandum.

A copy of the opinion of Original Special Counsel is attached hereto as Appendix C. $47,625,000*

CITY OF MODESTO, CALIFORNIA

WATER REFUNDING REVENUE CERTIFICATES OF PARTICIPATION
2008 SERIES A
Dated: Date of Original Delivery
(May 29, 2008)
Price: 100% CUSIP†
607804AC5 Due: October 1, 2036
This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Remarketing Memorandum to obtain information essential to making an informed investment decision. Capitalized terms used on this cover page not otherwise defined shall have the meanings set forth herein.

The City of Modesto, California Water Refunding Revenue Certificates of Participation, 2008 Series A (the “2008 Certificates”) were executed and delivered on May 29, 2008, pursuant to the Amended and Restated Trust Agreement, dated as of May 1, 2008 (the “Amended and Restated Trust Agreement”), by and between the Modesto Public Financing Authority (the “Authority”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), for the principal purpose of refinancing certain improvements to the Water Utility System of the City of Modesto (the “City”). The 2008 Certificates are payable solely from installment payments to be made by the City to the Authority pursuant to the Master Installment Purchase Contract, dated as of November 1, 1997, as supplemented by the 2008 Supplemental Installment Purchase Contract, dated as of May 1, 2008, by and between the City and the Authority. The obligation of the City to make such installment payments is a special obligation of the City payable solely from Gross Revenues of its Water Utility System and certain funds and accounts created under the Trust Agreement. As described herein, those Gross Revenues are also pledged to the payment of certain other Parity Obligations of the City. In connection with the mandatory tender and remarketing on the effective date of the Liquidity Facility described below, the Authority and the Trustee will enter into a First Supplemental Trust Agreement, dated as of [_____] 1, 2023, supplementing and amending the Amended and Restated Trust Agreement.

The Amended and Restated Trust Agreement, as so supplemented and amended, is referred to herein as the “Trust Agreement.” The 2008 Certificates will bear interest at a Weekly Mode to be established by the Remarketing Agent as described herein, until the Interest Rate Period is converted as provided herein. In general, the Weekly Rate is the rate of interest per annum determined by the Remarketing Agent, on and as of the applicable Rate Determination Date to be the minimum rate of interest which would result in the sale of the 2008 Certificates at a price equal to 100% of the principal amount thereof. Such interest is payable on the first Business Day of each month. The 2008 Certificates are subject to conversion to a different interest rate mode pursuant to the Trust Agreement. This Remarketing Memorandum describes the 2008 Certificates only while they are in the Weekly Mode.

While the 2008 Certificates are in the Weekly Mode, they are subject to optional and mandatory tender for purchase under the circumstances described herein. Effective [_____], 2023, payment of the purchase price of the 2008 Certificates will be payable from the proceeds of remarketing of the 2008 Certificates, and, to the extent remarketing proceeds are unavailable, and subject to certain terms and conditions, from amounts available under a Standby Certificate Purchase Agreement, dated as of __________, 2023 (the “Liquidity Facility”), by and among the Authority, the City and BMO Harris Bank N.A. (the “Liquidity Facility Provider”). [BMO Harris Bank N.A. logo]
The obligation of the Liquidity Facility Provider to purchase tendered but unremarketed 2008 Certificates is subject to suspension or termination without notice upon the occurrence of certain events. Unless extended or terminated, the Liquidity Facility will expire on ______, 20__. The Liquidity Facility does not support, secure or guaranty the payments of the principal of, premium, if any, or interest with respect to the 2008 Certificates.
* Original principal amount. As of the date of this Remarketing Memorandum the 2008 Certificates are outstanding in the principal amount of $42,390,000.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed by FactSet Research Systems Inc. on behalf of the American Bankers Association. CUSIP numbers have been assigned by an independent company not affiliated with the Authority, the City, its Financial Advisor or the Remarketing Agent is responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the 2008 Certificates or as indicated above. The CUSIP number for a specific certificate is subject to being changed after the issuance of the certificate as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of such certificates. #33..
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The 2008 Certificates were executed and delivered in book-entry form only and when executed and delivered were registered in the name of Cede &Co., as nominee of The Depository Trust Company, New York, New York. Beneficial interests in the 2008 Certificates while the 2008 Certificates are in the Weekly Mode will be available for purchase in denominations of $100,000 and any integral multiple of $5,000 in excess thereof. Purchasers of such beneficial interests will not receive certificates representing their beneficial ownership in the 2008 Certificates but will receive credit balances on the books of their respective nominees. The principal of and interest evidenced by the 2008 Certificates are payable by the Trustee to Cede & Co.; and such interest and principal payments are to be disbursed to the beneficial owners of the 2008 Certificates through their nominees.

The 2008 Certificates are subject to optional prepayment and mandatory sinking fund prepayment prior to maturity as well as optional and mandatory tender for purchase as described herein.

The scheduled payment of principal of and interest with respect to the 2008 Certificates when due will be guaranteed under a financial guaranty insurance policy issued concurrently with the delivery of the 2008 Certificates by Assured Guaranty Corp. [Assured Guaranty Corp. LOGO]

THE OBLIGATION OF THE CITY TO PAY INSTALLMENTS OF PRINCIPAL AND INTEREST IS A SPECIAL

OBLIGATION OF THE CITY PAYABLE SOLELY FROM THE GROSS REVENUES OF ITS WATER UTILITY SYSTEM LESS

MAINTENANCE AND OPERATIONS COSTS THEREOF (AS DEFINED IN THE MASTER INSTALLMENT PURCHASE CONTRACT), ALL AS FURTHER DESCRIBED HEREIN. SAID OBLIGATION DOES NOT CONSTITUTE A DEBT OF THE CITY

OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE

TAXING POWER OF THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENTS OR THE INTEREST THEREON.

Norton Rose Fulbright US LLP is currently serving as Special Counsel and Disclosure Counsel to the Authority. As Special Counsel to the Authority, Norton Rose Fulbright US LLP is not providing any opinion to the Owners with respect to the validity and enforceability of the 2008 Certificates. Certain legal matters in connection with the delivery of the Liquidity Facility will be passed upon for the City by Special Counsel.

Certain legal matters will be passed upon for the Authority by its City Attorney of the City and for the Liquidity Facility Provider by Hawkins, Delafield & Wood LLP, Los Angeles, California.

PNC Capital Markets LLC
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CITY OF MODESTO, CALIFORNIA
1010 10th Street
P.O. Box 642
Modesto, California 95353
(209) 577-5369

CITY COUNCIL
Sue Zwahlen, Mayor
Chris Ricci, Vice Mayor
Rosa Escutia-Braaton
Eric E. Alvarez
Nick Bavaro
Jeremiah Williams
David Wright

CITY OFFICIALS
Joseph P. Lopez, City Manager
Jose M. Sanchez, City Attorney
DeAnna Christensen, Finance Director/Treasurer
William Wong, Director of Utilities
__________

SPECIAL SERVICES
Special and Disclosure Counsel
Norton Rose Fulbright US LLP
San Francisco, California
Trustee
The Bank of New York Mellon Trust Company, N.A.

San Francisco, California
Municipal Advisor
PFM Financial Advisors LLC
San Francisco, California
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All the information which the Authority and the City intends to present investors regarding the Authority, the City and the 2008 Certificates is contained in this Remarketing Memorandum. While the City maintains an internet website for various purposes, none of the information on that website is intended to assist investors in making any investment decision, or to provide any continuing information, with respect to the 2008 Certificates or any other obligations of the City. Moreover, none of the information on the website is incorporated herein by reference. No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the Remarketing Agent to give any information or to make any representations other than those contained in this Remarketing Memorandum in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the City or the Remarketing Agent. This Remarketing Memorandum does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2008 Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Remarketing Memorandum is not to be construed as a contract with the purchasers of the 2008 Certificates.

The information set forth herein has been obtained from sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. The information and expression of opinions herein are subject to change without notice and neither delivery of this Remarketing Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Liquidity Facility Provider since the date hereof. All summaries of documents contained herein are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions.

The Liquidity Facility Provider has provided only the information related to itself set forth under the heading “LIQUIDITY FACILITY – BMO Harris Bank N.A.” for inclusion in this Remarketing Memorandum and has not provided any other information for this Remarketing Memorandum. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information given below or incorporated herein by reference is correct as of any time subsequent to its date. The Liquidity Facility Provider has not (i) independently verified or reviewed, (ii) made any representation regarding, nor (iii) accepted any responsibility for the accuracy or completeness of this Remarketing Memorandum or any information or disclosure contained herein, other than solely with respect to the information with respect to itself set forth under the heading “LIQUIDITY FACILITY – BMO Harris Bank N.A.” The 2008 Certificate Insurer has provided the following sentence for inclusion in this Remarketing Memorandum:

Assured Guaranty Corp.(“Assured Guaranty”) makes no representation regarding the 2008 Certificates or the advisability of investing in the 2008 Certificates. In addition, Assured Guaranty makes no representation regarding, nor does it accept any responsibility for, the accuracy or completeness of this Remarketing Memorandum or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty supplied by Assured Guaranty and presented under the heading “CERTIFICATE INSURANCE” and Appendix E — “FINANCIAL GUARANTY INSURANCE POLICY.” The issuance and sale of the 2008 Certificates have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)2 and 3(a)12, respectively, for the issuance and sale of municipal securities. ___________________________________

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS IN

THIS REMARKETING MEMORANDUM
Certain statements included in this Remarketing Memorandum constitute “Forward- Looking Statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as “plan,” “expect,” “estimate,” #33..
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“budget” and other similar words and include, but are not limited to, statements that describe possible future connections to and revenues and expenses of the Water Utility System.

The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The City does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which statements are based change. ___________________________________
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TABLE OF CONTENTS
Page
134895681.5 i
INTRODUCTION ......................................................................................................................... 1 Purpose ............................................................................................................................... 1 The 2008 Certificates ......................................................................................................... 1 Security for the 2008 Certificates ...................................................................................... 2 Certificate Insurance / Reserve Fund Insurance Policy ..................................................... 3 Liquidity Facility ............................................................................................................... 3 2008 Swap Agreement ....................................................................................................... 3 The City ............................................................................................................................. 4 The Water Utility System .................................................................................................. 4 Disclosure of Identity of Purchasers .................................................................................. 4 THE 2008 PROJECT ..................................................................................................................... 4 THE 2008 CERTIFICATES .......................................................................................................... 4 General Description ........................................................................................................... 4 Book-Entry-Only System................................................................................................... 5 Interest Rate Provisions ..................................................................................................... 5 Optional Tender ................................................................................................................. 6 Mandatory Tender for Purchase Upon Change of Mode ................................................... 6 Other Mandatory Tenders .................................................................................................. 7 Purchase Fund .................................................................................................................... 8 Liquidity Facility ............................................................................................................... 8 Delayed Remarketing Period ............................................................................................. 9 Prepayment ...................................................................................................................... 10 Purchase in Lieu of Prepayment ...................................................................................... 11 Parity Obligations ............................................................................................................ 11 SECURITY FOR THE 2008 CERTIFICATES ........................................................................... 11 General ............................................................................................................................. 11 2008 Payments ................................................................................................................. 12 Pledge of Gross Revenues ............................................................................................... 13 Rate Covenant .................................................................................................................. 13 Parity Reserve Fund ......................................................................................................... 14 Flow of Funds .................................................................................................................. 15 Existing and Future Parity Obligations ............................................................................ 17 #33..
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2008 Swap Agreement ..................................................................................................... 18 CERTIFICATE INSURANCE .................................................................................................... 19 Certificate Insurance Policy ............................................................................................. 19 The Reserve Fund Insurance Policy ................................................................................ 20 Assured Guaranty Corp.................................................................................................... 20 LIQUIDITY FACILITY .............................................................................................................. 22 Liquidity Facility ............................................................................................................. 22 BMO Harris Bank N.A. ................................................................................................... 28 REMARKETING ........................................................................................................................ 28 THE WATER UTILITY SYSTEM ............................................................................................. 29 General ............................................................................................................................. 29 History of the Water Utility System ................................................................................ 30 Existing Facilities ............................................................................................................. 32 Service Area and Customers ............................................................................................ 32 Sources of Water .............................................................................................................. 34 Treatment and Delivery Agreement ................................................................................. 35 Water Quality ................................................................................................................... 37 Water Charges and Billing ............................................................................................... 38 Delinquencies ................................................................................................................... 41 Insurance .......................................................................................................................... 41 DBCP Settlement Agreement .......................................................................................... 41 PCE Litigation ................................................................................................................. 42 TCP Litigation ................................................................................................................. 43 Management ..................................................................................................................... 43 Employees ........................................................................................................................ 43 Retirement Programs ....................................................................................................... 43 Historical Operating Results ............................................................................................ 50 Capital Improvement Program ......................................................................................... 51 Summary of Projected Operating Results of the Water Utility System ........................... 52 Investment Policy............................................................................................................. 53 Financial Statements ........................................................................................................ 55

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES................................................................................................ 55 #33..
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Tax Limitations – Proposition 13 .................................................................................... 55 Spending Limitations ....................................................................................................... 56 Proposition 62 .................................................................................................................. 56 Proposition 218 ................................................................................................................ 56 Proposition 26 .................................................................................................................. 58 Other Initiatives ............................................................................................................... 58 RISK FACTORS ......................................................................................................................... 58 General ............................................................................................................................. 59 Natural Disasters and Seismic Considerations ................................................................ 59 Public Health Emergencies .............................................................................................. 61 Demand for Water ............................................................................................................ 61 Water Supply ................................................................................................................... 61 Water Utility System Expenses ....................................................................................... 61 Cybersecurity ................................................................................................................... 62 Parity Obligations ............................................................................................................ 62 Limitations of the Liquidity Facility ................................................................................ 62 Rate Process ..................................................................................................................... 63 Statutory and Regulatory Impact ..................................................................................... 63 Limitations on Remedies and Bankruptcy ....................................................................... 63 Litigation .......................................................................................................................... 64 Interest Rate Swaps Terminated During a Period of Negative Value Could Negatively Impact Financial Condition ............................................................... 65 Ratings May Be Lowered or Withdrawn; Unsolicited Ratings ....................................... 65 THE AUTHORITY ..................................................................................................................... 66 ABSENCE OF LITIGATION ..................................................................................................... 66 TAX MATTERS .......................................................................................................................... 66 RATINGS .................................................................................................................................... 67 MUNICIPAL ADVISOR............................................................................................................. 67 CERTAIN LEGAL MATTERS .................................................................................................. 67 MISCELLANEOUS .................................................................................................................... 68 #33..
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APPENDIX A – EXCERPTS FROM THE CITY’S FINANCIAL STATEMENTS ........................................... A-1 APPENDIX B – DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ........................ B-1 APPENDIX C – COPY OF FINAL APPROVING OPINION OF ORIGINAL SPECIAL COUNSEL DATED MAY 29, 2008 ......................................................................................................... C-1 APPENDIX D – INFORMATION CONCERNING DTC ................................................................................... D-1 APPENDIX E – FINANCIAL GUARANTY INSURANCE POLICY ............................................................... E-1 APPENDIX F – CERTAIN INFORMATION ABOUT THE CITY ................................................................... F-1 #33..
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1 Remarketing Memorandum
relating to
$47,625,000*

CITY OF MODESTO, CALIFORNIA

WATER REFUNDING REVENUE CERTIFICATES OF PARTICIPATION
2008 SERIES A

INTRODUCTION
This Introduction is subject in all respects to the more complete information contained elsewhere in this Remarketing Memorandum, and the offering of the 2008 Certificates (as defined herein) to potential investors is made only by means of the entire Remarketing Memorandum. Capitalized terms used in this Introduction and not defined herein shall have the respective meanings assigned to them elsewhere in this Remarketing Memorandum or in the hereinafter-referenced Trust Agreement. See also APPENDIX B – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
Purpose
The purpose of this Remarketing Memorandum, which includes the cover page and appendices hereto, is to set forth certain information concerning the City of Modesto Refunding Water Revenue Certificates of Participation, 2008 Series A (the “2008 Certificates”), evidencing and representing the proportionate interests of the Owners thereof in certain payments to be made by the City of Modesto, California (the “City”), to be remarketed, as described herein.

The Modesto Public Financing Authority, a California joint exercise of powers agency (the “Authority”), caused the 2008 Certificates to be executed and delivered to refinance certain improvements (collectively, the “2008 Project”) to the City’s water utility system (the “Water Utility System”). Proceeds derived from the sale of the 2008 Certificates, along with other funds available for such purposes, were used to pay the costs of issuing the 2008 Certificates and to purchase a reserve fund financial guaranty insurance policy (the “Parity Reserve Fund Insurance Policy”) that was credited to, the debt service reserve fund for the Parity Obligations (as hereinafter defined) (the “Parity Reserve Fund”).

The 2008 Certificates
The 2008 Certificates represent the proportionate undivided interests of the registered owners thereof (the “Owners”) in installment payments (the “2008 Payments”) payable by the City under the Master Installment Purchase Contract, dated as of November 1, 1997 (the “Master Contract”), by and between the City and the Authority, as supplemented by supplemental purchase contracts including the 2008 Supplemental Installment Purchase Contract, dated as of May 1, 2008 by and between the City and the Authority (the “2008 Contract” and, collectively with the Master Contract, the “Contract”). The 2008 Certificates were executed and delivered pursuant to the Amended and Restated Trust Agreement, dated as of May 1, 2008 (the “Amended and Restated Trust Agreement”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Pursuant to the Trust Agreement, the Authority assigned to the Trustee for the benefit of the Owners of the 2008 Certificates all its rights under the Contract, including its right to receive 2008 Payments payable under the Contract and its right to enforce payment by the City of the 2008 Payments when due. In connection with the mandatory tender and remarketing on the effective date of the Liquidity Facility described below, the Authority and the Trustee will enter into a First Supplemental Trust Agreement, dated as of [_____] 1, 2023, supplementing and amending the Amended and Restated Trust Agreement. The Amended and Restated Trust Agreement, as so supplemented and amended, is referred to herein as the “Trust Agreement.”
The 2008 Certificates were dated their date of delivery (May 29, 2008) and will mature on October 1, 2036 (the “Maturity Date”), subject to prepayment prior thereto. The 2008 Certificates are currently in a Weekly Mode, and * Original principal amount. As of the date of this Remarketing Memorandum the 2008 Certificates are outstanding in the principal amount of $42,390,000.
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2 interest with respect to the 2008 Certificates in the Weekly Mode will be evidenced at the Weekly Rate. In general, the Weekly Rate is the rate of interest per annum determined by PNC Capital Markets LLC, as remarketing agent (the “Remarketing Agent”), on and as of the applicable Rate Determination Date to be the minimum rate of interest which would result in the sale of the 2008 Certificates at a price equal to 100% of the principal amount thereof. Such interest is payable on the first Business Day of each month. See “THE 2008 CERTIFICATES.” The 2008 Certificates are subject to conversion to a different interest rate mode pursuant to the Trust Agreement. This Remarketing Memorandum describes the 2008 Certificates only while they are in the Weekly Mode.

The City is required to make the 2008 Payments pursuant to the provisions of the Contract. The 2008 Payments represent the purchase price of the 2008 Project, which the Authority sold to the City.

The Master Contract. The Master Contract establishes the terms and conditions upon which certain obligations of the City will be incurred and secured. Pursuant to the Master Contract, all Gross Revenues (as defined in the Master Contract) of the Water Utility System are pledged to the payment of the 2008 Payments, all payments required to be made under all other Parity Obligations and Maintenance and Operations Costs; and amounts on deposit in the Parity Reserve Fund are pledged to the payment of the 2008 Payments and any other obligations hereafter issued in connection with a Supplemental Contract. To provide additional security for the 2008 Certificates and Parity Obligations, the Master Contract contains a rate covenant which requires the City to fix, prescribe, and collect certain minimum rates, fees and charges for the water service, calculated in accordance with the Master Contract. See “SECURITY FOR THE 2008 CERTIFICATES — Rate Covenant.”
The 2008 Contract. The 2008 Contract is a Parity Obligation executed and delivered under the provisions of the Master Contract. In consideration of the Authority’s agreement to finance the 2008 Project pursuant to the provisions of the 2008 Contract, the City agreed to pay the 2008 Payments to the Authority, solely from Gross Revenues on parity with all other Parity Obligations and Maintenance and Operation Costs, as provided in the 2008 Contract. The obligation of the City to make the 2008 Payments from Gross Revenues is absolute and unconditional; and, until such time as the 2008 Payments have been paid in full (or provision for the payment thereof shall have been made pursuant to the Master Contract), the City will not discontinue or suspend any such payments required to be made by it under the 2008 Contract when due whether or not the Water Utility System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or in part. See “SECURITY FOR THE 2008 CERTIFICATES — 2008 Payments.”
THE OBLIGATION OF THE CITY TO PAY THE 2008 PAYMENTS IS A SPECIAL OBLIGATION OF

THE CITY PAYABLE SOLELY FROM GROSS REVENUES OF THE WATER UTILITY SYSTEM AND DOES

NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR ANY POLITICAL

SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE

CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION, THEREOF IS PLEDGED TO THE PAYMENT OF THE 2008 PAYMENTS.
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3 Additional Parity Obligations. The City has previously incurred, and may in the future incur, obligations payable from Gross Revenues on a parity with the 2008 Payments (“Parity Obligations”) pursuant to the terms and conditions of the Master Contract. See “SECURITY FOR THE 2008 CERTIFICATES — Existing and Future Parity Obligations.”
Certificate Insurance / Reserve Fund Insurance Policy
Assured Guaranty Corp. (“Assured Guaranty” or the “2008 Certificate Insurer”) issued a municipal bond insurance policy (the “2008 Certificate Insurance Policy”) relating to the 2008 Certificates, effective as of the date of delivery of the 2008 Certificates. By the terms of the 2008 Certificate Insurance Policy, Assured Guaranty agrees to pay the principal and interest represented by the 2008 Certificates which come due for payment but which are unpaid, to the extent that the Trustee has not received sufficient funds from the City with which to make such payment. See “CERTIFICATE INSURANCE” and APPENDIX E — “FINANCIAL GUARANTY INSURANCE POLICY.” Assured Guaranty also issued the Parity Reserve Fund Insurance Policy (see “CERTIFICATE INSURANCE — The Reserve Fund Insurance Policy”); and, in connection therewith, the City and the Trustee entered into an agreement with Assured Guaranty, dated as of May 1, 2008 (the “Reserve Fund Reimbursement Agreement”). The City’s obligations under the Reserve Fund Reimbursement Agreement will be Parity Obligations.

Liquidity Facility
While the 2008 Certificates are in the Weekly Mode, they are subject to optional tender and mandatory tender for purchase. Effective [_____], 2023, funds for the payment of the purchase price of 2008 Certificates that are so tendered for purchase and that are not remarketed by the Remarketing Agent will be available (subject to certain conditions precedent and automatic termination events) under the Liquidity Facility. The Liquidity Facility does not support, secure or guaranty the payments of the principal of, premium, if any, or interest with respect to the 2008 Certificates when due. See “LIQUIDITY FACILITY.”
2008 Swap Agreement
The City entered into an interest rate swap agreement in the form of an ISDA Master Agreement (Local Currency – Single Jurisdiction), the U.S. Municipal Counterparty Schedule thereto, a Credit Support Annex and a Confirmation each dated as of and entered into on September 27, 2006 (collectively, the “2006 Swap Agreement”) with Bank of America, N.A. (the “Swap Provider”). In connection with the execution and delivery of the 2008 Certificates, the City and the Swap Provider amended the 2006 Swap Agreement in various respects, including increasing the notional amount thereof, revising the schedule pursuant to which the notional amount is to be reduced and providing for certain payments thereunder to be insured by Assured Guaranty (as so amended, the “2008 Swap Agreement”). The 2008 Swap Agreement is scheduled to expire on the Maturity Date of the 2008 Certificates; and the notional amount of the 2008 Swap Agreement is scheduled to be reduced on the same dates and in the same amounts as the principal evidenced by the 2008 Certificates is scheduled to be reduced. Pursuant to the 2008 Swap Agreement, the City will be required to make periodic payments to the Swap Provider calculated on the basis of a fixed rate of interest on an initial notional amount equal to the principal amount represented by the 2008 Certificates.

In return, the Swap Provider will be required to make periodic payments to the City calculated on the basis of a variable rate of interest equal to a percentage of one-month London Interbank Offered Rate (“LIBOR”) on the same notional amount. The amounts payable by each party pursuant to the 2008 Swap Agreement are netted against the payments to be received by such party thereunder.

On March 5, 2021, the U.K. Financial Conduct Authority, the body that regulates and supervises the publication of LIBOR, announced the cessation of the publication of 1-month USD LIBOR effective June 30, 2023.

Prior to the cessation of 1-month USD LIBOR quotations, the Authority intends to adhere to the ISDA 2020 IBOR Fallbacks Protocol and the IBOR Fallbacks Supplement to the 2006 ISDA Definitions, which will uniformly amend the Swap Agreements by converting any provisions and definitions referencing LIBOR to corresponding provisions and definitions based on the Secured Overnight Financing Rate. See “SECURITY FOR THE 2008 CERTIFICATES — 2008 Swap Agreement.”
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4 The City
The City, which has a population of approximately 217,880 as of January 1, 2022, is the county seat of Stanislaus County and was incorporated in 1884. It covers approximately 37.4 square miles. The City operates under a council-manager form of government pursuant to a charter adopted in 1963. The City is located in central California, approximately 93 miles east of the City and County of San Francisco. See Appendix A – “CERTAIN INFORMATION REGARDING THE CITY OF MODESTO.” See also “—COVID-19 Pandemic” below.

The Water Utility System
The Water Utility System provides potable water service to residential, commercial and industrial consumers located within the incorporated area of the City and in neighboring areas of Stanislaus County. The City owns, operates and maintains the Water Utility System, which is the sole retail provider of water service in the City. See “THE WATER UTILITY SYSTEM.”
Disclosure of Identity of Purchasers
Any person who purchases a beneficial interest in the 2008 Certificates in connection with the initial offering thereof agrees that the remarketing agent of the 2008 Certificates may disclose such person’s identity to the City and Authority unless such person advises his or her sales representative otherwise.

THE 2008 PROJECT
The 2008 Project consisted of the City’s conveyance to the Authority of certain of improvements made by the City in connection with the Modesto Irrigation District’s expansion of the Modesto Regional Water Treatment Plant (the “Water Treatment Plant”) and the Authority’s reconveyance thereof to the City.

The Water Treatment Plant was constructed and is owned and operated by the Modesto Irrigation District (“MID”). Pursuant to an agreement with the City (the “Treatment and Delivery Agreement”), MID expanded the Water Treatment Plant and its rated capacity from approximately 30 million gallons per day to approximately 60 million gallons per day. (The Water Treatment Plant has been designed to accommodate a possible further expansion subject to a future agreement between the City and MID.) On June 26, 2007, the Modesto Irrigation District Financing Authority issued bonds in a principal amount of $93,190,000 (the “MIDFA 2007 Bonds”) in order to provide financing for the previous Water Treatment Plant expansion described above. The ultimate source of funds to be used to pay debt service on the MIDFA 2007 Bonds consists of payments to be made by the City to MID pursuant to the Treatment and Delivery Agreement. See “THE WATER UTILITY SYSTEM — Treatment and Delivery Agreement.”
THE 2008 CERTIFICATES
General Description
The 2008 Certificates represent the proportionate interests of the Owners in the 2008 Payments. The 2008 Certificates were dated their delivery date (May 29, 2008) and will mature on the Maturity Date (October 1, 2036), subject to prepayment prior thereto as described below under “Prepayment.” The 2008 Certificates are in the Weekly Mode, and interest with respect to the 2008 Certificates in the Weekly Mode will be evidenced at the Weekly Rate.

See “Interest Rate Provisions” below.

The 2008 Certificates are registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC acts as securities depository for the 2008 Certificates. Ownership interests in the 2008 Certificates may be purchased in book entry form only. See “Book-Entry-Only System” below.

While the 2008 Certificates are in the Weekly Mode such ownership interests may be purchased in denominations of $100,000 and integral multiples of $5,000 in excess thereof. #33..
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5 Book-Entry-Only System
The 2008 Certificates were delivered in book-entry form only. Purchasers of the 2008 Certificates will not receive certificates representing their ownership interests in the 2008 Certificates purchased but will receive credit balances on the books of their respective nominees. All payments with respect to the 2008 Certificates are to be made by the Trustee directly to DTC. DTC is expected to credit such payments to the respective accounts of its Direct Participants which, in turn, are expected to make payment thereof to the purchasers of the 2008 Certificates.

As long as Cede & Co. is the registered owner of the 2008 Certificates, references herein to the Owners of the 2008 Certificates shall refer to Cede & Co. and not to the beneficial owners of the 2008 Certificates (the “Beneficial Owners”). Neither the Authority nor the City gives any assurance that DTC, its Participants or others will distribute payments with respect to the 2008 Certificates or notices concerning the 2008 Certificates to the Beneficial Owners thereof or that DTC will otherwise serve and act in the manner described in this Remarketing Memorandum. See APPENDIX D — “INFORMATION CONCERNING DTC” for a further description of DTC and its book-entry system. The information presented therein is based solely on information provided by DTC.

The Authority may decide to discontinue the use of book-entry transfers through DTC (or a successor Securities Depository). In that event, the 2008 Certificates will be printed and delivered to the Beneficial Owners and will be governed by the provisions of the Trust Agreement with respect to the payment of principal and interest and rights of exchange and transfer.

There are a number of provisions in the Trust Agreement relating to the terms of the 2008 Certificates purchased by the Liquidity Facility Provider pursuant to the Liquidity Facility (“Liquidity Provider Certificates”), which are not described in this Remarketing Memorandum. All references to the terms of the 2008 Certificates in this Remarketing Memorandum describe the 2008 Certificates that are not owned by the Liquidity Provider, unless expressly indicated herein.

Interest Rate Provisions
Establishment of the Weekly Rate. The 2008 Certificates will be executed and delivered in the Weekly Mode. The interest rate for the 2008 Certificates while they are in the Weekly Mode will be the rate of interest per annum determined by the Remarketing Agent on and as of the applicable Rate Determination Date (each Wednesday or, if Wednesday is not a Business Day, then the Business Day next succeeding such Wednesday) as the minimum rate of interest which, in the opinion of the Remarketing Agent under then-existing market conditions, would result in the sale of the 2008 Certificates at a price equal to 100% of the principal amount thereof. While the 2008 Certificates are in the Weekly Mode, the Remarketing Agent is obligated to establish the Weekly Rate by 4:00 p.m. New York City time on each Rate Determination Date; and the Weekly Rate shall be in effect during the applicable Weekly Rate Period (generally, the period commencing on Thursday of each week to and including Wednesday of the following week).

Notification of the Weekly Rate. The Remarketing Agent is required to make the Weekly Rate available no later than 5:00 p.m. New York City time on the Business Day following the Rate Determination Date by telephone or Electronic means to the Authority, each other Notice Party and any Beneficial Owner requesting such rate.

Alternate Rate. When the 2008 Certificates are in the Weekly Mode, in the event (i) the Remarketing Agent fails or is unable to determine the interest rate for the 2008 Certificates, (ii) the method by which the Remarketing Agent determines the interest rate with respect to the 2008 Certificates shall be held to be unenforceable by a court of law of competent jurisdiction, or (iii) the Remarketing Agent suspends its remarketing effort in accordance with the provisions of the Remarketing Agreement (as hereinafter defined), then the 2008 Certificates shall evidence interest during each subsequent Interest Period for the 2008 Certificates at the Alternate Rate in effect on the first day of such Weekly Rate Period. The Alternate Rate for the 2008 Certificates in the Weekly Mode as of any Rate Determination Date is a rate per annum equal to (a) the SIFMA Municipal Swap Index (the “SIFMA Rate”) most recently available as of the date of determination, or (b) if such index is no longer available, or if the SIFMA Rate is no longer published, the S&P Weekly High Grade Index (formerly the J.J. Kenny Index), or (c) if neither the SIFMA Rate nor the S&P Weekly High Grade Index is published, the index determined to equal the prevailing rate determined by the Remarketing Agent for tax-exempt state and local government bonds meeting criteria determined in good faith by the #33..
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6 Remarketing Agent to be comparable under the circumstances to the criteria used by the Securities Industry and Financial Markets Association (“SIFMA”) to determine the SIFMA Rate just prior to when the SIFMA stopped publishing the SIFMA Rate. If there is no Remarketing Agent for the 2008 Certificates, if the Remarketing Agent fails to make any such determination or if the Remarketing Agent has suspended its remarketing efforts in accordance with the Remarketing Agreement, then the Trustee shall make the determinations required by this definition, or if the Trustee shall decline to make such determination, a financial advisor, investment banker or other qualified party shall make such determination at the expense of the Authority. Such provisions will continue to apply until such time as the Remarketing Agent (or the Authority, if applicable) resumes making such determinations. In the case of clause (ii) above, the Remarketing Agent (or the Authority, if applicable) shall resume making such determination at such time as there is delivered to the Remarketing Agent or the Authority, as applicable, an opinion of Special Counsel to the effect that there are no longer any legal prohibitions against the Remarketing Agent or Authority, as applicable, making such determinations.

Optional Tender
Subject to the availability of sufficient funds from either the remarketing of such 2008 Certificates or the Liquidity Facility, while the 2008 Certificates are in the Weekly Mode, any 2008 Certificate or portion thereof in a principal amount equal to an Authorized Denomination is required to be purchased on any Business Day at a price equal to the Purchase Price, upon delivery of a Tender Notice to the Trustee by 5:00 p.m. New York City time on the Business Day seven days prior to the applicable Purchase Date. See, “Purchase Fund,” “Delayed Remarketing Period,” “Liquidity Facility” and “LIQUIDITY FACILITY — Initial Liquidity Facility.” A Tender Notice is a notice delivered by Electronic means or in writing that states: (i) the principal amount of the 2008 Certificates to be purchased pursuant to the optional tender provisions of the Trust Agreement; (ii) the Purchase Date on which such 2008 Certificates are to be purchased; (iii) applicable payment instructions with respect to such 2008 Certificates being tendered for purchase; and (iv) an irrevocable demand for such purchase. For so long as the 2008 Certificates are registered in the name of Cede & Co., as nominee for DTC, the tender option rights of Owners of 2008 Certificates may be exercised only by a Direct Participant of DTC acting, directly or indirectly, on behalf of a Beneficial Owner of 2008 Certificates by giving notice of its election to tender 2008 Certificates or portions thereof at the time and in the manner described above. Beneficial Owners will not have any rights to tender 2008 Certificates directly to the Trustee.

If funds sufficient to pay the Purchase Price of any Certificate are held by the Trustee on any Purchase Date, such 2008 Certificate shall be deemed to have been purchased and shall be purchased according to the terms of the Trust Agreement, for all purposes of the Trust Agreement, irrespective of whether or not such 2008 Certificate shall have been delivered to the Trustee; and neither the former Owner of such 2008 Certificate nor any other person shall have any claim thereon, under the Trust Agreement or otherwise, for any amount other than the Purchase Price thereof.

Mandatory Tender for Purchase Upon Change of Mode
Changes in Mode. At the option of the Authority, the 2008 Certificates in the Weekly Mode may be changed to another Mode (other than a Fixed Rate Mode) as set forth below, provided that all the 2008 Certificates shall be converted.

Unless otherwise specified in the Trust Agreement, notice of the proposed change in Mode must be given by the Trustee to the Owners of the 2008 Certificates not less than the 15th day next preceding the applicable Mode Change Date. Such notice must state the Mode to which the conversion will be made and the proposed Mode Change Date and, if applicable, shall be combined with the notice of mandatory purchase required to be delivered by the Trustee pursuant to the Trust Agreement. The new Mode shall commence on the Mode Change Date and the interest rate(s), together, in the case of a change to the Flexible Mode, with the Interest Period or Interest Period(s), as applicable, shall be determined by the Remarketing Agent (or the Authority in the case of the Interest Period for the 2008 Certificates being converted to a Term Rate Mode) in the manner provided in the Trust Agreement.

In the case of a change from the Weekly Mode, the Mode Change Date can be any Business Day. The 2008 Certificates shall be subject to mandatory tender for purchase on such Mode Change Date as described below: and, except as is otherwise described herein, the 2008 Certificates shall be purchased on the Mode Change Date at a Purchase Price equal to 100% of the principal amount thereof; provided, however, that if the 2008 Certificates are to be purchased on an Interest Payment Date other than the last Interest Payment Date applicable to the 2008 Certificates, #33..
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7 and if the 2008 Certificates would otherwise be subject to optional prepayment on such Mode Change Date at a prepayment price of more than 100% of the principal amount thereof, then the 2008 Certificates shall be purchased at a Purchase Price equal to such prepayment price.

Conditions Precedent. It is a condition precedent to a change in Mode that certain items shall have been delivered to the Authority, Trustee, the 2008 Certificate Insurer, and the Remarketing Agent on or prior to the Mode Change Date. Those items include (a) in the case of a change from the Weekly Mode to any Mode other than the Daily Mode, a Favorable Opinion of Special Counsel dated the Mode Change Date and (b) a notice from the Rating Agencies of the rating(s) to be assigned to the 2008 Certificates on such Mode Change Date. In addition, the Authority must also have obtained and delivered to the Trustee the written consent of the 2008 Certificate Insurer to the change in Mode.

Failure to Satisfy Conditions. In the event that the Authority has not withdrawn any election by it to change a Mode as described below and the conditions referred to above have not been satisfied by the applicable Mode Change Date, then the New Mode shall not take effect (although any mandatory purchase shall be made on such date if notice has been sent to the Owners stating that the 2008 Certificates would be subject to mandatory purchase on such date).

In the case of a failed change in Mode from the Weekly Mode, the 2008 Certificates shall remain in the Weekly Mode with interest rates established in accordance with the provisions described above under “Interest Rate Provisions” on and as of the failed Mode Change Date.

Rescission of Election to Change Mode. The Authority may rescind any election by it to change a Mode prior to the Mode Change Date by giving written notice thereof to the Notice Parties prior to such Mode Change Date.

If the Trustee receives notice of such rescission prior to the time the Trustee has given notice to the Owners of the 2008 Certificates, then such notice of change in Mode shall be of no force and effect. If the Trustee receives notice from the Authority of rescission of a Mode change after the Trustee has given notice thereof to the Owners of the 2008 Certificates, then if the proposed Mode Change Date would have been a Mandatory Purchase Date, such date shall continue to be a Mandatory Purchase Date. If the proposed change in Mode was from the Weekly Mode, the 2008 Certificates shall remain in the Weekly Mode with interest rates established in accordance with the provisions described above under “Interest Rate Provisions” on and as of the proposed Mode Change Date.

Mandatory Tender for Purchase on Change of Mode. A change from the Weekly Mode to any other Mode will result in the mandatory purchase of the 2008 Certificates on the Mode Change Date. The Trustee is required to give notice of each such mandatory purchase by mail to the Owners of the 2008 Certificates subject to mandatory purchase no less than 15 days prior to the applicable Mandatory Purchase Date, which is the Mode Change Date. Such notice is required to state the Mandatory Purchase Date, set forth the Purchase Price applicable on such Mandatory Purchase Date, and identify the 2008 Certificates to be purchased. Such notice must also state that interest on the 2008 Certificates subject to mandatory purchase shall cease to accrue from and after the Mandatory Purchase Date. The failure to mail such notice with respect to any 2008 Certificate shall not affect the validity of the mandatory purchase of any other 2008 Certificate with respect to which notice was so mailed. Any notice mailed will be conclusively presumed to have been given, whether or not actually received by any Owner.

Other Mandatory Tenders
The 2008 Certificates are subject to mandatory tender for purchase on each Mandatory Tender Date, In addition to Mode Change Dates, Mandatory Purchase Dates applicable to 2008 Certificates in the Weekly Mode are:
(i) any Substitution Date (the date on which an Alternate Liquidity Facility is substituted for the Liquidity Facility then in effect); (ii) the fifth Business Day prior to an Expiration Date (the stated expiration date of a Liquidity Facility, as it may be extended from time to time as provided in such Liquidity Facility, or any earlier date on which such Liquidity Facility shall terminate at the direction of the Authority, expire or be cancelled, other than the date on which a Liquidity Facility shall terminate as a result of an Automatic Termination Event or an event of default under the Reimbursement Agreement (defined in the Trust Agreement to include the standby certificate purchase agreement among the Liquidity Facility Provider, the City and the Authority in connection with the Liquidity Facility); (iii) the date specified by the Trustee following the occurrence of an event of default with respect to the Liquidity Facility which requires or gives the Liquidity Facility Provider the option to terminate the Liquidity Facility upon notice and requires that all Outstanding 2008 Certificates secured by such Liquidity Facility be tendered for purchase under the applicable Reimbursement Agreement, which date shall be a Business Day not less than 20 days after the Trustee’s #33..
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8 receipt of notice of such event of default from the applicable Liquidity Facility Provider and in no event later than the Business Day preceding the termination date specified in the notice of event of default delivered to the Trustee by such Liquidity Facility Provider; and (iv) any Business Day specified by the Authority in a notice delivered to the Trustee, which Mandatory Purchase Date shall be not less than twenty (20) days after the Trustee’s receipt of such notice from the Authority.

The Trustee is required to give notice of each such mandatory purchase at the same time and in the same manner as is described above under “Mandatory Tender for Purchase upon Change of Mode - Mandatory Tender for Purchase on Change of Mode,” provided that, if the mandatory purchase is directed as a result of an event of default under the Liquidity Facility, such notice may be given no less than 10 days prior to the applicable Mandatory Purchase Date or as late as the Mandatory Purchase Date.

Purchase Fund
The Trust Agreement requires the Trustee to establish and maintain a separate fund to be designated as the “2008 Purchase Fund” (the “2008 Purchase Fund”) and separate accounts therein to be designated as the “Remarketing Proceeds Account,” the “Liquidity Facility Account” and the “Authority Account.” The 2008 Purchase Fund shall be held in trust solely for the benefit of the Owners of tendered 2008 Certificates.

Upon receipt of the proceeds of a remarketing of any 2008 Certificate on the date such 2008 Certificate is to be purchased, the Trustee is required to deposit such remarketing proceeds in the Remarketing Proceeds Account to be applied to the payment of the Purchase Price of such 2008 Certificate. Upon receipt of the proceeds of a draw on a Liquidity Facility, the Trustee is required to deposit such Liquidity Facility proceeds in the Liquidity Facility Account to be applied to the payment of the Purchase Price of the 2008 Certificates to the extent that the moneys on deposit in the Remarketing Proceeds Account shall not be sufficient. Any amounts deposited in a Liquidity Facility Account and not needed for the payment of the Purchase Price of the 2008 Certificates shall be immediately returned to the applicable Liquidity Facility Provider. Upon receipt of funds from the Authority provided at its sole discretion for such purpose, the Trustee is required to deposit such funds in the Authority Account to be applied to the payment of the Purchase Price of the 2008 Certificates. Any amounts deposited in an Authority Account and not needed for the payment of the Purchase Price of the 2008 Certificates shall be immediately returned to the Authority. Amounts held in the Remarketing Proceeds Account, the Liquidity Facility Account and the Authority Account are not permitted to be commingled with any other funds held by the Trustee and must be held uninvested.

Each of the Remarketing Proceeds Account and the Liquidity Facility Account shall meet the requirements of an Eligible Account.

Liquidity Facility
Requirement. While the 2008 Certificates are in the Weekly Mode, the Authority is required to provide a Liquidity Facility. Each such Liquidity Facility (and any Alternate Liquidity Facility provided in replacement thereof) must (i) be in an amount equal to the Required Stated Amount, (ii) be provided by a Liquidity Facility Provider and (iii) provide for the purchase of the 2008 Certificates upon their optional or mandatory tender in accordance with the provisions of the Trust Agreement. The Authority is not permitted to voluntarily terminate such Liquidity Facility or any Alternate Liquidity Facility without providing at least 30 days written notice to the Trustee and each of the other Notice Parties.

Draws. If a Liquidity Facility is in effect with respect to the 2008 Certificates, on each date on which a 2008 Certificate is to be purchased, the Trustee, by demand given by Electronic means before 12:00 p.m. New York City time, is required to draw on the applicable Liquidity Facility in accordance with the terms thereof so as to receive thereunder by 3:00 p.m. New York City time on such date an amount, in immediately available funds, sufficient, together with the proceeds of the remarketing of such 2008 Certificates on such date, to enable the Trustee to pay the Purchase Price in connection therewith. The proceeds of such draw shall be paid to the Trustee, who shall deposit said proceeds in the Liquidity Facility Account.
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9 Alternate Liquidity Facility. The Authority may provide an Alternate Liquidity Facility on any Business Day not later than the fifth Business Day prior to the Expiration Date of the Liquidity Facility then in effect for the 2008 Certificates. Any such Alternate Liquidity Facility must be approved by the 2008 Certificate Insurer. The Authority must give at least 30 days’ written notice to the Trustee and each of the Notice Parties of its intent to furnish an Alternate Liquidity Facility, which notice shall specify the nature of such Liquidity Facility, the identity of the Liquidity Facility Provider and the proposed Substitution Date. The Trustee must then give notice of each Mandatory Purchase Date resulting from the proposed delivery of an Alternate Liquidity Facility in accordance with the provisions set forth in the Trust Agreement.

The Liquidity Facility to be provided by the Liquidity Facility Provider constitutes an Alternate Liquidity Facility. See “LIQUIDITY FACILITY” herein.

On or before the Substitution Date, there must be delivered to the Trustee: (i) the Alternate Liquidity Facility in substitution for the Liquidity Facility then in effect, (ii) a Favorable Opinion of Special Counsel and (iii) a written Opinion of Counsel for the provider of Alternate Liquidity Facility to the effect that such Alternate Liquidity Facility is a legal, valid, and binding obligation of the provider thereof and covering such other matters as the Authority shall require. Upon the satisfaction of such conditions, the Trustee must accept such Alternate Liquidity Facility and surrender the Liquidity Facility then in effect to the provider thereof on the Substitution Date; provided that if there are insufficient remarketing proceeds to pay the Purchase Price of all 2008 Certificates subject to mandatory purchase on such Substitution Date, the Trustee may not surrender the Liquidity Facility then in effect until the Trustee shall have drawn upon the existing Liquidity Facility to pay the Purchase Price for the 2008 Certificates subject to mandatory purchase on such Substitution Date. If any condition precedent to the substitution of an Alternate Liquidity Facility is not satisfied, the substitution shall not occur, but the affected 2008 Certificates shall remain subject to mandatory purchase on the proposed Substitution Date.

Delayed Remarketing Period
If sufficient funds are not available to pay the Purchase Price of all tendered 2008 Certificates (“Tendered Certificates”) to be purchased on any Purchase Date: (i) no purchase of such Tendered Certificates shall be consummated on such Purchase Date; (ii) all such Tendered Certificates shall be returned to the Owners thereof; (iii) all remarketing proceeds shall be returned to the Remarketing Agent for return to the persons providing such moneys; and (iv) such insufficiency and the failure to pay the Purchase Price on any Payment Date shall not constitute an Event of Default under the Trust Agreement. All such Tendered Certificates shall evidence interest at the Maximum Rate during the period of time from and including the applicable Purchase Date to (but not including) the date that all such Tendered Certificates are successfully remarketed (the “Delayed Remarketing Period”).

The Authority may direct the conversion of such Tendered Certificates to a different Mode during a Delayed Remarketing Period in accordance with the provisions of the Trust Agreement, but the Authority is not required to comply with the notice requirements otherwise applicable to a change of Mode.

During a Delayed Remarketing Period, the Remarketing Agent shall continue to use its best efforts to remarket such Tendered Certificates. Once the Remarketing Agent has advised the Trustee that it has a good faith belief that it is able to remarket all of such Tendered Certificates, the Trustee shall give written notice by mail to the Owners of such Tendered Certificates not later than five Business Days prior to the proposed Purchase Date, which notice shall state: (i) that such Tendered Certificates will be subject to mandatory tender for purchase on the proposed Purchase Date; (ii) the proposed Purchase Date; (iii) the Mode applicable to such Tendered Certificates from and after the proposed Purchase Date; (iv) the procedures for such mandatory tender for purchase; (v) the Purchase Price applicable to such Tendered Certificates; and (vi) the consequences of a failed remarketing.

The Trustee may, upon direction of the Authority, apply amounts on deposit in the 2008 Prepayment Subaccount of the 2008 Principal Account to the prepayment of Tendered Certificates, as a whole or in part on any Business Day during such Delayed Remarketing Period, at a prepayment price equal to the principal amount thereof, together with interest accrued thereon to the date fixed for prepayment, without premium. The Trustee shall give five (5) Business Days’ notice of such prepayment to the Owners of the 2008 Certificates to be prepaid. #33..
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10 Interest on Tendered Certificates shall be paid to the Owners thereof (i) on the first Business Day of each calendar month occurring during a Delayed Remarketing Period and (ii) on the day after the last day of such Delayed Remarketing Period.

Prepayment
Optional Prepayment. Each 2008 Certificate in the Weekly Mode is subject to prepayment at the option of the Authority, in whole or in part, in Authorized Denominations on any Business Day, at a prepayment price equal to 100% of the principal amount thereof, plus, accrued interest, if any, to the Prepayment Date, without premium.

Mandatory Sinking Fund Prepayment. Except in the case of 2008 Certificates that have been converted to Serial Certificates upon a change to the Fixed Rate Mode, the 2008 Certificates are subject to mandatory prepayment from Sinking Fund Payments prior to the Maturity Date, in part by lot, on October 1 of each year in accordance with the schedule set forth below upon notice hereinafter described, from and in the amount of the principal installment of the 2008 Payments due and payable on such dates, at a prepayment price equal to the sum of the principal amount evidenced and represented thereby plus accrued and unpaid interest evidenced and represented thereby to the Prepayment Date, without a prepayment premium. In addition, if any 2008 Certificates have been optionally prepaid, the amounts of such Sinking Fund Payments shall be reduced as directed by the Authority, or if not so directed, proportionality in increments of Authorized Denominations, by the principal amount evidenced and represented by all such 2008 Certificates so optionally prepaid
Mandatory Sinking Fund
Payment Date
(October 1) Sinking Fund Payment
2023 $2,300,000
2024 2,410,000
2025 2,515,000
2026 2,595,000
2027 2,705,000
2028 2,810,000
2029 2,945,000
2030 3,055,000
2031 3,185,000
2032 3,295,000
2033 3,430,000
2034 3,570,000
2035 3,705,000
2036 (maturity) 3,870,000
Notwithstanding the foregoing, no 2008 Certificate (other than a Liquidity Provider Certificate) shall be optionally prepaid while any Liquidity Provider Certificate is Outstanding unless all Outstanding Liquidity Provider Certificates are prepaid or purchased by the Trustee and cancelled concurrently with such prepayment or purchase.

If for any reason, the Liquidity Provider Certificates remain in book-entry but have not been assigned a separate CUSIP number, the Trustee shall apply the amounts in the 2008 Sinking Fund Subaccount set aside for prepayment to the purchase from the Liquidity Facility Provider of Liquidity Provider Certificates in an aggregate principal amount not in excess of the principal amount intended to be prepaid at a purchase price equal to the prepayment price specified above. The Liquidity Provider Certificates so purchased shall be cancelled by the Trustee, and the principal amount thereof shall be credited against the principal amount of the 2008 Certificates otherwise required to be prepaid.

Notice of Prepayment. When the prepayment of 2008 Certificates is authorized as described above, the Trustee is required to give notice thereof. Such notice must state the date of such notice, the prepayment price, the #33..
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11 place of prepayment (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the 2008 Certificates to be prepaid, and, if less than all of the 2008 Certificates are to be prepaid, the distinctive certificate numbers thereof to be prepaid and, in the case of 2008 Certificates to be prepaid in part only, the respective portions of the principal amount evidenced and represented thereby to be prepaid. Each such notice shall also state that on said date there will become due and payable on each of said 2008 Certificates the prepayment price thereof and, in the case of a 2008 Certificate to be prepaid in part only, the specified portion of the principal amount evidenced and represented thereby to be prepaid, together with accrued and unpaid interest evidenced and represented thereby to the prepayment date, and that from and after such prepayment date interest evidenced and represented thereby shall cease to accrue; and such notice shall require that said 2008 Certificates be then surrendered at the address of the Trustee specified in the prepayment notice.

Such notice must be mailed by the Trustee, at least 30 but not more 60 days before the prepayment date to the respective Owners of the 2008 Certificates designated for prepayment at their addresses appearing on the registration books of the Trustee. Such notice is also required to be provided to Securities Depositories and Information Services. Failure to receive such notice shall not invalidate any of the proceedings taken in connection with such prepayment.

Any prepayment may be cancelled if the notice of such prepayment has not been mailed to the respective Owners of the 2008 Certificates or if such notice expressly conditioned the prepayment upon the occurrence of one or more events. Notice of any such cancellation shall be given in the same manner as the notice of prepayment was given at least three Business Days prior to the date scheduled for prepayment.

Effect of Prepayment. If notice of prepayment has been duly given as described above and money for the payment of the prepayment price of the 2008 Certificates called for prepayment together with any accrued interest to the date fixed for prepayment is held by the Trustee, then on the prepayment date designated in such notice, the 2008 Certificates so called for prepayment will become due and payable on the date fixed for prepayment at the prepayment price specified in such notice; and from and after the date so designated, interest evidenced and represented by such 2008 Certificates so called for prepayment shall cease to accrue, and the Owners of such 2008 Certificates shall have no rights in respect thereof except to receive payment of the prepayment price thereof.

Purchase in Lieu of Prepayment
Subject to the provisions of the Trust Agreement, the Authority has the option to purchase any 2008 Certificate on any date on which it would be subject to optional prepayment at a purchase price equal to the then applicable prepayment price plus accrued interest thereon to the date of purchase.

Parity Obligations
The 2008 Payments are obligations payable from Gross Revenues of the City’s Water Utility System. Under the terms of the Master Contract, the City has incurred and may incur additional obligations payable from Gross Revenues of its Water Utility System on a parity with the 2008 Payments in the future. In addition to the City’s obligation to make the scheduled payments required pursuant to the 2008 Swap Agreement, its obligation to make termination payments under the 2008 Swap Agreement (but only if such payments are insured under the Swap Policy) and its obligations under the Reimbursement Agreement and the Liquidity Facility, the City currently has outstanding unpaid Parity Obligations with MID and the California Public Health Department. See “SECURITY FOR THE 2008 CERTIFICATES — Existing and Future Parity Obligations.” SECURITY FOR THE 2008 CERTIFICATES
General
Each 2008 Certificate represents a proportionate interest in the 2008 Payments to be made by the City under the 2008 Contract. Pursuant to the Trust Agreement, the Authority will assign substantially all of its right, title and interest in the 2008 Contract to the Trustee for the benefit of the Owners of the 2008 Certificates. The rights so assigned #33..
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12 include the Authority’s right to receive the 2008 Payments and its right to exercise any remedies provided in the 2008 Contract in the event of a default by the City thereunder.

Pursuant to the 2008 Contract, the City has purchased the 2008 Project from the Authority at the purchase price specified in the 2008 Contract, which is equal to the aggregate principal amount evidenced by the 2008 Certificates. The City is obligated to make such purchase by paying the 2008 Payments specified in the 2008 Contract including the interest on such payments.
2008 Payments
Pursuant to the Trust Agreement, the Authority has transferred, assigned and set over to the Trustee all of the 2008 Payments and any and all rights and privileges it has under the 2008 Contract with respect to the 2008 Certificates, including, without limitation, the right to collect and receive directly all of the 2008 Payments and the right to hold and enforce any security interest.

The 2008 Payments under the 2008 Contract represent the purchase price of the 2008 Project, which the Authority has sold to the City pursuant to the 2008 Contract. The obligation of the City to pay the 2008 Payments from Gross Revenues is absolute and unconditional; and, until such time as the 2008 Payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to the Master Contract), the City will not discontinue or suspend any 2008 Payments required to be paid by it under the 2008 Contract when due, whether or not the Water Utility System or any part thereof (including the 2008 Project) is operating or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or in part; and such payments are not subject to reduction whether by offset, abatement or otherwise and are not conditional upon the performance or nonperformance by any party to any agreement for any cause whatsoever. Notwithstanding anything contained in the Contract, however, the City is not required to advance any moneys derived from any source of income other than the Gross Revenues for the payment of the 2008 Payments or for the performance of any agreements or covenants required to be performed by it contained in the Contract.

As more fully described below, under the Contract, Gross Revenues of the Water Utility System are pledged as security for the payment of the 2008 Payments, any other Parity Obligations and the Maintenance and Operation Costs, as defined below.
“Water Utility System” is defined under the Master Contract to mean (i) all property rights, contractual rights and facilities of the City relating to water, including all facilities, properties, structures or works for the treatment, conservation, storage, transmission and distribution of water now owned by the City and (ii) all additions, betterments, extensions or improvements to such facilities, properties, structures or works or any part thereof hereafter acquired and constructed.
“Gross Revenues” is defined under the Master Contract to mean all gross income and revenue received or receivable by the City from the ownership or operation of the Water Utility System, determined in accordance with Generally Accepted Accounting Principles, including all rates, fees and charges (including all Connection Fees, contributions in aid of construction, and charges and standby water availability charges legally available for debt service) received by the City for the Water Service and the other services and facilities of the Water Utility System and all net proceeds of insurance covering business interruption loss relating to the Water Utility System and all other income and revenue howsoever derived by the City from the ownership or operation of the Water Utility System or arising from the Water Utility System, and including all Payment Agreement Receipts, and including all income from the deposit or investment of any money in the Revenue Fund or, to the extent deposited in the Revenue Fund, in the Parity Reserve Fund, but excluding in all cases any proceeds of taxes and any refundable deposits made to establish credit and advances.
“Maintenance and Operation Costs” is defined under the Master Contract to mean the costs paid or incurred by the City for maintaining and operating the Water Utility System, determined in accordance with Generally Accepted Accounting Principles, including, but not limited to, (a) all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water Utility System in good repair and working order, (b) all costs of water purchased by the City including all costs under the Treatment and Delivery Agreement by and among the City, the Del Este Water Company and MID which do not constitute debt service thereunder, (c) all #33..
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13 administrative costs of the City that are charged directly or apportioned to the operation of the Water Utility System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, payments into pension funds, and (d) all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of the Master Contract or of any resolution authorizing the execution of any Parity Obligation or of such Parity Obligation, such as compensation, reimbursement and indemnification of the trustee or remarketing agent for any such Parity Obligation, letter of credit fees for any such Parity Obligations, and fees and expenses of Independent Certified Public Accountants and Independent Consultants, but excluding in all cases (1) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles, premiums and discounts, (2) interest expense, (3) amounts paid from funds of the City other than Gross Revenues, and (4) in-lieu transfers or recoupment of contributed capital to the City’s general fund.

Pledge of Gross Revenues
Pursuant to the Contract, all Gross Revenues of the Water Utility System are irrevocably pledged to the payment of the 2008 Payments, any other Parity Obligations and the Maintenance and Operation Costs; and the Gross Revenues of the Water Utility System may not be used for any other purpose while any of the 2008 Payments remain unpaid; provided, however, that out of Gross Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Contract. Such pledge constitutes a first pledge of and charge and lien upon the Gross Revenues of the Water Utility System for the payment of the amounts due with respect to the Contract, other Parity Obligations and the Maintenance and Operation Costs in accordance with the terms of the Contract.

Rate Covenant
Pursuant to the Master Contract, the City covenants that it will at all times fix, prescribe and collect rates, fees and charges for the Water Service during each Fiscal Year which are reasonably fair and nondiscriminatory and which will be at least sufficient to yield Adjusted Annual Net Revenues for such Fiscal Year equal to at least 125% of Annual Debt Service to be paid during such Fiscal Year (the “Rate Covenant”). “Adjusted Annual Net Revenues” is defined under the Master Contract to mean, for any Fiscal Year or any designated 12-month period in question, the Adjusted Annual Gross Revenues during such Fiscal Year or 12-month period less the Maintenance and Operation Costs during such Fiscal Year or 12-month period. “Adjusted Annual Gross Revenues” is defined under the Master Contract to mean, for any Fiscal Year or any designated 12-month period in question, the Gross Revenues during such Fiscal Year or 12-month period, plus deposits to the City of Modesto Water Utility System Revenue Fund (the “Revenue Fund”) from amounts on deposit in the Rate Stabilization Fund, but only as and to the extent specified in the Master Contract, minus (y) amounts transferred from the Revenue Fund to the Rate Stabilization Fund in accordance with the Master Contract and, (z) for purposes of determining compliance with the rate covenant described above only, earnings from the investments in the Parity Reserve Fund that are deposited in the Revenue Fund in such Fiscal Year or 12-month period. “Adjusted Annual Debt Service” is defined under the Master Contract to mean, for any Fiscal Year or any designated 12-month period in question, the Annual Debt Service for such Fiscal Year or 12-month period minus the sum of (i) for purposes of the rate covenant described above only, the earnings from the investments in the Parity Reserve Fund that are deposited in the Revenue Fund in such Fiscal Year or 12-month period, and (ii) the amount of the Annual Debt Service paid from the proceeds of Parity Obligations or interest earned thereon (other from the Parity Reserve Fund), all as set forth in a Certificate of the City. “Annual Debt Service” is generally defined under the Master Contract to mean, for any Fiscal Year or any designated 12-month period in question, the payments required to be made with respect to all Outstanding Parity Obligations in such Fiscal Year or 12-month period; provided, that for purposes of determining compliance with the rate covenant described above, the Reserve Fund Requirement and conditions for the execution of Parity Obligations, certain additional provisions are applicable as described in APPENDIX B — “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
#33..
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14 The City’s ability to comply with the Rate Covenant may be limited by provisions of the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES.” The opinion of Sidley Austin LLP, Original Special Counsel, delivered upon execution and delivery of the 2008 Certificates stated that the enforceability of the Contract is subject to the limitations on the imposition by the City of certain fees and charges relating to the Water Utility System under Articles XIIIC and XIIID of the California Constitution. See APPENDIX C — “COPY OF FINAL APPROVING OPINION OF ORIGINAL SPECIAL COUNSEL DATED MAY 29, 2008.” The opinion of Original Special Counsel has not been updated subsequent to the date of delivery of the 2008 Certificates or as of the date of this Remarketing Memorandum. The City’s ability to comply with the Rate Covenant may also be adversely affected by other factors. See “RISK FACTORS.”
Parity Reserve Fund
The Parity Reserve Fund is provided for under the Trust Agreement. All amounts on deposit in the Parity Reserve Fund are available to be transferred to pay principal and interest evidenced and represented by the 2008 Certificates and any other obligations in connection with a future supplement to the Contract (collectively, the “Parity Certificates”) as described in greater detail below. Currently, only the 2008 Certificates are supported by the Parity Reserve Fund.

Concurrently with the execution and delivery of the 2008 Certificates, the Trustee credited the Parity Reserve Fund Insurance Policy to the Parity Reserve Fund; and, as a result of the foregoing, the balance then on deposit in the Parity Reserve Fund was equal to the Reserve Fund Requirement. See “CERTIFICATE INSURANCE — The Reserve Fund Insurance Policy” for a description of the Parity Reserve Fund Insurance Policy. “Reserve Fund Requirement” is defined under the Master Contract to mean, as of any date of determination and excluding any Parity Obligations which are not Supplemental Contracts and the debt service thereon, the least of (a) 10% of the initial offering price to the public of the Parity Obligations as determined under the Code, or (b) the Maximum Annual Debt Service, or (c) 125% of the Average Annual Debt Service, all as computed and determined by the City and specified in writing to the Trustee; provided, that such requirement (or any portion thereof) may be provided by one or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank or other institution if the obligations insured by such insurer or issued by such bank or other institution, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit equal to “Aa” or higher assigned by Moody’s (if Moody’s is then rating any of the Parity Obligations) and “AA” or higher assigned by S&P (if S&P is then rating any of the Parity Obligations) and that maintain at all times ratings at least equal to the lowest ratings (without giving effect to municipal bond insurance or other credit enhancement) on any of the Parity Obligations provided by Moody’s (if Moody’s is then rating any of the Parity Obligations) and by S&P (if S&P is then rating any of the Parity Obligations) (all such instruments collectively, “Reserve Funding Instruments”). If at any time, obligations insured by any such municipal bond insurer issuing a policy of municipal bond insurance or surety bond or a bank or other institution issuing a letter of credit as permitted by the definition of Reserve Fund Requirement shall no longer maintain such ratings as required in accordance with the immediately preceding sentence, the City shall provide or cause to be provided cash or a substitute municipal bond insurance policy or surety bond or a letter of credit meeting such requirements.

Pursuant to the Trust Agreement, the Trustee is to (i) withdraw and use all cash, if any, on deposit in the Parity Reserve Fund prior to using and withdrawing any amounts derived from payments under any Reserve Funding Instruments and (ii) draw on all Reserve Funding Instruments on a pro rata basis, based on the draw limit of each Reserve Funding Instrument. Amounts received by the Trustee from the City pursuant to the Master Contract as a replenishment of amounts withdrawn from the Parity Reserve Fund shall be applied first on a pro rata basis to reimburse draws on Reserve Funding Instruments and then to replenish cash withdrawn from the Parity Reserve Fund.

Moneys on deposit in the Parity Reserve Fund will be transferred by the Trustee to the 2008 Debt Service Fund established pursuant to the Trust Agreement to pay principal and interest evidenced and represented by the 2008 Certificates on any date on which interest is payable with respect thereto in the event amounts on deposit in the 2008 Debt Service Fund are insufficient for such purposes. The Trustee will also, from such amounts on deposit in the Parity Reserve Fund, transfer or cause to be transferred to any applicable debt service fund established under any other trust agreement under which any obligations are issued in connection with a Supplemental Contract, without #33..
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15 preference or priority between transfers made pursuant to this sentence and the preceding sentence, and in the event of any insufficiency of such moneys ratably without discrimination or preference, that sum or sums, if any, equal to the amount required to be deposited therein pursuant to such trust agreement under which any obligations are issued in connection with a Supplemental Contract. Following the valuation of investments in the Parity Reserve Fund on or before each October 1, all moneys on deposit in the Parity Reserve Fund in excess of the Reserve Fund Requirement will be transferred by the Trustee to the City for deposit in the Revenue Fund.

Flow of Funds
Contract Provisions. The City agrees and covenants in the Contract that all Gross Revenues it receives will be deposited when and as received in the Revenue Fund, which the City established under the Master Contract and which the City agrees and covenants to maintain separate and apart from other moneys of the City so long as any Parity Obligations remain unpaid, and all money on deposit in the Revenue Fund is to be applied and used as follows.

The City will pay at the following times in the following order of priority:
(1) Payment of Maintenance and Operation Costs and Parity Obligation Payment Fund Deposits. The City will, from the money in the Revenue Fund, without preference or priority, and in the event of any insufficiency of such moneys, ratably, without preference or priority (i) pay charges for Maintenance and Operation Costs of the Water Utility System (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not then immediately required) as such charges are due and payable, and (ii) deposit in the City of Modesto Water Utility System Parity Obligation Payment Fund established under the Master Contract, on the last Business Day of each month (1) an amount equal to the interest which has accrued or will accrue under all Parity Obligations during the next succeeding month calculated as if such interest has accrued or will accrue on a daily basis during such period, and (2) an amount equal to the principal which has accrued or will accrue (as a result of maturity, mandatory sinking fund payments or mandatory prepayment or otherwise) under all Parity Obligations during the next succeeding month calculated as if such principal has accrued or will accrue on a daily basis during such period, plus (3) the net payments due or which will be due on all Parity Payment Agreements calculated as if such net payments accrued or will accrue on a daily basis during such period, except that no such deposit need be made if the City then holds money in the Parity Obligation Payment Fund at least equal to the amount of interest and principal due or becoming due and payable under all Parity Obligations on the next succeeding date on which interest or principal becomes due and payable under any Parity Obligation plus the net payments due on all Parity Payment Agreements on such next succeeding due date therefor. Moneys on deposit in the Parity Obligation Payment Fund will be transferred by the City to make and satisfy the payments due on the next applicable date on which interest or principal becomes due and payable under any Parity Obligation or any net payment becomes due and payable by the City under any Parity Payment Agreement at least one Business Day prior to such next applicable due date. (2) Parity Reserve Fund Deposits. On or before the last Business Day of each month, the City will, from the remaining money on deposit in the Revenue Fund after deposits and transfers pursuant to paragraph (1) above, transfer to the Trustee for deposit in the Parity Reserve Fund that sum, if any, necessary to restore the Parity Reserve Fund to an amount equal to the Reserve Fund Requirement. The City will also, from such remaining moneys in the Revenue Fund, transfer or cause to be transferred to the applicable reserve fund or account for any Parity Obligations for which a separate reserve has been funded, without preference or priority between transfers made in accordance with this sentence and the preceding sentence, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, the sum or sums, if any, equal to the amount required to be deposited therein pursuant to such Parity Obligations.

After making the foregoing deposits and transfers, the City may apply any remaining money in the Revenue Fund for any lawful purpose of the City, including for the payment of any Subordinate Obligations in accordance with the instruments authorizing such Subordinate Obligations.

Pursuant to the Master Contract, the City has established the Rate Stabilization Fund, which currently has a balance of $[_______] on deposit therein. The City may deposit in the Rate Stabilization Fund any Gross Revenues, after providing for the payment of Parity Obligations and Maintenance and Operation Costs, and any other money received and available to be used therefor, provided that deposits from such Gross Revenues for each Fiscal Year may #33..
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16 be made until (but not after) 180 days after the end of such Fiscal Year. The City may withdraw amounts from the Rate Stabilization Fund only for inclusion in Adjusted Annual Net Revenues, such withdrawal to be made until (but not after) 180 days after the end of such Fiscal Year. All interest or other earnings upon deposits in the Rate Stabilization Fund will be accounted for as Gross Revenues. Notwithstanding the foregoing, no Gross Revenues will be deposited in the Rate Stabilization Fund to the extent that such amount was included by the City in Adjusted Annual Net Revenues for purposes of determining compliance with the rate covenant set forth in the Master Contract or the conditions for the execution of Parity Obligations contained in the Master Contract and deduction of the amounts to be deposited in the Rate Stabilization Fund would have caused noncompliance with such rate covenant or conditions.

The City’s ability to set rates, fees and charges for the Water Service at levels which would permit the City to make deposits into the Rate Stabilization Fund may be limited by amendments to the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES.” See also “THE WATER UTILITY SYSTEM — Summary of Projected Operating Results of the Water Utility System” for currently anticipated deposits into and withdrawals from the Rate Stabilization Fund.

The 2008 Contract establishes within the Parity Obligation Payment Fund the 2008 Supplemental Contract Payment Account. On or before the third Business Day immediately preceding each 2008 Payment Date or the date on which any net scheduled payment or insured termination payment is due under the 2008 Swap Agreement, the City shall, from the money in the Parity Obligation Payment Fund, deposit in the 2008 Supplemental Contract Payment Account (i) a sum equal to the amount of the interest and principal components of the 2008 Payments becoming due and payable under the 2008 Supplemental Contract on the next succeeding 2008 Payment Date and (ii) the net scheduled payments and any insured termination payment, if applicable, due under the 2008 Swap Agreement, except that no such deposit need be made if the amount then on deposit in the 2008 Supplemental Contract Payment Account is at least equal to the amount of the interest and principal components of the 2008 Payments becoming due and payable under the 2008 Contract on the next succeeding 2008 Payment Date plus the net scheduled payments and any insured termination payment, if applicable, due under the 2008 Swap Agreement on such next succeeding due date therefor. Moneys on deposit in the 2008 Supplemental Contract Payment Account shall (i) be transferred by the City to the Trustee on the Business Day immediately preceding each 2008 Payment Date to make and satisfy the 2008 Payment due on such 2008 Payment Date and (ii) be transferred by the City to the Trustee on the due date therefor to satisfy any net scheduled payment and any insured termination payment, if applicable, due under the 2008 Swap Agreement, all in accordance with the Master Contract and the Trust Agreement.

Trust Agreement Provisions. Pursuant to the Trust Agreement, the Trustee is required to deposit the 2008 Payments in a separate fund established by it and designated as the 2008 Debt Service Fund. The 2008 Debt Service Fund will contain two accounts: the 2008 Interest Account and the 2008 Principal Account (with a 2008 Prepayment Subaccount and a 2008 Sinking Fund Subaccount therein).

On the Business Day immediately preceding each Interest Payment Date, the Trustee is required to set aside from the 2008 Debt Service Fund and deposit in the 2008 Interest Account an amount equal to the amount of interest evidenced and represented by the 2008 Certificates becoming due and payable on each such Interest Payment Date.

No deposit is required to be made in the 2008 Interest Account if the amount contained therein (exclusive of amounts transferred for the payment of amounts due under the 2008 Swap Agreement) is at least equal to the aggregate amount of interest evidenced and represented by the 2008 Certificates becoming due and payable on the applicable Interest Payment Date. The Trustee is also required to deposit in the 2008 Interest Account any receipts relating to the 2008 Swap Agreement which the City has directed under the 2008 Swap Agreement to be transferred to the Trustee for deposit in the 2008 Interest Account and any amounts transferred to Trustee pursuant to the 2008 Contract for the payment of payments due under the 2008 Swap Agreement.

Except as otherwise provided in the Trust Agreement, all money in the 2008 Interest Account is required to be used and withdrawn by the Trustee solely for the purpose of paying the interest with respect to the 2008 Certificates as it shall become due and payable (including accrued interest evidenced and represented by any 2008 Certificates purchased or prepaid prior to their respective Certificate Payment Date) and the net scheduled payments due to the Swap Provider under the 2008 Swap Agreement. The Trustee shall be under no obligation to calculate the amount of Payment Agreement Payments due under the 2008 Interest Rate Swap Agreement and shall be entitled to rely conclusively on the information received by it with respect to the amount of the Payment Agreement Payments due and owing by the City. On the Business Day immediately preceding each October 1, the Trustee is required to set #33..
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17 aside from the 2008 Debt Service Fund and deposit in the 2008 Principal Subaccount (i) an amount equal to the principal amount evidenced and represented by the Outstanding Serial Certificates with a Certificate Payment Date of such October 1 (at the time of the execution and delivery of the 2008 Certificates, none of the 2008 Certificates will be Serial Certificates) and (ii) in the 2008 Sinking Fund Subaccount the amount of all Sinking Fund Payments required to be made on such October 1. Amounts to be applied to the optional prepayment of the principal component of the 2008 Certificates are to be deposited in the 2008 Prepayment Subaccount. No deposit need be made in the 2008 Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal evidenced and represented by the Outstanding Serial Certificates with a Certificate Payment Date of such October 1 and the amount contained in the 2008 Sinking Fund Subaccount is at least equal to the aggregate amount of all Sinking Fund Payments required to be made on such October 1.

All money in the 2008 Principal Account is required to be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the Serial Certificates as they shall become due and payable, whether at their respective Certificate Payment Dates or on prior prepayment, and all money in the 2008 Sinking Fund Subaccount is required to be used and withdrawn by the Trustee only to purchase or to prepay or pay Term Certificates, and with respect to the 2008 Sinking Fund Subaccount, on each Sinking Fund Payment Date, the Trustee is required to apply the Sinking Fund Payment required on that date to the prepayment (or payment at the Certificate Payment Date, as the case may be) of the Term Certificates upon the notice and in the manner provided in the Trust Agreement, provided that at any time prior to giving notice of such prepayment, the Trustee may, upon the Written Request of the Authority and receipt of sufficient moneys therefor, purchase for cancellation Term Certificates in accordance with the Trust Agreement.

Existing and Future Parity Obligations
Upon the execution and delivery of the 2008 Certificates, the obligation of the City to pay the 2008 Payments will be secured on a parity lien basis with certain existing Parity Obligations. In the Master Contract (as clarified in the 2008 Contract), “Parity Obligations” is specifically defined as the payment obligations under the Treatment and Delivery Agreement which constitute debt service and all Supplemental Contracts and all other obligations hereafter incurred by the City the payment of which constitutes a charge and lien on the Gross Revenues equal to and on a parity with the charge and lien upon the Gross Revenues for the payment of the Payments, other than (i) such portion of the payment obligations (including certain payments due upon an early termination thereof) under any Parity Payment Agreement to the extent such obligations are expressly subordinate to Parity Obligations pursuant to the terms of such Parity Payment Agreement and (ii) Parity Bank Agreements; provided that no amounts have been drawn under any such Parity Bank Agreements which have not been reimbursed by the City. Under the Master Contract “Treatment and Delivery Agreement” means the Treatment and Delivery Agreement by and among the City of Modesto, the Del Este Water Company and MID. The Treatment and Delivery Agreement has since been amended and restated and is now called “Amended and Restated Treatment and Delivery Agreement Between Modesto Irrigation District and City of Modesto.” Under the Treatment and Delivery Agreement, the City has agreed to pay all debt service on bonds issued by MID for the construction of the Water Treatment Plant (including, but not limited to, the 2007 MID Bonds), a raw water charge, project operation, administrative services and maintenance costs, insurance on the plant and the cost of electrical energy provided to the plant. The outstanding principal amount of MID bonds issued for the Water Treatment Plant as of [June 30, 2022] was $[93,190,000]. See “THE WATER UTILITY SYSTEM — Treatment and Delivery Agreement” for a description of the Treatment and Delivery Agreement and “THE WATER UTILITY SYSTEM — Summary of Projected Operating Results of the Water Utility System” for additional information concerning existing Parity Obligations. See also Appendix B — “DEFINITIONS AND SUMMARY OF PRINCIPAL DOCUMENTS.” In addition to the Parity Obligations specifically defined as such in the Master Contract, the 2008 Swap Agreement (to the extent described below) constitutes a Parity Obligation. The Reimbursement Agreement and the Liquidity Facility constitute Parity Bank Agreements under the Contract; and Parity Bank Agreements are Parity Obligations if any amounts have been drawn thereunder which have not been reimbursed by the City. In addition, the City has an outstanding Parity Obligation in the form of a loan from the California Department of Public Health for Water System Utilities projects. The loan is currently outstanding in the approximate amount of $290,000.

In addition to the existing Parity Obligations, the City may at any time execute additional Parity Obligations, but subject to the specific conditions set forth in the Master Contract, including the conditions that there be on file with the Trustee either:
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18 (1) A Certificate of the City demonstrating that during any 12 consecutive calendar months out of the immediately preceding 18 calendar month period, the Adjusted Annual Net Revenues were at least equal to 125% of the Maximum Annual Debt Service for all existing Parity Obligations plus the Parity Obligations proposed to be executed; provided, that for the purpose of providing such Certificate, the City may adjust the foregoing Adjusted Annual Net Revenues to reflect:
(i) An allowance for Gross Revenues that would have been derived from each new connection to the Water Utility System that was made prior to the execution of such Parity Obligations but which, during all or any part of said 12 month period, was not in existence, in an amount equal to the estimated additional Gross Revenues that would have been derived from each such connection if it had been made prior to the beginning of said 12 month period, and (ii) An allowance for Gross Revenues that would have been derived from any increase in the rates, fees and charges fixed and prescribed for Water Service which became effective prior to the execution of such Parity Obligations but which, during all or any part of said 12 month period, was not in effect, in an amount equal to the estimated additional Gross Revenues that would have been derived from such increase in rates, fees and charges if it had been in effect prior to the beginning of said 12 month period; or
(2) A Consultant’s Report showing that the Adjusted Annual Net Revenues for the Fiscal Year next following the end of the period during which interest on the Parity Obligations proposed to be executed is to be capitalized or, if no interest is capitalized, the Fiscal Year in which the Parity Obligations proposed to be executed are executed, will be at least equal to 125% of the Maximum Annual Debt Service; provided, that for the purpose of providing the Consultant’s Report, the Independent Consultant may adjust the foregoing Adjusted Annual Net Revenues to reflect:
(i) An allowance for Gross Revenues that would have been derived from any increase in the rates, fees and charges prescribed for Water Service in effect and being charged, or rates, fees and charges for Water Service that are expected to be charged in accordance with a program of specific rates, fees, charges, rate levels or increases in overall Gross Revenue approved by a resolution of the City Council; and
(ii) An allowance for Gross Revenues from customers of the Water Utility System anticipated to be served by the facilities or improvements financed in substantial part by the Parity Obligations proposed to be executed together with any additional Parity Obligations expected to be executed prior to the Fiscal Year of determination.

Notwithstanding the foregoing, the Master Contract specifies that there shall be no limitations on the ability of the City to execute any Parity Obligation at any time to refund any outstanding Parity Obligation. 2008 Swap Agreement
The City entered into an interest rate swap agreement in the form of an ISDA Master Agreement (Local Currency – Single Jurisdiction), the U.S. Municipal Counterparty Schedule thereto, a Credit Support Annex and a Confirmation each dated as of and entered into on September 27, 2006 (collectively, the “2006 Swap Agreement”) with Bank of America, N.A. (the “Swap Provider”). In connection with the execution and delivery of the 2008 Certificates, the City and the Swap Provider amended and restated the 2006 Swap Agreement (as so amended and restated, the “2008 Swap Agreement”). The 2008 Swap Agreement is scheduled to expire on the Maturity Date of the 2008 Certificates; and the notional amount of the 2008 Swap Agreement is scheduled to be reduced on the same dates and in the same amounts as the principal evidenced by the 2008 Certificates is scheduled to be reduced. Pursuant to the 2008 Swap Agreement, the City is required to make periodic payments to the Swap Provider calculated on the basis of a fixed rate of interest on an initial notional amount equal to the principal amount represented by the 2008 Certificates. In return, the Swap Provider is required to make periodic payments to the City calculated on the basis of a variable rate of interest equal to a percentage of 1-month USD London Interbank Offered Rate (“LIBOR”) on the same notional amount. The amounts payable by each party pursuant to the 2008 Swap Agreement are netted against the payments to be received by such party thereunder.
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19 On March 5, 2021, the U.K. Financial Conduct Authority, the body that regulates and supervises the publication of LIBOR, announced the cessation of the publication of 1-month USD LIBOR effective June 30, 2023.

Certain of the amounts that may be payable by the City to the Swap Provider will be insured pursuant to a policy of interest rate swap insurance to be issued by Assured Guaranty (the “Swap Policy”).

The City’s obligations under the 2008 Swap Agreement to make scheduled payments and certain termination payments (but only if such termination payments are insured pursuant to the Swap Policy) are Parity Obligations. No arrangements made in respect of the 2008 Swap Agreement will alter the City’s obligation to make the 2008 Payments.

Both the City and the Swap Provider have the right to terminate the 2008 Swap Agreement prior to its stated termination date under certain conditions. Any such termination could result in an obligation on the part of the City or the Swap Provider to make termination payments to the other party, and the amount of such termination payments could be substantial. Any obligation on the part of the City to make such a termination payment (other than a termination payment that is insured under the terms of the Swap Policy) will not be a Parity Obligation and will be subordinate to the City’s liabilities with respect to Parity Obligations.

Under an Agreement Regarding Insured Swap Transaction, dated as of July 1, 2011, between the City and Assured Guaranty, the City agreed, unless Assured Guaranty otherwise consents in writing, within the earlier of (a) the tenth business day after the first date on which the estimated settlement amount of the swap transaction under the 2008 Swap Agreement is zero or positive to the City and (b) the third anniversary of the date of such agreement, to (i) designate an early termination date, or other optional termination, with respect to such swap transaction in accordance with the provisions of the 2008 Swap Agreement; or (ii) cause the Swap Provider to terminate the Swap Policy by delivering to Assured Guaranty the original Swap Policy along with an instrument from the Swap Provider satisfactory to Assured Guaranty deeming such swap transaction no longer to be insured under the Swap Policy and releasing Assured Guaranty from all further liability under the Swap Policy.

Neither the Trustee nor the Owners will have any rights under the 2008 Swap Agreement or against the Swap Provider.

CERTIFICATE INSURANCE
The following information has been provided by Assured Guaranty Corp. It has not been verified by the Authority or the City, and neither the Authority nor the City guarantees its accuracy or completeness. The following information is not complete, and reference is made to Appendix E for a copy of the financial guaranty insurance policy and specimen endorsements (the “2008 Certificate Insurance Policy”) of Assured Guaranty Corp.

Certificate Insurance Policy
On the date of delivery of the 2008 Certificates, Assured Guaranty Corp. (“Assured Guaranty” or the “2008 Certificate Insurer”) issued its financial guaranty insurance policy (together with certain endorsements expected to be issued by Assured Guaranty, the “2008 Certificate Insurance Policy”) for the 2008 Certificates. The 2008 Certificate Insurance Policy guarantees the scheduled payment of principal of and interest on the 2008 Certificates when due as set forth in the form of the 2008 Certificate Insurance Policy (including specimen expected endorsements) included as an exhibit to this Official Statement.

The 2008 Certificate Insurance Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. #33..
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20 The Reserve Fund Insurance Policy
On the date of delivery of the 2008 Certificates, Assured Guaranty issued a financial guaranty insurance policy for the reserve fund (the “Reserve Fund Insurance Policy”) for the 2008 Certificates. Under the terms of the Reserve Fund Insurance Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of the scheduled principal and interest on the 2008 Certificates that becomes due for payment but shall be unpaid by reason of nonpayment by the Authority (the “Insured Payments”).

Assured Guaranty will pay each portion of an Insured Payment that is due for payment and unpaid by reason of nonpayment by the Authority to the Trustee or Paying Agent, as beneficiary of the Reserve Fund Insurance Policy on behalf of the holders of the 2008 Certificates on the later to occur of (i) the date such scheduled principal or interest becomes due for payment or (ii) the business day next following the day on which Assured Guaranty receives a demand for payment therefor in accordance with the terms of the Reserve Fund Insurance Policy.

No payment shall be made under the Reserve Fund Insurance Policy in excess of $2,082,512.74 (the “Reserve Fund Insurance Policy Limit”). Pursuant to the terms of the Reserve Fund Insurance Policy, the amount available at any particular time to be paid to the Trustee or Paying Agent shall automatically be reduced to the extent of any payment made by Assured Guaranty under the Reserve Fund Insurance Policy, provided, that, to the extent of the reimbursement of such payment to Assured Guaranty, the amount available under the Reserve Fund Insurance Policy shall be reinstated in full or in part, in an amount not to exceed the Reserve Fund Insurance Policy Limit.

The Reserve Fund Insurance Policy does not insure against nonpayment caused by the insolvency or negligence of the Trustee or Paying Agent.

The Reserve Fund Insurance Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Corp.

Assured Guaranty is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in 1988. Assured Guaranty is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO.” AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and international public finance (including infrastructure) and structured finance markets and asset management services. Neither AGL nor any of its shareholders or affiliates, other than Assured Guaranty, is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty.

Assured Guaranty’s financial strength is rated “AA” (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), and “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of Assured Guaranty in its sole discretion. In addition, the rating agencies may at any time change Assured Guaranty’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by Assured Guaranty. Assured Guaranty only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by Assured Guaranty on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.
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21 Current Financial Strength Ratings
On October 21, 2022, KBRA announced it had affirmed Assured Guaranty’s insurance financial strength rating of “AA+” (stable outlook). Assured Guaranty can give no assurance as to any further ratings action that KBRA may take.

On July 8, 2022, S&P announced it had affirmed Assured Guaranty’s financial strength rating of “AA” (stable outlook). Assured Guaranty can give no assurance as to any further ratings action that S&P may take.

For more information regarding Assured Guaranty’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Capitalization of Assured Guaranty Corp.

At December 31, 2022:
 The policyholders’ surplus of Assured Guaranty was approximately $1,916 million.  The contingency reserve of Assured Guaranty was approximately $347 million.  The net unearned premium reserve and net deferred ceding commission income of Assured Guaranty were approximately $327 million.

The policyholders’ surplus, contingency reserve, net unearned premium reserve and net deferred ceding commission income of Assured Guaranty were determined in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference
Portions of AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023 that relate to Assured Guaranty are incorporated by reference into this Remarketing Memorandum and shall be deemed to be a part hereof.

All information relating to Assured Guaranty included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8 K, after the filing of the last document referred to above and before the termination of the offering of the 2008 Certificates shall be deemed to be incorporated by reference into this Remarketing Memorandum and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Remarketing Memorandum.

Any information regarding Assured Guaranty included herein under the caption “CERTIFICATE INSURANCE - Assured Guaranty Corp.” or included in a document incorporated by reference herein (collectively, the “Assured Guaranty Information”) shall be modified or superseded to the extent that any subsequently included Assured Guaranty Information (either directly or through incorporation by reference) modifies or supersedes such previously included Assured Guaranty Information. Any Assured Guaranty Information so modified or superseded shall not constitute a part of this Remarketing Memorandum, except as so modified or superseded.

Miscellaneous Matters
Assured Guaranty makes no representation regarding the 2008 Certificates or the advisability of investing in the 2008 Certificates. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Remarketing Memorandum #33..
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22 or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured Guaranty supplied by Assured Guaranty and presented under the heading “CERTIFICATE INSURANCE”.

LIQUIDITY FACILITY
The following summary of certain provisions of the Liquidity Facility does not purport to be complete or definitive, does not constitute a complete summary of the Liquidity Facility, and is qualified in their entirety by reference to the complete provisions of the Liquidity Facility, which is available from the Authority, City or the Remarketing Agent. Investors should obtain and review a copy of the Liquidity Facility in order to understand all of the terms of the document. The provisions of any substitute liquidity facility or credit facility may be different from those summarized below.

Liquidity Facility
The Liquidity Facility secures only payment of the purchase price of the 2008 Certificates bearing interest at a Weekly Rate tendered for purchase, and does not otherwise secure payment of the principal of or interest on the 2008 Certificates. The Liquidity Facility is subject to termination at the option of the Liquidity Facility Provider as described below.

General. The Liquidity Facility contains various provisions, covenants and conditions, certain of which are summarized below. Capitalized terms used in the following summary are defined in this Remarketing Memorandum or the Liquidity Facility and reference thereto is made for full understanding of their import. The Liquidity Facility will have a stated expiration date of [__________], 2026.

Defined Terms. As used below, the following terms shall have the meanings set forth below:
“Available Commitment” means on any day the sum of the Available Principal Commitment and the Available Interest Commitment on such day.
“Available Interest Commitment” means for each Weekly Rate Period $[487,776], representing an amount equal to [35] days of interest on the Available Principal Commitment calculated at the assumed rate of interest of 12% per annum (on the basis of actual days elapsed and a 365-day year) and rounded up to the nearest dollar. The Available Interest Commitment shall increase or decrease concurrently and proportionately with each increase or decrease in the Available Principal Commitment. Notwithstanding the foregoing provisions of this defined term, in no event shall the Available Interest Commitment exceed $[487,776].
“Available Principal Commitment” means initially $42,390,000.00 and thereafter means such amount adjusted from time to time as follows: (a) downward by the amount of any reduction or termination of the Available Principal Commitment pursuant to the provisions of the Liquidity Facility, (b) downward by the principal amount of any Certificates purchased by the Bank pursuant to the Liquidity Facility; and (c) upward by the principal amount of any Certificates theretofore purchased by the Bank pursuant to the Liquidity Facility, which are repurchased upon a successful remarketing in accordance with the Trust Agreement or are prepaid pursuant to the terms of the Liquidity Facility and for which the Liquidity Facility Provider has received immediately available funds equal to the principal amount thereof and accrued interest thereon, or which cease to bear interest at the Bank Rate pursuant to the provisions of the Liquidity Facility; provided that after giving effect to such adjustment the Available Principal Commitment shall never exceed $42,390,000. Any adjustment pursuant to clause (a), (b) or (c) in this defined term shall occur simultaneously with the event requiring such adjustment. “Bond Insurer Event of Insolvency” means the occurrence and continuance of one or more of the following events: (a) the issuance, under the laws of the state of incorporation or formation of the Bond Insurer, of an order of relief, rehabilitation, reorganization, conservation, liquidation or dissolution of the Bond Insurer; (b) the commencement by the Bond Insurer of a voluntary case or other proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect including, without limitation, the #33..
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23 appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property; (c) the commencement of an involuntary case or other proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property, and such involuntary case or appointment remains undismissed and unstayed for a period of 90 consecutive days; (d) the consent of the Bond Insurer to any relief referred to in the preceding clause (c) in an involuntary case or other proceeding commenced against it; (e) the making by the Bond Insurer of a general assignment for the benefit of creditors; (f) the failure of the Bond Insurer to generally pay its debts as they become due or claims under any of its insurance policies as such claims are made; or (g) the board of directors or any senior officer of the Bond Insurer shall take any action to authorize any of the foregoing. “Debt” of any Person means at any date, without duplication, (a) all obligations of such person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (d) all obligations of such Person as lessee under capital leases; (e) all Debt of others secured by a lien on any asset of such Person, whether or not such Debt is assumed by such Person; and (f) all obligations, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other person including, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that with respect to the City, Debt shall exclude conduit, enterprise and other Debt that have no claim on the General Fund of the City other than obligations payable from the Revenue Fund. “Defaulted Interest” means accrued interest payable on a 2008 Certificate, which was not paid when due under the terms of the Trust Agreement.
“Eligible Certificates” means any 2008 Certificate bearing interest at the Weekly Rate other than Liquidity Provider Certificates and 2008 Certificates owned by, for the account of, or on behalf of, the Authority or the City. “Extended Bank Purchase Period” means, upon the City’s written request for extension and the Liquidity Facility Provider’s agreement thereto, the period from the then current Stated Expiration Date to such new Stated Expiration Date.
“Notice of Bank Purchase” means a notice in a specified form appropriately completed and executed by the Trustee requesting the Liquidity Facility Provider to purchase Eligible Certificates during the Bank Purchase Period as a result of an optional tender or a mandatory purchase. “Other Event of Insolvency” means the occurrence and continuance of one or more of the following events:
(a) the Authority or the City shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code (the “Bankruptcy Code”) or any other federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for itself or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take action for the purpose of effecting any of the foregoing; or (b) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Authority, the City or of a substantial part of the property of the Authority or the City, under the Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Authority, the City or for a substantial part of the property of the Authority or the City, and such proceeding or petition shall continue undismissed and unstayed for #33..
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24 60 days; or an order or decree for relief shall be entered against the Authority or the City under the Bankruptcy Code as now or hereafter in effect.
“Purchase Date” means the date on which the Liquidity Facility Provider purchases Eligible Certificates following its receipt of a Notice of Bank Purchase.
“Related Documents” means the fee letter agreement relating to the Liquidity Facility, the 2008 Certificates, the Trust Agreement, the Contract, the custodian agreement, relating to the Liquidity Facility, this Remarketing Memorandum, the Bond Insurance Policy and the Remarketing Agreement. “Stated Expiration Date” means the later of (a) [__________], 2026 and (b) the last day of the Extended Bank Purchase Period as extended from time to time at the request of the City pursuant to the Liquidity Facility or, if any such day is not a Business Day, the next preceding Business Day to such day.

Commitment to Purchase 2008 Certificates. Upon compliance with the terms and conditions of the Liquidity Facility, and subject to the terms and conditions set forth therein, the Liquidity Facility requires the Liquidity Facility Provider, at the request of the Trustee, to purchase from time to time during the Bank Purchase Period at the Purchase Price, with its own immediately available funds, Eligible Certificates tendered or deemed tendered for purchase pursuant to an optional tender or a mandatory purchase and which, in either case, the Remarketing Agent has been unable to remarket. The aggregate principal amount of any 2008 Certificate purchased by the Liquidity Facility Provider on a Purchase Date shall be an authorized denomination applicable to 2008 Certificates bearing interest at the Weekly Rate, and in any case the aggregate principal amount of all 2008 Certificates purchased on the applicable Purchase Date shall not exceed the Available Principal Commitment on such date (calculated immediately before giving effect to any such purchase of 2008 Certificates by the Liquidity Facility Provider on such date). The aggregate amount of the Purchase Price comprising interest on the 2008 Certificates (the “Interest Component”) purchased on a Purchase Date shall not exceed the lesser of (a) the Available Interest Commitment on such date and (b) the actual aggregate amount of interest accrued and unpaid on each such 2008 Certificate, other than Defaulted Interest, to but excluding a Purchase Date; provided that if a Purchase Date is an Interest Payment Date the amount described in this clause (b) shall be reduced by the amount of interest payable on each such 2008 Certificate on such Interest Payment Date.

Any Eligible Certificates so purchased by the Liquidity Facility Provider will constitute Liquidity Provider Certificates and will bear interest at the Bank Rate in accordance with the Liquidity Facility.

The Bank Purchase Period means the period from the Effective Date to and including the earliest of (a) the Stated Expiration Date then in effect; (b) the first Business Day following the date on which the Rate Period for all of the 2008 Certificates ceases to be a Weekly Rate Period; (c) the close of business of the Liquidity Facility Provider on the Business Day following the Substitution Date; (d) the Purchase Termination Date (except to the extent that purchases are permitted on the Termination Date following delivery of a Notice of Termination); (e) the date on which no 2008 Certificates are Outstanding; and (f) the date on which the Available Commitment is terminated in whole upon substitution by the City of the Liquidity Facility with an Alternate Liquidity Facility.

If the Liquidity Facility Provider receives a Notice of Bank Purchase from the Trustee at or before 9:30 a.m. (California time) on a Business Day during the Bank Purchase Period to purchase Eligible Certificates during the Bank Purchase Period as a result of an optional tender or a mandatory purchase, the Liquidity Facility Provider will, unless it determines that any applicable condition to the obligation of the Liquidity Facility Provider to purchase any of the Eligible Certificates under the Liquidity Facility on such date is not satisfied, transfer not later than 11:30 a.m. (California time) on the same Business Day to the Trustee, in funds of the Liquidity Facility Provider to be available as specified in such Notice of Bank Purchase, an amount equal to the aggregate Purchase Price of such Eligible Certificates.

Termination of the Liquidity Facility Provider’s Commitment to Purchase 2008 Certificates. Upon the occurrence of certain specified Events of Default, the Available Commitment and the obligation of the Liquidity Facility Provider to purchase 2008 Certificates shall immediately terminate without notice or demand, as described below under “Remedies — Immediate Termination. Upon the occurrence of certain other specified Events of Default, the Liquidity Facility Provider may terminate the Available Commitment by given written notice specifying the date #33..
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25 on which the Available Commitment shall terminate, which shall be not less than thirty (30) days from the date of receipt of such notice, as described below under “Remedies — Termination With Notice.” Upon the occurrence of certain other specified insolvency events or Events of Default, the Liquidity Facility Provider’s obligation to purchase Eligible Certificates under the Liquidity Facility shall immediately be suspended without further action, as described below under “Remedies — Immediate Suspension.”
Events of Default. Each of the following events shall constitute an “Event of Default” under the Liquidity Facility:
(a) any principal or interest due on the 2008 Certificates is not paid by the Authority when due and such principal or interest is not paid by the Bond Insurer when, as and in the amounts required to be paid pursuant to the terms of the Bond Insurance Policy; or
(b) a Bond Insurer Event of Insolvency shall have occurred; or (c) (i) any material provision of the Bond Insurance Policy at any time for any reason ceases to be valid and binding on the Bond Insurer in accordance with the terms of the Bond Insurance Policy or is declared or ruled to be null and void by a court or other governmental agency of appropriate jurisdiction; or (ii) the Bond Insurer shall (A) in writing to the Trustee claim that the Bond Insurance Policy with respect to the payment of principal or interest on the 2008 Certificates is not valid and binding on the Bond Insurer, (B) repudiate in writing the obligations of the Bond Insurer under the Bond Insurance Policy with respect to payment of principal of or interest due on the 2008 Certificates, or (C) initiate legal proceedings seeking an adjudication that the Bond Insurance Policy, with respect to the payment of principal or interest on the 2008 Certificates, is not valid and binding on the Bond Insurer; or (d) the Bond Insurer shall default in any payment or payments of amounts payable by it under any insurance policy or policies (other than the Bond Insurance Policy) when due and such default shall continue for a period of thirty (30) days; (it being understood by the Liquidity Facility Provider that default, for the purposes of this paragraph, shall not mean a situation whereby the Bond Insurer contests in good faith its liability under any such policy or policies in light of the claim or claims made thereunder); or (e) any material representation or warranty made by the Authority or the City under or in connection with the Liquidity Facility or in any Related Document shall prove to be untrue in any material respect on the date as of which it was made; or
(f) any Other Event of Insolvency shall have occurred; or (g) (i) nonpayment of any fees due to the Liquidity Facility Provider hereunder pursuant to the Liquidity Facility, if such failure to pay when due shall continue for ten (10) Business Days after the City, the Authority and the Bond Insurer have received written notice thereof from the Liquidity Facility Provider; or (ii) nonpayment of any other amounts payable to the Liquidity Facility Provider under the Liquidity Facility or under any of the Related Documents and such failure is not cured within 20 days after the City, the Authority and the Bond Insurer have received written notice thereof from the Liquidity Facility Provider; or (h) the breach by the Authority or the City of any of the terms or provisions of certain specified covenants set forth in the Liquidity Facility; or
(i) the Authority shall default in the performance or observance of any other material covenant or agreement contained (or incorporated by reference) in the Liquidity Facility and such default shall continue unremedied for a period of thirty (30) days after the Authority has received written notice thereof from the Liquidity Facility Provider; or
(j) the City shall default in the performance or observance of any other material covenant or agreement contained (or incorporated by reference) in the Liquidity Facility and such default shall continue unremedied for a period of thirty (30) days after the City has received written notice thereof from the Liquidity Facility Provider; or #33..
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26 (k) any provision of the Liquidity Facility or any of the Related Documents ceases to be valid and binding against the Authority or the City or shall be declared null and void or the Authority or the City repudiates its obligations under the Liquidity Facility or any of the Related Documents or the pledge and assignment pursuant to the Liquidity Facility and the Related Documents shall for any reason cease to be fully enforceable with the priority required hereunder and thereunder; or
(l) the occurrence of any “event of default” under any of the Related Documents which is not otherwise specified as another Event of Default, other than the failure of the Liquidity Facility Provider to provide funds for the purchase of Eligible Certificates when required by the terms and conditions of the Liquidity Facility; or (m) the Trustee ceases to have an effective security interest in the Trust Estate prior to any lien, pledge, assignment or security interest of any creditors of the City or the Authority; or (n) (i) S&P and Moody’s shall suspend or withdraw the financial strength or claims paying ability rating of the Bond Insurer for credit related reasons or shall reduce such rating below BBB- in the case of S&P and Baa3 in the case of Moody’s, or (ii) the long term claims-paying or financial strength rating of the Bond Insurer is lowered below Aa3 and AA- by each of Moody’s, and S&P, respectively; or (o) the City shall default in any payment of principal of or premium, if any, or interest on any of its Debts in excess of $500,000 and such default shall continue beyond the expiration of the applicable grace period, if any, or the City shall fail to perform any other agreement, term or condition contained in any agreement under which any obligation for the payment of $500,000 or more is created or secured, which shall permit or result in the declaring due and payable of such obligation prior to the date on which it would otherwise have become due and payable; or (p) a final judgment or order for the payment of money for an uninsured claim in excess of $500,000 shall have been rendered against the City and such judgment or order shall not have been satisfied, stayed or bonded pending appeal within a period of thirty (30) days from the date on which it was first so rendered; or (q) any cancellation, termination, replacement, amendment, replacement or other modification of the Bond Insurance Policy or substitution of the Bond Insurer occurs without the prior written consent of the Liquidity Facility Provider; or
(r) the long-term, unenhanced rating of the Revenue Fund shall be withdrawn or suspended or otherwise unavailable for credit-related reasons or reduced below Baa1 in the case of Moody’s, BBB+ in the case of S&P or BBB+ in the case of Fitch; provided that in the event of split ratings, the default will be determined by reference to the lowest rating; or
(s) a moratorium shall have been declared with respect to the payment of the debts of the Authority or the City; or
(t) any of the funds or accounts established pursuant to the Trust Agreement or the Contract or any funds or accounts on deposit, or otherwise to the credit of, such funds or accounts shall become subject to any stay, writ, judgment, warrant of attachment, execution or similar process by any of the creditors of the City or the Authority and such stay, writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or stayed within thirty (30) days after its issue or levy; or (u) an event shall have occurred that in the opinion of the Liquidity Facility Provider has a material adverse effect on the financial condition, operations or prospects of the City or its ability to perform its obligations under the Liquidity Facility or any Related Document.

Remedies.

Immediate Termination. In the case of an Event of Default specified in paragraphs (a), (b), (c)(i), (d), (n)(i) or (q) above (each, a “Termination Event”), the Available Commitment and the obligation of the Liquidity Facility Provider to purchase 2008 Certificates shall immediately terminate without notice or demand, and thereafter the #33..
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27 Liquidity Facility Provider shall be under no obligation to purchase 2008 Certificates. Promptly after the Liquidity Facility Provider receives written notice of such Termination Event, the Liquidity Facility Provider shall give written notice of the same to the Trustee, the Authority, the City, the Rating Agencies and the Remarketing Agent; provided, that the Liquidity Facility Provider shall incur no liability or responsibility whatsoever by reason of its failure to give such notice and such failure shall in no way affect the termination of the Available Commitment and of the Liquidity Facility Provider’s obligation to purchase Eligible Certificates pursuant to the Liquidity Facility.

Termination With Notice. Upon the occurrence and during the continuance of an Event of Default specified in paragraphs (g)(i) or (n)(ii) above, the Liquidity Facility Provider may terminate the Available Commitment by giving written notice (a “Notice of Termination”) to the City, the Trustee, the Remarketing Agent and the Bond Insurer, specifying the date on which at 3:00 p.m. California time the Available Commitment shall terminate (the “Termination Date”), which shall be not less than thirty (30) days from the date of receipt of such notice by the Trustee, and after the Termination Date the Liquidity Facility Provider shall be under no further obligation to purchase 2008 Certificates hereunder other than 2008 Certificates which are the subject of the Notice of Liquidity Facility Provider Purchase delivered by the Trustee in accordance with the provisions of the Liquidity Facility and received by the Liquidity Facility Provider on or prior to the Termination Date.

Immediate Suspension. In the case of (i) the occurrence of an Event of Default of the type specified in paragraph (c)(ii) above or (ii) the commencement of an involuntary case or other involuntary proceeding seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with respect to the Bond Insurer or its debts or claims under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian, assignee, sequestrator or other similar official for the Bond Insurer or any substantial part of its property (an “Involuntary Insolvency Event”), the Liquidity Facility Provider’s obligation to purchase Eligible Certificates hereunder shall immediately be suspended without further action on the part of any Person. Upon such a suspension, the Liquidity Facility Provider shall give written notice thereof to the City, the Trustee, the Remarketing Agent and the Bond Insurer; provided, however, that the failure of the Liquidity Facility Provider to give such notice shall not affect the validity of such suspension. The obligation of the Liquidity Facility Provider to purchase Eligible Certificates shall be suspended until either (x) the Liquidity Facility Provider delivers a written notice to the Trustee rescinding the automatic suspension of its obligation to purchase Eligible Certificates under the Liquidity Facility (a “Rescission Notice”) or, (y)(1) in the case of a suspension event upon an Event of Default specified in paragraph (c)(ii) above, a final non-appealable order of a court having jurisdiction in the premises shall be entered declaring that all material contested provisions of the Bond Insurance Policy are upheld in their entirety or (2) in the case of an Involuntary Insolvency Event, a court having jurisdiction in the premises shall dismiss or stay such involuntary case, proceeding or appointment within 60 days. In the event a final non-appealable order is entered declaring any material provision of the Bond Insurance Policy to be null and void, or declaring that the Bond Insurer does not have any further liability or obligation under the Bond Insurance Policy or in the event an Involuntary Insolvency Event is not dismissed or stayed within 60 days by a court having jurisdiction in the premises, then the obligation of the Liquidity Facility Provider to purchase Eligible Certificates shall immediately terminate without any further action by any Person. In the event a final non-appealable order is entered declaring that all material contested provisions of the Bond Insurance Policy are upheld in their entirety or in the event a court having jurisdiction in the premises shall dismiss or stay any Involuntary Insolvency Event within 60 days, the obligation of the Liquidity Facility Provider to purchase Eligible Certificates shall be automatically reinstated and the terms of the Liquidity Facility will continue in full force and effect (unless the Bank Purchase Period shall have otherwise expired or terminated) as if there had been no such suspension. Notwithstanding the foregoing, if the Liquidity Facility Provider has not delivered a Rescission Notice to the Trustee and if, upon the earlier of (a) the last day of the Bank Purchase Period or (b)(i) in the case of the occurrence of an Event of Default specified in paragraph (c)(ii) above, the date which is three years after the effective date of suspension of the obligation of the Liquidity Facility Provider to purchase Eligible Certificates, litigation is still pending and a judgment regarding the validity of the Bond Insurance Policy has not been obtained or (ii) in the case of the occurrence of an Involuntary Insolvency Event, the date which is 60 days after the commencement of the involuntary case, proceeding or appointment, such involuntary case, proceeding or appointment has not been dismissed or stayed, then the Available Commitment and the obligation of the Liquidity Facility Provider to purchase Eligible Certificates shall at such time terminate without notice or demand and thereafter the Liquidity Facility Provider shall be under no further obligation to purchase Eligible Certificates.

Other Remedies. In addition to the rights and remedies set forth above under “Immediate Termination,” “Termination With Notice” and “Immediate Suspension,” in the case of any Event of Default, upon the election of the #33..
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28 Liquidity Facility Provider: (i) all amounts payable hereunder (other than payments of principal and interest on Liquidity Provider Certificates) shall upon notice to the City become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Authority and the City, and (ii) the Liquidity Facility Provider shall have all the rights and remedies available to it under the Liquidity Facility, the Related Documents or otherwise pursuant to law or equity other than acceleration of the 2008 Certificates or termination of its obligation to purchase 2008 Certificates.

See “RISK FACTORS – Limitations of the Liquidity Facility.” BMO Harris Bank N.A.

The following information has been provided by BMO Harris Bank N.A. It has not been verified by the Authority or the City, and neither the Authority nor the City guarantees its accuracy or completeness.

Except for the contents under this subheading, BMO Harris Bank N.A. did not participate in the preparation of, or in any way verify the information in, any other part of this Remarketing Memorandum and assumes no responsibility for the nature, contents, accuracy or completeness of the information set forth in this Remarketing Memorandum.

BMO Harris Bank N.A. (“BMOHB”), with executive offices in Chicago, Illinois, is a wholly-owned subsidiary and the principal asset of BMO Financial Corp., a Delaware corporation (“BFC”). BFC is a wholly-owned subsidiary of the Bank of Montreal. BMOHB is a commercial and retail bank offering a wide range of banking and trust services to customers located throughout the United States and around the world.

Each quarter, BMOHB files quarterly reports called “Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices” (“BMOHB Call Reports”). Each BMOHB Call Report may be obtained from the FDIC on its website at http://www.fdic.gov. The financial information referenced in this paragraph is not incorporated by reference into the information under this subheading.

The above information has been supplied by BMOHB. The delivery of the information under this subheading shall not create any implication that there has been no change in the affairs of BMOHB since the date such information was provided by BMOHB, or that the information contained or referred to under this subheading is correct as of any time subsequent to the date it was provided by BMOHB.

Neither BMOHB nor its affiliates make any representations as to the contents of this Remarketing Memorandum (except as to the information under this subheading), the suitability of the 2008 Certificates for any investor, the feasibility or performance of any project or compliance with any securities or tax laws and regulations.

REMARKETING
PNC Capital Markets LLC has been appointed to serve as the Remarketing Agent for the 2008 Certificates pursuant to the Trust Agreement and pursuant to the Remarketing Agreement. Subject to the terms and conditions set forth in the Remarketing Agreement, the Remarketing Agent agrees to perform the duties of Remarketing Agent set forth in the Trust Agreement.

The Remarketing Agent’s responsibilities include determining the interest rate from time to time and remarketing 2008 Certificates that are tendered by the owners thereof either pursuant to an optional or mandatory tender (subject, in each case, to the terms of the Remarketing Agreement), all as further described in this Remarketing Memorandum. The Remarketing Agent is appointed by the Authority and is paid by the Authority for its services. As a result, the interests of the Remarketing Agent may differ from those of existing owners and potential purchasers of 2008 Certificates.

The Remarketing Agent Routinely Purchases 2008 Certificates for its Own Account. The Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations and, in its sole discretion, routinely purchases such obligations for its own account. The Remarketing Agent is permitted, but not obligated, to purchase #33..
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29 tendered 2008 Certificates for its own account and, in its sole discretion, routinely acquires such tendered 2008 Certificates in order to achieve a successful remarketing of the 2008 Certificates (i.e., because there otherwise are not enough buyers to purchase the 2008 Certificates) or for other reasons. However, the Remarketing Agent is not obligated to purchase 2008 Certificates, and may cease doing so at any time without notice. The Remarketing Agent may also make a market in the 2008 Certificates by routinely purchasing and selling 2008 Certificates other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par.

However, the Remarketing Agent is not required to make a market in the 2008 Certificates. The Remarketing Agent may also sell any 2008 Certificates it has purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the 2008 Certificates. The purchase of 2008 Certificates by the Remarketing Agent may cause the interest rate to be lower than it would be if the Remarketing Agent did not purchase 2008 Certificates and may create the appearance that there is greater third-party demand for the 2008 Certificates in the market than is actually the case. The practices described above also may result in fewer 2008 Certificates being tendered in a remarketing. 2008 Certificates May be Offered at Different Prices on Any Date Including a Rate Determination Date.

Pursuant to the Remarketing Agreement, the Remarketing Agent is required to determine the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the 2008 Certificates bearing interest at the applicable interest rate at par plus accrued interest, if any, on and as of the applicable Rate Determination Date. The interest rate will reflect, among other factors, the level of market demand for the 2008 Certificates (including whether the Remarketing Agent is willing to purchase 2008 Certificates for its own account). The purchase of the 2008 Certificates by the Remarketing Agent may cause the interest rate to be lower than it would be if the Remarketing Agent did not purchase 2008 Certificates. There may or may not be 2008 Certificates tendered and remarketed on a rate determination date, the Remarketing Agent may or may not be able to remarket any 2008 Certificates tendered for purchase on such date at par and the Remarketing Agent may sell 2008 Certificates at varying prices to different investors on such date or any other date. The Remarketing Agent is not obligated to advise purchasers in a remarketing if it does not have third party buyers for all of the 2008 Certificates at the remarketing price. The Remarketing Agent, in its sole discretion, may offer 2008 Certificates on any date, including the Rate Determination Date, at a discount to par to some investors.

The Ability to Sell the 2008 Certificates other than Through Tender Process May Be Limited. The Remarketing Agent may buy and sell 2008 Certificates other than through the tender process. However, it is not obligated to do so and may cease doing so at any time without notice and may require owners that wish to tender their 2008 Certificates to do so through the Tender Agent with appropriate notice. Thus, investors who purchase the 2008 Certificates, whether in a remarketing or otherwise, should not assume that they will be able to sell their 2008 Certificates other than by tendering the 2008 Certificates in accordance with the tender process.

Under Certain Circumstances, the Remarketing Agent May Be Removed, Resign or Cease Remarketing the 2008 Certificates, Without a Successor Being Named. Under certain circumstances the Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, without a successor having been named, subject to the terms of the Remarketing Agreement. In the event there is no Remarketing Agent, the Trustee is required to apply to a court of competent jurisdiction for appointment of a successor Remarketing Agent.

THE WATER UTILITY SYSTEM
General
The City’s Water Utility System serves customers within the metropolitan area of the City, located in the central portion of Stanislaus County, consisting of approximately 36 square miles as well as the communities of Salida, Del Rio, Empire, Grayson, and portions of Turlock and Ceres. Water Utility System delivers surface water and/or groundwater to its customers through about 74,000 water connections. Total water production for the Water Utility System during calendar year 2022 was approximately 17.02 billion gallons. #33..
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30 History of the Water Utility System
The origin of the City’s municipal water system dates back to 1876 when a privately-owned utility, later known as the Modesto Water Company, was established to provide water service to the village of Modesto. In 1895, the City purchased the Modesto Water Company, and in subsequent years it purchased other local water systems that have been incorporated in the present Water Utility System.

In April 1992, the City entered into the original Treatment and Delivery Agreement with MID and the Del Este Water Company (“Del Este”), providing for a supply of treated water for the City and Del Este from the Water Treatment Plant, which was constructed and is owned and operated by MID. See “— Sources of Water” below. In July 1995, the City purchased substantially all of the assets and assumed substantially all of the liabilities of Del Este, the last private water company within City limits. The acquisition included Del Este’s other water service areas including the communities of Salida, Waterford, Empire, Hickman, Grayson, and parts of Turlock, Ceres and Del Rio Estates. As a consequence of the varying operating conditions among these communities, the City initially operated the Water Utility System in three separate zones. However, the three zones were essentially merged into a single zone for rate purposes in 2005.

Under the Treatment and Delivery Agreement, the City is be entitled to receive up to 60 million gallons per day of treated water for use of the City’s service area that is within MID’s authorized service area. See “— Treatment and Delivery Agreement” below.

In general terms, the City’s total water service area consists of one large contiguous area and several outlying, non-contiguous service areas. The contiguous water area includes all of the property currently within the corporate boundaries of the City as well as the property located within its sphere of influence and properties located within the communities of North Ceres, Empire and other contiguous Stanislaus County areas. There are five outlying noncontiguous water service areas. They are the communities of Del Rio and Grayson, and portions of the City of Turlock and Ceres.

A map showing the City’s water service area appears on page [___]. #33..
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31 #33..
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32 Existing Facilities
The principal facilities serving the existing Water Utility System consist of 92 domestic wells (80of which are currently active), over 1,000 miles of transmission and distribution lines, twelve active storage tanks and the MID’s Water Treatment Plant serving surface water and/or groundwater to its customers, currently through about 75,000 service accounts.

MID surface water is treated at the Water Treatment Plant and conveyed to the City via transmission mains for direct use in the contiguous portion of the City’s water service area. The City’s facilities are designed to deliver both surface water and groundwater. The Water Treatment Plant does not provide surface water to the outlying, noncontiguous portions of the City’s water service areas including those portions that are outside of MID’s authorized service boundaries.

Groundwater is pumped directly from the wells into the distribution system, which consists of approximately 1,000 miles of water mains and pipelines. Most of the larger water mains are 10-inch and 12-inch diameter pipelines which have been installed by the City. The installation of smaller pipelines in subdivisions is typically the responsibility of the developer/subdivider. Twelve ground-level tanks and booster pump stations provide storage capacities ranging from 250,000 to 6,000,000 gallons each. There are also two 5.0 million-gallon Water Treatment Plant reservoirs (10.0 million gallons total) that are owned and operated by MID which deliver treated water from MID to the Water Utility System’s transmission system.

The following table sets forth statistical information relating to the Water Utility System during the periods shown.

WATER UTILITY SYSTEM STATISTICS
Calendar Years
2018 2019 2020 2021 2022
Number of Service Accounts 73,423 73,591 73,897 74,094 74,356 Total Water Production (MG)(1) 16,782.0 16,059.0 17,141.6 17,569.0 17,018.0 Capacity (MGD)(2)(3) 168.0 168.2 170.3 135.0 130.0
Peak Daily Distribution (MGD) 77.5 83.5 75.1 75.9 73.6
Average Daily Distribution (MGD) 46.0 44.0 47.0 48.1 46.6 (1) “MG” means million gallons.
(2) “MGD” means million gallons per day.
(3) The actual capacity of the Water Utility System for Fiscal Year 2021 was reported using source (wells) and surface water capacity. Reporting for such capacity will be done in this method moving forward.

Source: City of Modesto.

During the five year period covered by the table, the City’s population by nearly 3% while the aggregate volume of water sold declined by approximately [__]%. Thus, on a per capita basis, consumption of water in the City’s service area has reduced over the course of this period. This reduction has been the result of many variables, including water conservation efforts, weather, system repairs, more efficient water consumption by customers and the availability of alternative water sources (onsite private wells).

Service Area and Customers
The water service area of the Water Utility System is within the metropolitan area of the City, located in the central portion of Stanislaus County, consisting of approximately 36 square miles as well as the communities of Salida, Del Rio, Empire, Grayson, and portions of Turlock and Ceres.

The following tables set forth (i) the revenues for the periods indicated and (ii) the ten largest water customers of the Water Utility System in terms of total water sales and total billings for the fiscal year ended June 30, 2022. #33..
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33 During the fiscal year ended June 30, 2022, the Water Utility System delivered approximately 17.0 billion gallons of water to an average of approximately 75,000 service accounts. Residential accounts (single family as well as multifamily accounts) represent approximately 64.4% of the City’s water consumption and water sales revenues.

Commercial, industrial and municipal accounts represent approximately 35.6% of the City’s water consumption and water sales revenues. The City’s ten largest customers represented approximately 8.93% of total water revenues in fiscal year 2021-22.

WATER UTILITY SYSTEM
Sale of Water
Fiscal Year Ended June 30
2018 2019 2020 2021 2022
Revenues ($000)
Residential (Flat) $ 5,506,516 $ 4,385,017 $ 3,450,868 $ 2,533,090 $ 1,414,328 Residential (Metered) 49,012,923 50,700,789 55,093,989 59,171,381 56,373,665 Commercial, Industrial
and Municipal
(Metered) 11,099,796 12,232,838 15,081,524 16,997,821 18,694,999 Total $65,619,235 $67,318,644 $73,626,381 $78,702,292 $76,482,992 Source: City of Modesto.

WATER UTILITY SYSTEM
Ten Largest Customers
(Fiscal Year ended June 30, 2022)
Customer Business Type
Usage
(ccf)(1)
% of Total
Usage
Water Sales
Revenues
% of Total
Water
Sales
Revenue
1) Modesto City Schools Education 550,206 2.42% 1,442,306 1.89% 2) City of Modesto Local Government 368,439 1.62% 1,161,840 1.52% 3) Foster Farms Dairy Processor 422,907 1.86% 870,256 1.14% 4) Stanislaus Food Products Cannery 349,278 1.54% 763,063 1.00% 5) Sunopta Cannery 262,791 1.16% 553,119 0.72%
6) Stanislaus Housing
Authority
Housing Authority
165,745 0.73% 510,052 0.67%
7) E & J Gallo Winery Processor 169,453 0.74% 478,601 0.63% 8) Modesto Irrigation District Power Company 161,256 0.71% 406,260 0.53% 9) STANCO Local Government 83,700 0.37% 319,533 0.42%
10) Yosemite Community
College
Education
102,041 0.45% 313,365 0.41%
Top Ten Total 2,635,816 11.60% $6,818,395 8.93%
Total Flat/Metered Revenues $76,482,992
(1) “ccf” means hundred cubic feet
Source: City of Modesto.

In five Fiscal Years ended June 30, 2017 through June 30, 2022, the percentage of total water sales revenue attributable to the ten largest customers has ranged between 8.45% and 8.93%. #33..
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34 Sources of Water
The City’s primary sources of water supply are surface water provided by MID under the Treatment and Delivery Agreement (described below) and its local groundwater sources. A 30 MGD Water Treatment Plant and delivery system was implemented under the original Treatment and Delivery Agreement, which came on line in January 1995. The Water Treatment Plant was later expanded, bringing the facility to a nominal plant capacity of up to 60 MGD, with a peak capacity of 72 MGD. The Water Utility System’s current average day demand is about 46 MGD.

The Water Treatment Plant serves as the baseline supply, and seasonal demands are served by the groundwater wells. In general, the Water Treatment Plant currently supplies approximately 50% of the City’s water demands and groundwater supplies the remainder. The Treatment and Delivery Agreement includes a formula to reduce deliveries in drier than average years based on the number of inches allocated to MID’s agricultural customers.

The reduction in supply is not determined until the time of the shortage. In 2022, due to drought conditions and low water supply, MID reduced its water allocation to all recipients by about 30%.

The Treatment and Delivery Agreement also provides the opportunity for the City to purchase additional water from MID (at a higher rate) or to exchange groundwater meeting the requirements of the Treatment and Delivery Agreement for agricultural use for treated surface water during drought years if such supplemental water supplies are available. See “Treatment and Delivery Agreement – Delivery of Treated Water” below.

The following table sets forth the total water production for the Water Utility System during the last five calendar years.

WATER UTILITY SYSTEM
Service Area Total Production (Billion Gallons)
Year Ending June 30 Groundwater Surface Water Total
2018 9.82 6.23 16.05
2019 5.45 9.86 15.31
2020 7.71 8.76 16.47
2021 7.12 9.56 16.68
2022 8.81 8.21 17.02
Source: City of Modesto.

The City relied exclusively on groundwater to meet water demands until the introduction of treated surface water in 1995. The City currently has 80 active groundwater wells in both the contiguous and outlying service areas.

MID currently pumps groundwater only to supplement water supplies to agricultural customers and does not pump and deliver groundwater supply to urban suppliers.

The Sustainable Groundwater Management Act of 2014 (the “SGMA”) sets a framework for statewide sustainable groundwater management by local agencies to mitigate overdraft of groundwater basins. The SGMA requires medium- and high-priority basins to develop groundwater sustainability agencies (“GSA”), develop groundwater sustainability plans (“GSP”) and manage groundwater for long-term sustainability. The California Department of Water Resources (“DWR”) evaluates GSPs to determine if they comply with the SGMA, substantially comply with the GSP regulations, and whether implementation of the GSP is likely to achieve the sustainability goal for the basin. DWR’s evaluation and assessment is based on criteria outlined in GSP regulations.

In 2017, member agencies of the Stanislaus and Tuolumne Rivers Groundwater Basin Association (“STRGBA”), including the City, Modesto Irrigation District, City of Oakdale, Oakdale Irrigation District, City of Riverbank, City of Waterford and Stanislaus County, formed as a GSA. STRGBA GSA has the authority and responsibility to manage the Modesto groundwater basin. Most of the cities within the Modesto basin rely heavily or solely on groundwater.
#33..
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35 Many groundwater basins in the San Joaquin Valley have experienced heavy groundwater pumping – especially during recent droughts. Several are now in a condition of critical overdraft. A basin is subject to critical overdraft when continuation of present water management practices would probably result in significant adverse overdraft-related environmental, social, or economic impacts. Overdraft occurs where the average annual amount of groundwater extraction exceeds the long-term average annual supply of water to the basin.

The Modesto basin is not currently considered to be critically overdrafted, but the Modesto basin is considered a high-priority basin. As such a GSP is required. STRGBA GSA engaged a third-party to prepare a GSP for the Modesto basin, and a GSP was adopted in December 2021. The GSP will help to identify areas within the basin that need better groundwater monitoring and provide a path to preventing undesirable results over the next 50 years.

See “RISK FACTORS – Water Supply” herein.

Treatment and Delivery Agreement
In April 1992, MID entered into the original Treatment and Delivery Agreement with the City and Del Este.

Pursuant to the Treatment and Delivery Agreement, MID agreed to finance, construct, own and operate the Water Treatment Plant and certain related facilities, and the City agreed to pay the costs of acquisition, construction and operation of the Water Treatment Plant. Pursuant to the Treatment and Delivery Agreement, the City was initially allocated a 70% share of the Water Treatment Plant, and was likewise responsible for 70% of its costs; Del Este was allocated a 30% share and was likewise responsible for 30% of its cost.

The Modesto Irrigation District Financing Authority (“MIDFA”) has issued from time to time its notes and bonds to provide initial acquisition and construction financing for the Water Treatment Plant or to refinance such notes and bonds. On June 26, 2007, MIDFA issued the MIDFA 2007 Bonds in order to provide financing for the Water Treatment Plant expansion described above. The ultimate source of funds to be used to pay debt service on the MIDFA 2007 Bonds consists of payments to be made by the City to MID pursuant to the Treatment and Delivery Agreement. See “THE WATER UTILITY SYSTEM — Treatment and Delivery Agreement.” In July 1995, the City purchased substantially all of the assets and liabilities of Del Este and in accordance with the provisions of the original Treatment and Delivery Agreement assumed all interests, rights and obligations of Del Este under the original Treatment and Delivery Agreement. Accordingly, Del Este had no further obligation to make payments under the Treatment and Delivery Agreement.

Construction of the Water Treatment Plant began in October 1992, and the Water Treatment Plant was placed into operation in May 1995. It is located directly south of the Modesto Reservoir on an approximately 30-acre site, about 15 miles east of the City. Treated water is pumped from a five-million gallon treated water storage reservoir through approximately 14 miles of transmission pipeline to two five-million gallon terminal-storage reservoirs. The water is then distributed to distribution mains in the City water system.

The Water Treatment Plant derives its raw water from the Tuolumne River at the Modesto Reservoir. Raw water delivered for treatment under the original Treatment and Delivery Agreement was provided under MID’s pre1914 water rights, which are not subject to the permitting authority of the State Water Board. The rights available to MID to treat and deliver water to the City through the Water Treatment Plant consist of (i) various water rights owned by MID, including the pre-1914 water right and (ii) water available to it under a license held by MID and Turlock Irrigation District (License 11058) which authorizes the two districts to store up to 1,046,800 acre-feet of water in New Don Pedro Reservoir between November 1 and the succeeding July 31 for irrigation and recreational use. MID petitioned for and received an order from the State Water Resources Control Board (WR Order 2005-0022-DWR) which amended License 11058 and authorized a long-term transfer of up to 67,200 acre-feet of water per year to the City and which added municipal and industrial uses to the uses of water permitted under the transfer. This long-term transfer is effective through December 31, 2054.

During the period of the long-term transfer, MID is required to comply with all of the terms and conditions required by the Federal Energy Regulatory Commission for the New Don Pedro Project. The New Don Pedro Project, is at the New Don Pedro Reservoir, with impounded water serving irrigation water storage, but also flood control and hydroelectricity production. The terms and conditions required by the Federal Energy Regulatory Commission for #33..
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36 the New Don Pedro Project include potential FERC-required releases that could affect long-term water supplies from the Tuolumne River to the Modesto Reservoir, which supplies the Water Treatment Plant’s raw water.

In addition, pursuant to California Water Code Sections 100 and 275 as well as the common law public trust doctrine, all rights and privileges under the long-term transfer order, including method of diversion, method of use and quantity of water diverted, are subject to the continuing authority of the State Water Board in accordance with law and in the interest of the public welfare to protect public trust uses and to prevent waste, unreasonable use, unreasonable method of use or unreasonable method of diversion.

The original Treatment and Delivery Agreement provided that the City would receive 30 million gallons per day of treated water. The terms of the original Treatment and Delivery Agreement were subsequently amended and restated to provide for the expansion of the Water Treatment Plant above. With completion of the expansion the City became entitled to receive up to 60 million gallons per day of treated water on an average annual basis.

In accordance with the Treatment and Delivery Agreement, MID owns, operates, and maintains the Water Treatment Plant for the purposes of treatment and delivery of water to the City. MID may not assign its maintenance and operation responsibility for the Water Treatment Plant without the consent of the City. The City is granted a permanent beneficial interest in the Water Treatment Plant output, which may not be transferred or assigned without the consent of MID.

The City has agreed to pay all costs and expenses of all phases of the Water Treatment Plant, including (i) payments of Debt Service in connection with the financing of the Water Treatment Plant (a Parity Obligation), (ii) raw water charges for raw water furnished to the Water Treatment Plant by MID, (iii) payments of operation, maintenance, repair, replacement and modification costs attributable to the operation of the Water Treatment Plant, (iv) costs of administrative services of MID attributable to the operation of the Water Treatment Plant and the administration of the Treatment and Delivery Agreement, (v) costs of insurance required to be maintained by MID pursuant to the Treatment and Delivery Agreement (as described below), (vi) cost of electric energy provided to the Water Treatment Plant by MID, and (vii) other payments or costs (and deductions from payments or costs from the reserve and contingency fund [and certain reserve funds relating to Modesto Irrigation District Financing Authority bonds] and other amounts as specified by the Treatment and Delivery Agreement.

Some of the key provisions of the Treatment and Delivery Agreement, as amended and restated, are:
 The City will continue to receive raw water at the same unit cost as MID’s agricultural users.  The City will reimburse MID for all capital and operating costs associated with the treatment of the water.
 Reductions in water deliveries required as a result of a drought will be borne proportionately by the City and MID’s agricultural customers.
 MID’s commitments to its agricultural customers and to the City must be met before MID may transfer any water for delivery outside of its boundaries.  The Policy Committee, which advises the Board of Directors of MID and City Council of the City on matters related to the project, consists of two members of the City Council and two members of the MID Board.

Delivery of Treated Water. Under the terms of the Treatment and Delivery Agreement, MID is generally required to make available to the City 67,204.2 acre-feet per year and 60 million gallons per day. However, in a drought situation, MID may reduce its deliveries of water to the City, but only if and to the extent that MID reduces its deliveries to its own agricultural customers proportionally. Moreover, MID’s commitments to the City and to its own agricultural customers must be met before any water is transferred for delivery outside of MID’s boundaries (other than transfers to and from MID and Turlock Irrigation District that are made in the ordinary course of operations). The City may exchange groundwater for use by MID’s irrigation system for treated water in the event of #33..
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37 a reduced allocation. The City will bear all costs, including the costs of additional capital facilities, if any are necessary, associated with delivering the groundwater supply to MID’s irrigation system. MID may not sell any treated water from the Water Treatment Plant without first offering such water to the City. Treated water delivered by MID to the City must be utilized by the City within MID’s irrigation service area. MID will consult with the City regularly with respect to the scheduling of delivery of treated water from the Water Treatment Plant. MID shall be excused from its obligation to deliver treated water in the event that MID is rendered unable, wholly or in part, by force majeure to carry out its obligations under the Treatment and Delivery Agreement. Upon the occurrence of any event of force majeure which impacts MID’s ability to deliver treated water, the provisions of the Treatment and Delivery Agreement shall be determinative as to whether the City is excused from its obligation to pay debt service and fixed costs pursuant to the Treatment and Delivery Agreement.

Pursuant to the Treatment and Delivery Agreement two advisory committees are formed for the purposes of the Water Treatment Plant, the Policy Committee and the Technical Committee. Each of these Committees include representatives from MID and the City.

The Board of Directors of MID has the authority to make final decisions with respect to the Water Treatment Plant, subject to the rights of the City to review and advise MID with respect to certain budgetary matters as provided in the Treatment and Delivery Agreement.

Conservation Program. The City has an ongoing water conservation program which includes limitations on watering hours, restrictions on certain water uses and water conservation rebates for homeowners and business. In the event of drought, the City will likely expand its water conservation program to include additional water use restrictions, such as imposing limitations on the landscaping of new developments.

Water Quality
Land use in the vicinity of the City is a mixture of rural, residential, agricultural, commercial and industrial uses. Potential sanitary hazards include the percolation of agricultural chemicals and fertilizers in adjacent fields and underground storage of fuels in single contained tanks. All wells are adequately located away from sewer lines and sewage disposal facilities. Above-ground on-site fuel storage tanks are or will be provided with a containment system.

Historically, the overall well system has not required major treatment facilities to deliver potable water supplies to date. However, over the past 15 years, the number of natural and man- made contaminants which the City is required to monitor has increased from 96 to 170 and there have been significant changes in the maximum contaminant levels permitted under regulations adopted by federal and State regulatory agencies. As a result, concerns over water quality have necessitated the closure of wells with poor water quality and has led to the requirement for treatment of several groundwater wells. The City litigated to protect, and/or to recover damages to, its groundwater supplies. See “— DBCP Settlement Agreement,” “— PCE Litigation” and “— TCP Litigation” below.

The operation of the wells is performed automatically in response to system pressure and reservoir water level. All wells are monitored in accordance with State water quality monitoring regulations. Samples are collected for general physical, general mineral, inorganic chemical, radioactivity and organic chemical analysis. Additional monitoring is conducted for bacteriological and general mineral analysis on a routine basis. Bacteriological quality of the groundwater sources is generally good. Follow-up samples on positive total coliform test results are generally negative.

In addition to water wells as a domestic supply source, the City manages approximately 9,500 rock wells for the drainage of stormwater. Stormwater runoff occurs when rainfall intensity exceeds the infiltration rate of the soil.

Suspended solids, heavy metals, and oil and grease are the major types of pollutants conveyed by runoff water to drainage facilities. The pollutant loading in runoff typically increases with increased urbanization. About 70 percent of the City service area employs rock wells which vary in depth from 25 to 50 feet. As a precaution to any risk of pollutants from stormwater and other wastewater entering the rock wells and percolating into the usable groundwater aquifer, the City seals its water wells at appropriate depths in relation to rock wells. After decades of operation of rock wells, no pollutants attributable to urban drainage have been detected in the drinking water supply. Recent studies of the federal Environmental Protection Agency conclude that properly operated rock wells provide significant treatment and removal of pollutants from percolating water.
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38 Water Charges and Billing
Water Service Rates. Water rates are fixed by the City Council and are not subject to regulation by the California Public Utility Commission or any other State or federal agency. Before 2005, customer service charges for single family residential accounts were generally based on a flat monthly service charge, which varied only based on the size of the lot and in which of three zones the lot was located. Under a rate structure which went into effect on January 1, 2005, a single service area was established, combining all three prior water zones into a single zone. The rates included a uniform volume-based charge reflecting the volume of water consumed. Residential metered and flat rates were designed so that monthly bills for these types of customers will be comparable were water consumption is estimated to be comparable. Residential flat rates were standardized by lot size (previously, the size ranges varied between water zones) based upon the number of parcels in each range and patterns of water use.

Historically, the City had not metered water use by its single-family residential customers; however, since 1992 all new construction has been equipped with a meter; and those single family residential properties that are equipped with water meters that are read for billing purposes are charged the metered water rate. Pursuant to State legislation, the City will be required to install meters and to read and bill for water service based on metered rates by 2025. The City expects that all water connections will be metered by the end of 2023.

More than 70,000 water meters are currently in operation. An automated meter reading system is in place in the City, allowing meter readers to electronically gather data by driving within 300 feet of the meters on their routes, rather than taking individual reads of every meter.

All regular customers are liable for service charges unless service is permanently discontinued. In addition, all new regular water service connections, increases in meter sizes, and the connection of additional dwelling units to existing services require the payment of a connection fee.

The City’s most recent water rate study (the “2016 Rate Study”) was completed in September 2016. See “Rate Setting Process” below for a discussion of the process followed by the City in implementing the new rate structure. Following the 2016 Rate Study, the City Council established a rate structure that went into effect on September 1, 2016 and maintains fixed monthly meter charges, a single volume rate charged to all metered water use, and fixed charges for unmetered customers. All City service areas are charged the same rates. Metered customers are charged rates that consist of a based charge (determined based on meter size) and a water consumption charge (determined based on water usage). Unmetered customers are charged a flat rate for water service based on lot size, with larger lots charged a higher rate. The flat rates are intended to recover the costs of unmetered customers’ share of the estimated usage and other related costs. All water service charges are billed monthly.

The rate structure adopted by the City Council following the 2016 Rate Study provided for uniform rate increases of 25% effective September 1, 2016, 9% effective April 1, 2018, 9% effective January 1, 2019, 6% effective April 1, 2020 and 2% effective October 1, 2021.
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39 The following table sets forth adopted monthly service charge and volume charge for metered accounts through fiscal year 2021-22.

WATER UTILITY SYSTEM
Water Rates and Charges
Metered Accounts
As of
July 1, 2018
As of
July 1, 2019
As of
July 1, 2020
As of
July 1, 2021
As of
July 1, 2022
Volume-based Rate ($/ccf) $1.82 $1.93 $1.98 $1.98 $ 2.02 Fixed Monthly Meter Charge
(in addition to volume-based charges) (1)
5/8” - 3/4” meter $21.47 $23.34 $24.94 $24.94 $ 25.44
1” meter 30.39 33.48 36.11 36.11 36.83
1-1/2” meter 52.71 58.83 64.04 64.04 65.32
2” meter 79.49 89.25 97.55 97.55 99.50
3” meter 164.30 185.59 203.66 203.66 207.73
4” meter 289.28 327.55 360.04 360.04 367.24
6” meter 588.33 667.24 734.22 734.22 748.90
8” meter 1,079.32 1,224.95 1,348.56 1,348.56 1,375.53
10” meter 1,704.21 1,934.76 2,130.44 2,130.44 2,173.05
12” meter 2,239.84 2,543.16 2,800.62 2,800.62 2,856.63
Source: City of Modesto
The City also approved a drought rate effective October 1, 2021. The current volume-based rate of $2.02 per hundred cubic feet would increase to the drought rate of $2.14 per hundred cubic feet if the State Water Resources Control Board imposes a mandatory conservation target that exceeds the City’s self-imposed conservation target. The City does not currently impose the drought rates.

The table below sets forth the adopted single family residential flat rates approved through fiscal year 2021-

22. WATER UTILITY SYSTEM
Monthly Single Family Residential Flat Water Rates(1)
Lot Size
As of
July 1, 2018
As of
July 1, 2019
As of
July 1, 2020
As of
July 1, 2021
As of
July 1, 2022
0-5,000 sq. ft. lot $48.77 $52.97 $56.11 $59.48 $60.66
5,001-7,000 sq. ft. lot 56.23 60.89 64.23 68.08 69.44
7,001-11,000 sq. ft. lot 70.98 76.52 80.26 85.08 86.78
11,001-17,000 sq. ft. lot 93.00 99.87 104.22 110.47 112.68 Over 17,000 sq. ft. lot 104.10 111.65 116.3 123.28 125.75 (1) Single family residential properties with water meters that are read for billing purposes, are charged the metered water rate.

Source: City of Modesto.
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40 The following table sets forth connection fees for all users except multi-family units by meter size for fiscal year 2021-22.

WATER UTILITY SYSTEM
Connection Fees For All Users
Except Multi-Family Units
(Fiscal Year 2021-22)
Meter Size Connection Fees
5/8” $2,202
1” 3,671
1-1/2” 7,341
2” 11,746
3” 25,695
4” 46,250
6” 95,437
8” 176,191
10” 278,970
12” or larger 367,065
Source: City of Modesto.

Anticipated Rate Study. The City is currently in the process of a water rate study update and a water engineering report update to determine the necessary rates to support the future capital improvement program for water infrastructure. The update will evaluate rates and projects over the next five to ten years. The rate study is expected to be presented to the City Council for consideration. It is anticipated that the new water rates could take effect October 1, 2023.

Comparison of Rates and Charges. The following table lists certain water suppliers in the Modesto region and their average monthly residential water service charges.

WATER UTILITY SYSTEM
Comparison of
Average Monthly Water Rates
Flat Rate (1” Service)
As of July 1, 2021
City
Flat Rate Typical
Home
Fresno (1) $17.90
Lodi (2) 34.01
Modesto 69.44
Stockton (1) 33.90
Tracy (2) 30.90
Turlock (1) 105.00
(1) Water is metered. Charge varies per meter size.
(2) Water is both metered and flat rate. Charge varies per meter and dwelling size Source: City of Modesto.

The City’s water rates reflect the steps the City has taken to assure a long-term water supply by entering into the regional water management partnership with MID. The rates of the other nearby cities reflect the particular circumstances of each city’s water system, such as the degree to which it relies on ground water or surface water. The rates also reflect their specific circumstances with regard to the cost of current and prospective water supplies. #33..
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41 Rate Setting Process. In connection with its consideration of the current water rate structure, the City Council followed a process which the City believes satisfies the requirements of the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES” below.

Delinquencies
The City’s municipal water department has historically accounted for water system revenues on a full accrual basis. The City has developed procedures for handling delinquent accounts. There has not generally been a significant delinquency problem. The threatened suspension of water delivery is normally sufficient incentive to induce customers to make payment on their billings. In addition, the City customers may have tax liens placed on their property when water bills are delinquent. Uncollectible accounts (accounts closed and referred to a third-party collection agency) have historically been less than 1% of revenues and remain at that level.

During the COVID pandemic, the City experienced an increase in active accounts with past due balances.

For a period, the State suspended water service shutoffs based on delinquent payments. That suspension was lifted, and the City began shutting off service to delinquent accounts in August 2022. Currently, about 9% of accounts are past due, with that percentage expected to decline with the availability of the service disconnection remedy.

Insurance
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to and illnesses of employees; and natural disasters. The City maintains the Insurance Internal Service Fund to account for and finance its risks of loss. Under this program, the City is self-insured for the following risks up to the maximum amount per claim/occurrence as follows: workers’ compensation $750,000; liability $1,000,000. The City purchases commercial insurance for property loss, airport liability, miscellaneous coverage, and for claims in excess of the preceding self-insured limits.

For liability claims, the City is one of thirteen members of the Authority for California Cities Excess Liability risk pool. This pool covers City claims between $1,000,000 and $10,000,000. The purpose of the pool is to spread the adverse effect of losses among the member agencies and leverages buying power in the commercial insurance market for excess coverage. The City contributes its pro rata share of anticipated losses to the pool. Should actual losses among participants be greater than anticipated, the City will be assessed its pro rata share of that deficiency.

Conversely, if the actual losses are less than anticipated, the City will be refunded its pro rata share of the excess subject to the board approval and current conditions. Commercial insurance, covers claims over $10,000,000 in several excess layers for a total coverage of $55,000,000 per claim. Settled claims have not exceeded this commercial coverage in any of the past five fiscal years.

The City currently maintains insurance against damage to its Water Utility System facilities of approximately $50 million, but damage resulting from earthquakes is not covered. Coverage is under a commercial property insurance policy with a blanket limit of [$608,248,400].

DBCP Settlement Agreement
In January 1997, the City came to a settlement in litigation with certain defendants who are the manufacturers and distributors of dibromochloropropane (“DBCP”), which was impacting the drinking water quality throughout the combined City and former Del Este water systems. The settlement agreement (the “Settlement Agreement”) compensated the City for past expenses related to complying with drinking water standards and providing well-head treatment. The Settlement Agreement and the damage recovery covers the City’s entire current and projected service area over the 40 years following the execution of the Settlement Agreement. The Settlement Agreement provides a formula by which the majority of future capital and operating expenses for DBCP mitigation will be compensated by the defendants. The Settlement Agreement includes cost escalation indexes and requires that these payments be used in the area where the damage occurs, as a protection for the defendants against possible Del Este ratepayer actions.

The Settlement Agreement puts a variety of operating obligations on the City to ensure that the contamination is managed economically and in compliance with applicable regulations. #33..
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42 The annual proceeds from Settlement Agreement are included in the Historical Operating Results and the Projected Operating Results of the Water Utility System described below. For operating costs, the City receives a specified amount for each well which is receiving well head treatment for DBCP, escalated annually by the Producer Price Index (“PPI”). For each additional or new well requiring GAC equipment, 90% of the capital costs, escalated by the PPI, will be compensated. The actual amount will depend upon the number of GAC units needed for the specific well. The process for compensation provides that the City file an annual claim with the trustee for operation and maintenance for the preceding year and for a capital claim upon issuing a notice to proceed for construction of a treatment system at a qualifying well. The defendants are required to maintain a certain balance in the trustee account, the amount of which declines over the 40 year life of the Settlement Agreement. The City is responsible for any difference between actual operating and capital expense and the stipulated compensation formula. Any shortfall would then be covered by the City through appropriate action, including without limitation a rate adjustment to assure compliance with the covenants in the Settlement Agreement..

Water supplied by the City has and continues to meet all federal and State requirements for quality standards.

The City has in place a program to monitor and evaluate proposed regulatory water quality standards. The City anticipates that it will be able to meet increasingly stringent water standards.

PCE Litigation
The City of Modesto Redevelopment Agency brought an action in 1998 against numerous defendants, alleging causes of action for strict liability, negligence, negligence per se, continuing trespass, private and public nuisance, private and public nuisance per se, response costs and declaratory relief under the Carpenter-Presley-Tanner Hazardous Substance Account Act (Health & Safety Code Section 25300 et seq.), ultrahazardous activity, and cost recovery under the Polanco Redevelopment Act (Health & Safety Code Section 33459 et seq.) (San Francisco County Superior Court Case No. 999345). Because the City had to provide certain related cleanup efforts, simultaneously with the filing of that action, the City, along with the City of Modesto Sewer District No. 1, brought another action against a nearly identical group of defendants seeking damages for solvent contamination under many of the same legal theories; but this action did not include a Polanco Redevelopment Act cause of action (San Francisco County Superior Court Case No. 999643). The defendants included chlorinated solvent manufacturers, distributors of solvents and dry-cleaning equipment, chlorinated solvent equipment manufacturers, and dry-cleaning retailers.

The complaints alleged that two cleaning solvents, perchloroethylene (“PERC” or “PCE”) and trichloroethylene, cause risks to health and the environment, that dry cleaners customarily dumped solvent wastewater into the public sewer systems, and that dry cleaners experienced a habitual problem of chlorinated solvents leaking into the environment. According to the complaints, the defendants who manufactured and supplied solvents and equipment instructed dry cleaners that chlorinated solvents could be discharged into sewers and/or failed to issue recalls or warnings regarding the equipment and solvents.

The plaintiffs, including the City, tried five “bellwether” suits before a jury from February to June of 2006, and won a verdict for compensatory damages of $3.1 million and a verdict for punitive damages of $175 million, later lowered to $12 million. In October of 2007, the plaintiffs reached an agreement with one of the defendants, Vulcan Materials Company (“Vulcan”), pursuant to which Vulcan agreed to pay the plaintiffs $20 million to settle the actions pending against Vulcan. The City’s water system and its sewer system were each credited with half of net amount of the settlement after payment of litigation fees and expenses and certain other costs (approximately $6.5 million each), but the money may be expended only for projects that will remediate PCE. From 2009 to 2011 the City tried the remainder of the case, with mixed results, and all parties appealed.

In 2018 the Court of Appeal issued an opinion largely in the City’s favor and remanded the case for further proceedings. After several years of discovery, motion practice and unsuccessful attempts at mediation, an additional bellwether site was tried to a jury in October of 2022. The jury awarded the City $4 million in compensatory damages against PPG and The Dow Chemical Company and $56 million in punitive damages against The Dow Chemical Company. The Court subsequently reduced the punitive damages to $16 million. The City, PPG and Dow are now simultaneously involved in attempts to settle the case and in preparing to try the next bellwether site.

After adding settlements received over the course of the litigation to date and deducting litigations and remediation expenses, the City had a cash balance [from settlement revenue] of $15,773,618 as of June 30, 2022. #33..
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43 TCP Litigation
On March 2, 2020, the City filed suit against Shell Oil Company, The Dow Chemical Company, and a number of their distributors for contaminating the City’s groundwater with 1, 2, 3-Trichloropropane (“TCP”), an impurity in 1,3-dichloropropene nematicide used throughout the Central Valley for decades. The case was subsequently transferred into a “coordinated proceeding” in San Bernardino County where TCP cases filed by similarly situated cities throughout California have been gathered. Shell and Dow have historically settled these cases. The City reasonably expects to settle its TCP case as well, but will be prepared for trial if necessary. Trial, should it occur, could extend for several years.

Management
The Water Utility System is operated under the management and control of the City Council. Currently, dayto-day management is provided by William Wong, Director of Utilities, under the general supervision of Scotty Douglass, Deputy City Manager and Joseph Lopez, City Manager.

Brief resumes of the senior staff of the Water Utility System are presented below:

William Wong - Utilities Director. Will Wong has a B.S. in Civil Engineering from University of California at Davis and is a California-licensed Civil Engineer. He has over 29 years of experience working on water and wastewater infrastructure projects, and has been with the City for over 22 years. He is currently the City’s Utilities Director, overseeing the Utilities Department’s Wastewater Operations and Maintenance, Water Operations and Maintenance, and Engineering Services Divisions.

Jeffery Daniels – Water Division Manager. Jeff Daniels has over 22 years of experience working in water operations, and has been with the City for over 22 years. He is currently the City of Modesto’s Water Division Manager in the Utilities Department, overseeing the Department’s Water Operations and Maintenance Division.

Cristian Ciotau - Acting Engineering Division Manager. Cris Ciotau has over 25 years of experience working in engineering, and has been with the City for over 7 years. He is currently the City Acting Engineering Division Manager in the Utilities Department, overseeing the Department’s Engineering Services Division.

The City is conducting an internal process to develop a succession plan for senior management, which includes formal training and lines of succession.

Employees
The Director of Utilities has primary responsibility for the management of the Water Utility System, which is operated by the City’s Water Services Division, as well as for the wastewater system and storm drains. The Water Services Division currently has allocated 97 full-time employees. Employees are represented by the Modesto City Employees Association whose current Memorandum of Understanding expires on June 30, 2023 and the Modesto Confidential and Management Association whose current Memorandum of Understanding expires on June 30, 2023.

The City is currently negotiating with both collective bargaining units in hopes of reaching a negotiated new agreement by the end of the current fiscal year. The City has never experienced a labor strike.

Retirement Programs
Pension Plans. The City’s permanent employees, including Water Services Division employees, are covered by the California Public Employees Retirement System (“CalPERS”) through agent multiple-employer defined benefit plans administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State. 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 at www.calpers ca.gov. The foregoing internet address is included for reference only, and the information on the internet site is not incorporated by reference herein. #33..
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44 The City’s defined benefit pension plans, the Miscellaneous Plan and the City’s Safety Plan, provide retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members (who must be public employees) and beneficiaries. Benefit provisions and all other requirements of the plans are established by State statute, including the Public Employees’ Pension Reform Act of 2013 which primarily affects new pension plan members enrolled after 2012, and City resolutions. No employees assigned to the Water Services Division participate in the City’s Safety Plan.

Set forth below is a table summarizing the funding status of the City’s Miscellaneous Plan for the four Fiscal Years ended June 30, 2021:

CITY OF MODESTO
Funding Status
Fiscal Years 2015-16 through 2018-19
Fiscal Year
Accrued
Liability
Market Value of
Assets (MVA)
Unfunded
Liability Funded Ratio
Annual
Covered Payroll
2017-18 $474,834,279 $342,310,119 $132,524,160 72.1% $49,545,472 2018-19 490,376,850 352,917,082 137,459,768 72.0 50,717,747 2019-20 507,747,374 357,764,151 149,983,223 70.5 52,663,414 2020-21 535,680,756 428,374,564 107,306,192 80.0 52,444,358

Source: CalPERS, Miscellaneous Plan of the City of Modesto, Annual Valuation Report as of June 30, 2021.

The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City’s required contributions to CalPERS in future years. One of the most significant factors used in determining the liability and the funding requirements is the rate of return that investments will yield prior to making payments, known as the discount rate.

All else equal, decreases in the discount rate will increase the unfunded liability and the contributions required to meet pension funding obligations. CalPERS has periodically adjusted the discount rate in recent years. CalPERS approved an incremental reduction in the discount rate to be used in its actuarial valuation from 7.5% to 7.0% over the three Fiscal Years 2017-18 to 2019-20. In November 2021, CalPERS further revised its discount rate assumption to 6.8%.

The designated period for amortizing unfunded liabilities is another important factor affecting required contributions.

In February 2018, CalPERS revised its amortization policy to reduce the amortization period for gains and losses from a 30-year period to a 20-year period for new gains/losses established on or after June 30, 2019, which began to affect contribution rates in Fiscal Year 2020-21. See “CITY OF MODESTO Required and Projected Future Employer Contribution Miscellaneous Plan Fiscal Years 2022-23 through 2027-28” below.

Under Governmental Accounting Standards Board (“GASB”) Statement No. 68, the City is required to report the Net Pension Liability (i.e., the difference between the Total Pension Liability and the Pension Plan’s Net Position or market value of assets) in its financial statements.

In accordance with applicable State law, the contribution rate for all public employers is determined annually by the actuary and is effective on the July 1 following notice of a change in rate. Funding contribution amounts are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate applied to annual payroll is the estimated amount necessary to finance the costs of benefits earned by employees during the year (called the “normal cost”), with an additional amount to amortize any unfunded accrued liability. The City is required to contribute the actuarially determined amounts, net of contributions by employees, necessary to fund the benefits for its members, using the actuarial basis recommended by CalPERS actuaries and actuarial consultants and adopted by the CalPERS Board of Administration. The cost of the Miscellaneous Plan is funded through bi-weekly contributions from employees and from employer contributions by the City. The employer contribution rates are established, and may be amended, by CalPERS.
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45 Set forth below is a table showing the City’s required employer and employee contribution rates for normal cost of the Miscellaneous Plan (as a percentage of annual covered payroll) for the four Fiscal Years ended June 30, 2022. The City does not pick up any payments on behalf of its employees.

CITY OF MODESTO
Historical Employer and Employee Contribution Rates
Fiscal Years 2018-19 through 2021-22
Fiscal Year
Employee Contribution
Rate as Percentage of
Annual Covered Payroll
Employer Contribution
Rate as Percentage of
Annual Covered Payroll
2018-19 6.802% 7.430%
2019-20 6.755 7.922
2020-21 6.717 8.691
2021-22 7.00 8.32

Source: CalPERS, Miscellaneous Plan of the City of Modesto, Annual Valuation Report as of June 30, 2021.

The Water Services Division is allocated its portion of the City’s total required contribution (including normal cost and amounts to amortize any unfunded accrued liability) for the Miscellaneous Plan. This allocation is based on eligible employee wages. Set forth below is a table showing the City’s total required contributions (and an additional discretionary payment to amortize unfunded accrued liability) to its CalPERS Miscellaneous Plan for the four Fiscal Years ended June 30, 2019 through 2022 and the amount in each year allocated to the Water Services Division:

CITY OF MODESTO

WATER UTILITY SYSTEM
Historical Employer and Employee Contribution Rates
for the City and Water Services Division Allocation
Fiscal Years 2018-19 through 2021-22
Fiscal Year
City Required
Contribution
Amount Allocated to the
Water Services Division
2018-19 $10,158,019 $1,623,879
2019-20 11,856,209 1,893,070
2020-21(1) 12,406,705 2,099,200
2021-22 14,308,353 2,274,594

(1) Includes additional discretionary payment of $304,930 to amortize unfunded accrued liability.

Sources: CalPERS, Miscellaneous Plan of the City of Modesto, Annual Valuation Report as of June 30, 2021; City of Modesto Finance Department.

The City has made all actuarially required payments to CalPERS for its Pension Plans on a timely basis.

CalPERS provided the City with the following required and projected contributions from Fiscal Year ended June 30, 2023 through June 30, 2026:
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46 CITY OF MODESTO
Required and Projected Future Employer Contributions
Miscellaneous Plan
Fiscal Years 2022-23 through 2028-29
Fiscal Year Total Contributions(1)
Allocated to Water Services
Division
2022-23 $16,438,794 $ 2,613,270
2023-24 16,903,818 2,687,194
2024-25 16,808,529 2,672,046
2025-26 16,416,475 2,609,722
2026-27 15,994,365 2,542,619
2027-28 15,326,179 2,436,398
2028-29 15,794,894 2,510,909

(1) Total contribution consists of the normal cost plus payments to amortize unfunded accrued liability. Figures are for the City as a whole for its Miscellaneous Plan only.

Source: CalPERS, Miscellaneous Plan of the City of Modesto, Annual Valuation Report as of June 30, 2021.

Approximately 15.9% of these contributions are expected to be allocable to the Water Services Division as assumed in the table above and these amounts are included in the line item “Total Operating Expenditures, Net of Depreciation” shown in the projected debt service coverage table. See “Projected Debt Service Coverage” below.

Future increases in required CalPERS contributions will impact the City’s reserve levels and may require future action to either reduce expenses through service reductions or increase revenues through tax or service rate increases. The City’s ability to increase revenue is subject to Constitutional limitations. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WASTEWATER RATES AND CHARGES—Proposition 218—Article XIIIC and —Article XIIID.” The City cannot provide any assurances that the City’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. As noted above, as of June 30, 2021, the unfunded liability of the City’s Miscellaneous Plan was $107,306,192. Declines in investment values could result in a significant increase in the City’s unfunded pension liability and future pension costs. In July 2022, a CalPERS news release reported a negative

6.1% preliminary investment net return for fiscal year ended June 30, 2022. In October 2022, CalPERS adjusted the preliminary investment return for fiscal year ended June 30, 2022 to negative 7.1% when it released the actuarial valuation for its pension fund to account for a timing lag in the reporting of market value of certain assets.

Retiree Health Benefits. In addition to the defined benefit pension plan described above, the City also maintains its own program providing “other post-employment benefits” (“OPEB”) to employees who retire from the City based on certain criteria related to their hired and retirement dates, their employee bargaining unit, and their grandfathered sick leave at retirement. All full-time employees hired before January 1, 2011, except firefighters who receive a cash payout, are eligible to convert accumulated grandfathered sick leave upon retirement to a Retirement Health Savings account. Such converted amounts are included in the total OPEB liability below. All employees hired on or after January 1, 2011 will not be eligible to participate in the sick leave conversion. Any sick leave accumulated after January 1, 2011 cannot be converted to a Retirement Health Savings account and has no cash value at retirement.

The City has no obligation to pay the health insurance allowance for new retirees. At June 30, 2021, 467 current City employees were covered by the OPEB plan. At June 30, 2021, 351 former City employees were covered by the OPEB plan. Based on eligibility status, these retirees or surviving spouses may participate in a health plan offered by the City depending on their Medicare eligibility, year of hire, year of retirement, age and employee group.

The City has several plans with different contribution levels and benefit provisions. City contributions vary up to 100% of annual premium cost, depending on the employee’s Medicare eligibility, year of hire, year of retirement, age and employee group.
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47 The City’s contributions toward the cost of its OPEB program are generally funded on a pay-as-you-go basis.

The City’s OPEB liability for the Fiscal Years ended June 30 of 2021 and 2022 are set forth below:

CITY OF MODESTO
Schedule of Changes in the OPEB Liability and Related Ratios Fiscal Years 2020-21 through 2021-2022
FY 2020-2021 FY 2021-2022

Measurement Period June 30, 2021 June 30, 2022
Total OPEB liability $30,427,400 $29,551,870
Service cost 836,292 1,196,410
Interest 903,896 667,183
Differences between expected and actual experience 1,737,964 - Changes of assumptions 3,430,611 129,927
Benefit payments (2,941,351) (2,869,050)
Net change in total OPEB liability $ 3,967,412 $ (875,530) Total OPEB liability ‐ beginning $26,459,988 $30,427,400 Total OPEB liability ‐ ending (a) $30,427,400 $29,551,870

Covered‐employee payroll $54,106,179 $52,545,565

Total OPEB liability as a Percentage of Covered-Employee Payroll 56.24% 56.24%

Source: MacLeaod Watts Actuarial Study of the City of Modesto, as of June 30, 2022.

The following table provides a schedule of contributions for the City’s OPEB liability that is based on the most recent actuarial valuation as of January 1, 2022.

CITY OF MODESTO
Schedule of OPEB Contributions
Fiscal Year 2018-2019 through 2021-2022
Fiscal Year 2018-2019 2019-2020 2020-2021 2021-2022
Actuarially Determined Contribution (ADC) $ 3,012,214 $ 3,569,890 $ 2,869,050 $ 4,114,604 Contributions in Relation to the ADC (3,012,214) (3,569,890) (2,869,050) (4,114,604) Contribution Deficiency (Excess) $ - $ - $ - $ -
Covered-Employee Payroll $ 50,879,818 $ 54,106,179 $ 52,545,565 $ 52,727,185 Contributions as a Percentage of CoveredEmployee Payroll

5.92% 6.60% 5.46% 7.80%

Source: City of Modesto, Annual Comprehensive Financial Report for Fiscal Year ended June 30, 2022.

Beginning in the Fiscal Year ended June 30, 2018, the City adopted Governmental Accounting Standards Board (“GASB”) Statement No. 75, affecting the reporting of OPEB liabilities for accounting purposes. GASB No. 75 requires the OPEB liability of the City to be measured as the portion of the present value of projected benefit payments #33..
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48 to be provided to current active and inactive employees that is attributed to those employees’ past periods of service (total OPEB liability), less the amount of the OPEB plan’s fiduciary net position.

Additional information regarding the City’s retirement plans and OPEB, including information regarding the assumptions used to determine the pension and OPEB liabilities and the funding requirements therefor, can be found in Notes III(F) and III(G) and the Required Supplementary Information to the City’s audited financial statements included in the City’s annual comprehensive financial report for the Fiscal Year ended June 30, 2022, attached hereto as Appendix B.

The Water Services Division is allocated its portion of the City’s required contribution for OPEB. This allocation is based on eligible employee wages. Set forth below is a table showing the City’s required and actual contributions to its OPEB Plan for the three Fiscal Years ended June 30, 2019 through 2022. Approximately 11.3% of the actual contributions in each year were allocated to the Water Services Division.

CITY OF MODESTO
Other Post-Employment Benefits (OPEB)
Historical Employer and Employee
Contribution Rates for the City
Fiscal Years 2018-19 through 2021-22
Fiscal Year
City Required
Contribution
Actual
Contribution
Actual Amount Allocated
to the Water Services
Division
2018-19 $ 3,012,214 $ 3,012,214 $339,998
2019-20 3,569,890 3,569,890 402,944
2020-21 2,869,050 2,869,050 323,838
2021-22 4,114,604 4,114,604 464,428

Source: City of Modesto, Annual Comprehensive Financial Report for Fiscal Year ended June 30, 2022; City of Modesto Finance Department.

The City projects the following OPEB contributions for calendar years 2023 through 2028:

CITY OF MODESTO
Projected Future Employer OPEB Contributions
Calendar Years 2023 through 2028
Calendar Year Total Contribution Allocable to the Water Services Division
2023 $3,801,061 $429,037
2024 3,538,756 399,430
2025 3,350,560 378,188
2026 3,192,575 360,355
2027 3,028,704 341,859
2028 2,887,253 325,893

Source: City of Modesto Department of Finance.

Approximately 11.3% of these contributions are expected to be allocable to the Water Services Division as noted in the table above and such amounts are included in “Total Operating Expenditures, Net of Depreciation” shown #33..
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49 in the projected debt service coverage table. See “WASTEWATER SYSTEM FINANCES—Projected Debt Service Coverage” below.

Future increases in OPEB contributions will impact the City’s reserve levels and may require future action to either reduce expenses through service reductions or increase revenues through tax or service rate increases. The City’s ability to increase revenue is subject to Constitutional limitations. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WASTEWATER RATES AND CHARGES—Proposition 218— Article XIIIC and —Article XIIID.” The City cannot provide any assurances that the City’s required contributions OPEB in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions.
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50 Historical Operating Results
The following table summarizes operating revenues, operating expenses and net income of the Water Utility System for the five fiscal years 2017-18 through 2021-22, The information for each of the fiscal years shown was prepared by the City on the basis of its audited financial statements.

WATER UTILITY SYSTEM
Historical Debt Service Coverage
Fiscal Year
2017-18 (5)
Fiscal Year
2018-19 (6)
Fiscal Year
2019-20 (7)
Fiscal Year
2020-21 (8)
Fiscal Year
2021-22 (9)

GROSS OPERATING REVENUES
Charges for Services $68,928,504 $71,952,653 $76,996,091 $80,908,193 $79,318,075 Connection Charges 1,661,151 1,081,913 1,904,330 1,559,621 1,194,261 Refunds, Damages & Recoveries (121,929) 95,591 92,786 (801,155) (4,141,774) Interest and Rental Income 689,500 999,269 1,086,126 864,989 971,868 Service Credits (1) 3,408,238 3,309,703 3,576,012 3,654,881 3,405,150 Miscellaneous (2) 1,117,571 1,120,960 1,243,999 1,738,084 1,995,136 GROSS OPERATING REVENUES 75,683,035 78,560,089 84,899,344 87,824,613 82,742,716

OPERATING EXPENSES:

Operating Expenses 35,685,576 38,806,127 39,167,326 42,088,154 47,165,967 Operating Transfers 1,239,943 3,129,583 2,241,135 3,283,246 689,875 TOTAL OPERATING EXPENSES(3) 36,925,519 41,935,710 41,408,461 45,371,400 47,855,842

NET OPERATING REVENUES $38,757,516 $36,624,379 $43,490,883 $42,553,231 $34,886,874

DEBT SERVICE:
2008 Certificates of Participation $ 2,268,298 $ 2,121,410 $ 2,309,687 $ 2,130,448 $ 2,138,850 MID Treatment & Delivery
Agreement 10,208,384 10,214,947 10,213,274 10,709,280 10,400,158 ARRA Grant 36,080 37,123 39,350 37,540 37,343
TOTAL DEBT SERVICE $12,512,762 $12,373,480 $12,562,311 $12,877,268 $12,576,351

DEBT SERVICE COVERAGE (4) 3.10 2.96 3.46 3.30 2.77
(1) Service credits are billing of services to other City departments. (2) Fiscal year 2019-20 operating transfers of $2,241,135 include $900,000 in one-time loan to fund number 4893 (Carpenter Road Landfill). This $900,000 is in addition to the $2,300,000 that was borrowed in fiscal year 2018-19. (3) Total operating expenses excludes depreciation and amortization, as well as the debt service component under the Treatment and Delivery Agreement.
(4) The financial figures reported only reflect net operating revenues in the Water Operating Fund. (5) Fiscal year 2017-18 miscellaneous revenues include $1,048,863 of one-time transfer as result of the dissolution of the Central Stores Fund.
(6) Fiscal year 2018-19 operating transfers of $3,129,583 includes $2,300,000 in one-time loan to fund number 4893 (Carpenter Road Landfill) to be repaid over 6 years
(7) Fiscal year 2019-20 miscellaneous revenues include the first, interest-only payment of the fiscal year 2018-19 loan from the Water fund to the Carpenter Road Landfill fund.
(8) Fiscal year 2020-21, negative refunds, damages, and recoveries is due to large negative change in fair market value.

Operating transfers include a new $1,540,000 loan to the Carpenter Road Landfill fund. (9) Fiscal Year 2021-22 negative refunds, damages, and recoveries is due to large negative change in fair market value.

Miscellaneous revenues includes repayment of the Carpenter Road Landfill loan.

Source: City of Modesto
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51 Capital Improvement Program
The City’s capital improvement program (CIP) for the Water Utility System for fiscal years 2023-24 through 2027-28 includes budgeted and/or planned programs and projects, which are expected to be funded through City funds obtained from annual revenues and additional parity obligations. There are currently over $20 Million dollars’ worth of Strengthen & Replace Water Mains projects in construction throughout various parts of the City and outlying areas.

These projects will improve the City’s Water Utility System reliability by increasing flows and pressures, while also improving water quality. Other projects within the CIP include the rehabilitation and/or wellhead treatment expansion of the 12 existing inactive wells. The 12 inactive wells in the City’s Water Utility System are all offline due to various contaminant issues and they are each being addressed through the City’s Capital Improvement Program in order to meet State Drinking Water requirements prior to becoming active within the City’s Water System. Existing tank maintenance and improvements are also a part of the CIP for the twelve tanks within the City’s system. Tank 5 & 12 we recently re-coated in 2022 and Tank #4 is schedule to be re-coated in FY23-24, with others to follow. We also have new tanks that are being designed and constructed as part of the CIP. Del Rio Tank 14 & Pump Station was recently completed in 2022. The outlying area of Grayson, as part of the Grayson Water Improvements Project, will also soon see a new 0.25 million gallon tank being constructed as it’s currently in the design phase. The Grayson tank is anticipated to begin construction in FY24-25. The Grayson Water Improvements Project also includes a new pump station and treatment system to provide the outlying area of Grayson with increased system reliability, flows, pressures, and overall increased water quality. The latest well (Well 69) being constructed within the City’s system also happens to lie within the outlying area of Grayson. The City is currently identifying areas of need throughout the Water Utility System for new wells can potentially be explored and drilled.

Within the CIP, the City is also in the process of awarding a project to upgrade the City’s obsolete Supervisory Control and Data Acquisition (SCADA) system to improve operational efficiencies and reliability. In conjunction with upgrading the City’s SCADA system the City is also has project to convert all city service meters (approximately 76,000) from the current Automated Meter Reading (“AMR”) to Advanced Metering Infrastructure (“AMI”). Converting to AMI will allow the City to more effectively collect metering data, as well as have the ability of providing customers with up-to-date information for water usage. Overall, the City has many projects within the CIP that will continue to provide maintenance and upgrades to the City’s Water Utility System for years to come.

Total capital expenditures for fiscal year 2023-2024 are estimated to be approximately $25.6 million. #33..
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52 Capital Improvement Program Projects(1)
Project Detail FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Water Resources Projects $780,000 $955,000 $2,955,000 $2,640,000 $2,270,000 Downstream Improvements 505,000 2,510,000 2,310,000 1,535,000 510,000 New Wells 865,000 620,000 650,000 590,000 435,000
Wellhead Treatment 615,000 1,075,000 810,000 355,000 655,000 Existing Tank Improvements 30,000 225,000 475,000 460,000 285,000 New Water Tanks 450,000 400,000 4,400,000 4,100,000 4,100,000 New Water Main Extensions 1,025,000 1,640,000 1,290,000 535,000 320,000 Water Mains - Strengthen & Replace 18,875,000 12,056,000 5,910,000 7,045,000 9,265,000 Operations – Water Mains
Replacements 30,000 890,000 1,085,000 835,000 1,100,000 Operations – Wellhead Treatment 1,000,000 500,000 0 0 0 Operations – New Water Corp Yard
(Phase 2) 0 50,000 400,000 1,150,000 1,650,000
Operations – Water Meters 0 0 2,500,000 5,000,000 5,000,000 Operations – Flush Lines 225,000 225,000 225,000 115,000 0 Operations – Non-Capital Projects 1,225,000 1,225,000 1,225,000 1,225,000 1,225,000 Total Capital Improvement
Program $25,625,000 $22,371,000 $24,235,000 $25,585,000 $26,815,000 - Grants $800,000 $853,200 $4,400,000 $4,100,000 $4,100,000 - Bonds/Parity Debt(1) - - - - -
- Internally Generated Funds (Water
Operating Fund)(2) - - - - -
Total Expected Sources of Funding $800,000 $853,200 $4,400,000 $4,100,000 $4,100,000

(1) Assumes rate increases per annum as indicated in table entitled “WATER UTILITY SYSTEM - Projected Operating Results” below. Rate increases anticipated to be adopted in fall 2023. Rate increases for Fiscal Years ending June 30, 2024 through June 30, 2028 have not yet had a Proposition 218 hearing or been approved by the City Council but scheduled to be completed by Spring 2023.

Source: City of Modesto Department of Finance.

Planned projects may be cancelled, and new projects not presently anticipated may be undertaken. To the extent that total funds required exceed cash available, the City expects that the projects will either be funded by bond proceeds or deferred or terminated.

The City is currently in the process of a water rate study update and a water engineering report update to determine the necessary rates to support the future capital improvement program for water infrastructure. The update will evaluate rates and projects over the next five to ten years.

Summary of Projected Operating Results of the Water Utility System The City has prepared the following table of projections of operating results of the Water Utility System for the fiscal years ending June 30, 2023 through 2027. The projected amounts set forth below are based on certain assumptions made by the City. To the extent that actual future conditions vary from those assumed in preparing the projections, the actual results will vary from those set forth herein. #33..
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53 WATER UTILITY SYSTEM
Projected Operating Results(1)
Fiscal Year
2023(2)
Fiscal Year
2024
Fiscal Year
2025
Fiscal Year
2026
Fiscal Year
2027

GROSS OPERATING REVENUES
Charges for Services(3) $82,110,000 $81,232,793 $81,232,793 $81,232,793 $81,232,793 Connection Charges $1,220,500 $1,244,910 $1,269,808 $1,295,204 $1,321,108 Refunds, Damages & Recoveries 10,000 10,200 10,404 10,612 10,824 Interest and Rental Income 542,000 492,840 448,697 409,071 373,512 Service Credits(4) 3,062,214 3,092,836 3,123,764 3,155,002 3,186,552 Miscellaneous 200,902 - - - -
Loan Repayment from fund number 4893
(Carpenter Road Landfill)(5) 707,421 707,421 707,421 707,421 707,421 TOTAL GROSS OPERATING REVENUES 87,853,037 86,781,000 86,792,887 86,810,103 86,832,210

OPERATING EXPENSES:

Operating Expenses(6) 49,542,114 49,871,276 50,831,983 51,848,623 52,885,597 Operating Transfers(7) 765,000 765,000 765,000 765,000 765,000 TOTAL OPERATING EXPENSES(8) $50,307,114 $50,636,276 $51,596,983 $52,613,623 $53,650,597

NET OPERATING REVENUES $37,545,923 $36,144,724 $35,195,904 $34,196,480 $33,181,613

DEBT SERVICE:
2008 Certificates of Participation(9) $ 2,164,623 $ 4,244,303 $ 4,240,014 $ 4,240,014 $ 4,240,014 MID Treatment & Delivery Agreement 9,075,200 8,398,606 8,409,205 8,409,205 8,409,205 California Public Health Department Loan(10) 46,723 36,600 36,600 36,600 36,600 TOTAL DEBT SERVICE $11,286,546 $12,679,509 $12,685,819 $12,685,819 $12,685,819 DEBT SERVICE COVERAGE 3.33 2.85 2.77 2.70 2.62
(1) Calculated in conformity with the Contract and Trust Agreement. (2) Unaudited actuals through December 31, 2022. Projected thereafter through June 30, 2023. (3) [Estimated based on assumed rate increase of [___]% on each July 1.] (4) Service credits are billing of services to other City departments. (5) See footnote 1 in table entitled “WATER UTILITY SYSTEM - Historical Debt Service Coverage” above. (6) Assumes an inflationary rate of 2%.
(7) Assumes operating transfers for building rental fee of $65,000 annually and $700,000 annual transfer to the Storm Drain Fund to actively protect the groundwater supply source from contamination. (8) Excludes depreciation and amortization and the debt service component under the Treatment and Delivery Agreement. (9) Assumes interest rate of [3-4]%.
(10) See “SECURITY FOR THE 2008 CERTIFICATES - Existing and Future Parity Obligations.” Source: City of Modesto.

Investment Policy
The cash attributable to the Water Utility System must be invested in accordance with the City’s Investment Policy, adopted by the City Council during 1984 and most recently revised in 2022. #33..
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54 In accordance with Sections 53600 et seq. and following of the California Government Code, idle cash management and investment transactions are the responsibility of the City Finance Director/Treasurer and permitted investments include the following:
 City Issued Bonds
 US Treasury Notes/ Bills
 State of California Securities (provided that the securities are rated in a rating category of “A”)  California Municipal Securities (provided that the securities are rated in a rating category of “A”)  Other 49 State Municipal Securities (provided that the securities are rated in a rating category of “A”)  Federal Agencies
 Banker’s Acceptance (may not exceed 180 days maturity)  Commercial Paper (of "prime" quality of the highest ranking or of the highest letter)  Certificates of Deposit
 Negotiable Certificates of Deposit
 Repurchase Agreements (used solely as short-term investments not to exceed 90 days)  Reverse Repurchase Agreements (may not be used to leverage the portfolio)  Medium Term Notes (provided that the notes are rated in a rating category of “A”)  Money Market Fund
 LAIF
 Mortgage and Asset-Backed Securities (provided that the securities are rated in a rating category of “AA”)  CAMP
Supranationals (provided that the securities are rated in a rating category of “AA”)Criteria for selecting investments and the order of priority are:
 Safety of Principal - Preservation of principal and interest,  Liquidity - Ability to readily convert investment to cash at any moment in time, and  Yield - Potential dollar earnings on an investment.

Under the City’s investment policy, the City’s aims to obtain a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and cash flow needs. Investment criteria include protecting principal, ensuring adequate liquidity to meet cash needs, and attaining a market rate of return on investments.
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55 Financial Statements
The City’s annual financial report is audited in accordance with generally accepted auditing standards, and contains opinions that the financial statements present fairly, in all material respects, the financial position of the City.

The reports include certain notes to the financial statements. Such notes constitute an integral part of the audited financial statements. The Annual Comprehensive Financial Reports of the City have received the Government Finance Officers Association (“GFOA”) Certificate of Achievement for Excellence in Financial Reporting for each of the past 39 consecutive years. The City received the GFOA’s Triple Crown Award for the first time in 2020, recognizing governments who have received the GFOA’s Certificate of Achievement for Excellence in Financial Reporting, Popular Annual Financial Reporting Award, and the Distinguished Budget Presentation Award.

The basic financial statements of the City as of June 30, 2022, which are incorporated by reference in and portions of which are included in Appendix A to this Remarketing Memorandum, have been audited by Hudson Henderson & Company Inc. (the “Auditor”), independent certified public accountants, as set forth in their report. In connection with the incorporation of the financial statements and the report of the Auditor thereon in Appendix A to this Remarketing Memorandum, the City did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Remarketing Memorandum; and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report. The Auditor has not been engaged to perform, and has not performed, since the date of its report included herein any procedures on the financial statements addressed in that report.

CONSTITUTIONAL AND STATUTORY LIMITATIONS

ON TAXES AND WATER RATES AND CHARGES
Cities are subject to constitutional and statutory limitations that affect their ability to generate revenue and make expenditures, including Proposition 218 and Proposition 26, which specifically impact the City’s ability to impose water rates and charges. These limitations are described below.

Tax Limitations – Proposition 13
Article XIIIA of the State Constitution, known as Proposition 13, was approved by the voters in June 1978.

Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to 1% of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State statutes. Section 1(b) of Article XIIIA provides that the 1% limitation does not apply to ad valorem taxes levied to pay interest or redemption charges on (1) indebtedness approved by the voters prior to July 1, 1978, and (2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.

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

Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the City. #33..
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56 Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

The effect of Article XIIIA on the City’s finances has been to restrict ad valorem tax revenues for general purposes to the statutory allocation of the 1% levy while leaving intact the power to levy ad valorem taxes in whatever rate or amount may be required to pay debt service on its outstanding general obligation bonds and unissued bonds authorized prior to July 1, 1978. Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.

Spending Limitations
At the statewide special election of November 6, 1979, the voters approved an initiative entitled “Limitation of Government Appropriations” which added Article XIIIB to the California Constitution. Under Article XIIIB, State and local governmental entities have an annual “appropriations limit” which limits the ability to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations.”
Proposition 62
A statutory initiative (“Proposition 62”) was adopted by the voters voting in the State at the November 4, 1986 General Election which (1) requires that any tax for general governmental purposes imposed by local governmental entities be approved by resolution or ordinance adopted by two-thirds vote of the governmental agency’s legislative body and by a majority of the electorate of the governmental entity, (2) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (3) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (4) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (5) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities and (6) requires that any tax imposed by a local governmental entity on or after March 1, 1985 be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988.

Proposition 218
On November 5, 1996, the voters of the State approved Proposition 218, the so-called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local governments to levy and collect both existing and future taxes, assessments, fees and charges.

Article XIIID. Article XIIID established procedural requirements for imposition of assessments, which are defined as any charge on real property for a special benefit conferred upon the real property. Standby charges are classified as assessments. Procedural requirements include the conducting of a public hearing and an election by mailed ballot, with notice to the record owner of each parcel subject to the assessment. The assessment may not be imposed if a majority of the ballots returned oppose the assessment, with each ballot weighted according to the proportional financial obligation of the affected parcel. The City does not currently impose standby charges or assessments for its Wastewater System.

Article XIIID conditions the imposition or increase of any “fee” or “charge” upon there being no written majority protest after a required public hearing and, for fees and charges other than for sewer, water or refuse collection services, voter approval. Article XIIID defines “fee” or “charge” to mean levies (other than ad valorem or special taxes or assessments) imposed by a local government upon a parcel or upon a person as an incident of the ownership or tenancy of real property, including a user fee or charge for a “property-related service.” One of the requirements of Article XIIID is that before a property-related fee or charge may be imposed or increased, a public hearing upon the proposed fee or charge must be held and notice must be mailed to the record owner of each identified parcel of land #33..
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57 upon which the fee or charge is proposed for imposition. In the public hearing if written protests of the proposed fee or charge are presented by a majority of the owners of affected identified parcel(s), an agency may not impose the fee or charge.

Article XIIID provides that nothing in Proposition 218 shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

The California Supreme Court decisions in Richmond v. Shasta Community Services District, 32 Cal. 4th 409 (2004) (“Richmond”), and Bighorn Desert View Water Agency v. Verjil, 39 Cal. 4th 206 (2006) (“Bighorn”) have clarified uncertainty surrounding the applicability of Section 6 of Article XIIID to service fees and charges. In Richmond, the California Supreme Court upheld a Court of Appeal decision that water connection fees (which included a capacity charge for capital improvements to the water system and a fire suppression charge) imposed by the Shasta Community Services District were not property related fees or charges subject to Article XIIID because a water connection fee results from the property owner’s voluntary decision to apply for the connection. In both Richmond and Bighorn, however, the Court stated that a fee for ongoing water service through an existing connection is imposed “as an incident of property ownership” within the meaning of Article XIIID, rejecting, in Bighorn, the water agency’s argument that consumption based water charges are not imposed “as an incident of property ownership” but as a result of the voluntary decisions of customers as to how much water to use.

The City has followed the notice, hearing and protest procedures in Article XIIID in connection with its current water rates, and plans to follow such notice, hearing and protest procedures in connection with future rate increases.

In addition to the procedural requirements of Article XIIID, under Article XIIID all property-related fees and charges, including those which were in existence prior to the passage of Proposition 218 in November 1996, must meet the following substantive standards:
(1) Revenues derived from the fee or charge cannot exceed the funds required to provide the propertyrelated service. (2) Revenues derived from the fee or charge must not be used for any purpose other than that for which the fee or charge was imposed.
(3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership must not exceed the proportional cost of the service attributable to the parcel. (4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Fees or charges based on potential or future use of a service are not permitted. Standby charges, whether characterized as charges or assessments, must be classified as assessments and cannot be imposed without compliance with Section 4 of Article XIIID (relating to assessments).
(5) No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services where the service is available to the public at large in substantially the same manner as it is to property owners.

On April 20, 2015, the California Fourth District Court of Appeal issued a decision in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal.App.4th 1493 (2015), holding that the City of San Juan Capistrano’s tiered water rates (or inclining block rates) that were in effect from February 1, 2010 through June 30, 2014 violated the requirement of Proposition 218 that a fee or charge for property-related services, such as water delivery, must be proportional to the cost of providing service. In interpreting Proposition 218, the Court of Appeal emphasized that tiered water rates, or inclining block rates, that go up progressively in relation to usage are compatible with Proposition 218. However, the court concluded that Article XIIID requires that each tier must reflect the actual costs of service for property owners falling in each of the tiers. The court further concluded that the city had the burden #33..
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58 of proof to demonstrate compliance with Proposition 218 and that the city failed to meet its burden of proof in demonstrating that its tiered water rates corresponded to the actual costs of providing service to each tier.

The City believes that its established and proposed rates for water service comply with the substantive standards of Article XIIID. However, due to the uncertainties of evolving case law and potential future judicial interpretations of Proposition 218, the City is unable to predict at this time whether Proposition 218 could be interpreted, for example, to further limit fees and charges for water services and/or to require stricter standards for the allocation of costs among customers and customer classes.

Article XIIIC. Article XIIIC provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments. Article XIIIC does not define the terms “local tax,” “assessment,” “fee” or “charge.” The California Supreme Court held in Bighorn that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. The City and its City Attorney do not believe that Article XIIIC grants to the voters within the City the power to repeal or reduce rates and charges in a manner that would be inconsistent with the contractual obligations of the City.

The interpretation and application of Proposition 218 will likely be subject to further judicial determinations, and the City is unable to predict the outcome of such determinations, or what, if any, further implementing legislation will be enacted. No assurance can be given that that the courts will not further interpret Article XIIIC and Article XIIID to limit the ability of the City to impose, levy, charge and collect increased fees and charges for water services, or the voters of the City will not, in the future, approve initiatives which seek to repeal, reduce or prohibit the future imposition or increase of assessments, fees or charges, including the City’s water service fees and charges.

Proposition 26
Proposition 26, which amended Articles XIIIA and XIIIC of the California Constitution, was approved by the electorate at the November 2, 2010 election. Proposition 26 imposes a majority voter approval requirement on local governments such as the City with respect to certain fees and charges for general purposes, and a two-thirds voter approval requirement with respect to certain fees and charges for special purposes, unless the fees and charges are expressly excluded. Proposition 26, according to its supporters, was intended to prevent the circumvention of tax limitations imposed by the voters in California Constitution Articles XIIIA, XIIIC and XIIID pursuant to Proposition 13, approved in 1978, Proposition 218, approved in 1996, and other measures. Proposition 26 expressly excludes from its scope “a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable cost to the local government of providing the service or product” and “assessments and property-related fees imposed in accordance with the provisions of Article XIIID.” The City believes that its water fees and charges meet the criteria for exclusion under Proposition 26 and that the initiative is not intended to, and would not, apply to fees for water services charged by the City. The City is unable to predict, however, how Proposition 26 will be interpreted by the courts or what its ultimate impact will be.

Other Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62 and 26 were adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time other initiatives have been and could be proposed and adopted affecting the City’s revenues or ability to increase revenues. Neither the nature and impact of these measures nor the likelihood of qualification for ballot or passage can be anticipated by the City.

RISK FACTORS
Some of the factors which could impair the ability of the City to pay the 2008 Payments as they become due under the 2008 Contract are summarized below. This discussion is not meant to be an exhaustive list of the risks associated with the purchase of the 2008 Certificates and does not necessarily reflect the relative importance of the #33..
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59 various factors discussed. Potential investors are advised to consider the following factors, along with all other information in this Remarketing Memorandum, in evaluating the 2008 Certificates. There can be no assurance that other risk factors will not become material in the future.

General
The payment of principal and interest on the 2008 Certificates is secured solely by a pledge of the Gross Revenues of the Water Utility System and money on deposit in certain funds under the Trust Agreement. Under the terms of the Master Contract, Gross Revenues are to be deposited in the Revenue Fund and used by the City, ratably, without preference or priority, to (i) pay charges for Maintenance and Operation Costs of the Water Utility System (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not immediately required) as such charges are due and payable and (ii) deposit in the Parity Obligation Payment Fund the amount described in the Master Contract (in general terms, debt service which has accrued or will accrue during the next succeeding month on all Parity Obligations and net payments due or which will be due on all Parity Payment Agreements). See “SECURITY FOR THE 2008 CERTIFICATES — Flow of Funds.” The realization of revenues sufficient in amount to meet both of said obligations is subject to, among other things, the capabilities of management of the City, the ability of the City to provide water service to its users, and the ability of the City to establish and maintain water fees and charges sufficient to provide the required debt service coverage as well as pay for Maintenance and Operation Costs.

The 2008 Certificates are limited obligations of the City are not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts, except the Gross Revenues of the Water Utility System. The obligation of the City to make the 2008 Payments does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.

The City is obligated under the Trust Agreement to make debt service payments on the 2008 Certificates solely from Gross Revenues and certain other funds provided under the Trust Agreement. There is no assurance that the City can succeed in operating the Water Utility System such that the Gross Revenues in the amounts projected in this Remarketing Memorandum will be realized.

If Gross Revenues are insufficient to meet both of the requirements described above, the amounts available to pay Maintenance and Operation Costs will be reduced ratably along with the money to be deposited in the Parity Obligation Payment Fund. This could result in an inability on the part of the City to pay Maintenance and Operation Costs as the same become due which, in turn, could adversely affect the ability of the City to operate the Water Utility System thereby further reducing Gross Revenues.

Among other matters, drought, general and local economic conditions and changes in law and government regulations (including initiatives and moratoriums on growth) could adversely affect the amount of Gross Revenues realized by the City.

Natural Disasters and Seismic Considerations
General. The occurrence of any natural disaster within the City or affecting the City, including, without limitation, earthquake, wildfire, drought, high winds, landslide or flood, could have an adverse material impact on the economy within the City and the revenues available for the payment of the 2008 Certificates and result in substantial damage to and interference with the operations of the Water Utility System.

Seismic Activity. The area encompassed by the City as well as areas from which water supplies are derived, like much of California, may be subject to unpredictable seismic activity. The City and the Water Utility System facilities are located within a regional network of several active and potentially active faults. If there were to be an occurrence of severe seismic activity in or affecting the or the Water Utility System facilities, there could be an impact on the ability of water users to pay the Water Utility System rates and charges, diminishing Gross Revenues, which could have a material adverse effect on payment of the 2008 Certificates. #33..
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60 Flooding. Portions of the City are located are mapped within flood plains and have the potential to flood if rain events exceed the floodplain capacity. Some Water Utility System assets are located in a floodplain and could be vulnerable to a significant flooding event. An emergency response plan is in place to ensure services are restored or redirected as quickly as possible. A major natural disaster (i.e., 100-year flood) could cause a significant disruption to water services. See the subcaption “Climate Change” below. Damage to or contamination of portions of the City or Water Utility System facilities due to flooding and the related impacts on the activities taking place in the Water Utility System service area may affect the demand for water from the Water Utility System or the ability or willingness of customers to pay charges.

Fire. Wildfires have occurred historically in different regions of the State. The City’s facilities are not under direct threat from wildfire, however there is the possibility that wildfire could affect the water shelf and have downstream impacts to water quality. There is also the possibility a major wildfire disaster could affect the Water Treatment Plant and impact the water supply therefrom. There can be no assurance that fires will not occur near Water Utility System facilities or within the boundaries of the City in the future, leading to decreased water supplies received by the City or usage of the Water Utility System and a decline in Gross Revenues.

Drought. In the past several years, the State has experienced significant drought periods. The City has the authority to implement water conservation measures due to water shortage, based on the City’s urban water management plan and its water conservation plan. The City also has a water shortage contingency plan, which addresses water supply reductions.

Since 2015, the City has adopted a water shortage contingency restriction, which allows up to 3-day per week outdoor watering in the summer months and 2-day per week watering in the winter months.

Drought conditions could cause the State, the City or local authorities to curtail access to sources of water or impose conservation measures or both. The City cannot predict the effect of such actions would impact water supplies in future water years. There can be no assurance that drought conditions will not persist or worsen in the future. The persistence of drought conditions could materially adversely affect the ability of the City to generate Gross Revenues in amounts that are sufficient to pay the 2008 Certificates, even if the City imposed relatively higher drought water service rates. See “THE WATER UTILITY SYSTEM - Water Charges and Billing - Water Service Rates” above and “Water Supply” below.

Climate Change. Climate change, including change caused by human activities, may have material adverse effects on the Water Utility System. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, potentially increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the on the Water Utility System and its facilities is difficult to predict, but it could be significant and it could have a material adverse effect on the Water Utility System’s finances by requiring greater expenditures to counteract the effects of climate change or by changing the business and activities of Water Utility System customers. The City considers the potential effects of climate change in its planning, consistent with state law.

The Master Contract requires the City to “procure and maintain such insurance relating to the Water Utility System which it shall deem advisable or necessary to protect its interests and the interests of the Authority, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with water systems similar to the Water Utility System.” Such insurance is permitted to be maintained under a program of self-insurance so long as such program is maintained in the amounts and manner as is, in the opinion of an accredited actuary, actuarially sound. While City currently maintains insurance against property damage to its Water Utility System facilities in amounts up to approximately $50 million, damages resulting from earthquakes are not covered.

MID currently maintains up to approximately $195 million of insurance coverage for property damage to the Water Treatment Plant (with the City as a named insured), but that coverage does not include damage resulting from either floods or earthquakes.
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61 Public Health Emergencies
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. The spread of COVID-19 has had significant adverse health and financial impacts throughout the City, increasing costs and challenges to the City’s public health system and disruption of the regional and local economy and widespread business closures. However, the City did not experience a material impact to the operations or financial position of the Water Utility System as a result of the COVID-19 pandemic.

From time to time since the onset of the COVID-19 pandemic, authorities have implemented and revised restrictions on mass gatherings and widespread closings or other limitations of the operations of government, commercial, educational, and other institutions. While significant portions of the population of the State of California (including the City) have been vaccinated, COVID-19 variants have resulted, and may continue to result, in increased infection rates and the imposition of certain restrictions on commercial and other activities.

Neither the City nor the Authority can predict the ultimate effects of the COVID-19 pandemic or other public health emergencies or whether any such effects will have material adverse effect on the availability of Gross Revenues in an amount sufficient to pay debt service on the 2008 Certificates.

Demand for Water
There can be no assurance that the demand for water service will occur as projected in this Remarketing Memorandum. Not only is it possible that future increases in demand for water service will not occur at the rate described herein, it is also possible that current levels of demand could be reduced. A reduction in the level of demand could require an increase in rates or charges in order to comply with the Rate Covenant. See “SECURITY FOR THE 2008 CERTIFICATES — Rate Covenant.” The City’s ability to increase revenue is subject to Constitutional limitations. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WASTEWATER RATES AND CHARGES—Proposition 218—Article XIIIC and —Article XIIID.” Such rate increases could increase the likelihood of nonpayment, and could further decrease demand.

Water Supply
There can be no assurance that the supply of water available to the City to meet potential system-wide demand will be consistent with the projections in this Remarketing Memorandum. Adequacy of supply could be adversely affected by factors such as water quality standards or groundwater basin regulation which restrict the ability of the City to use existing groundwater supplies to meet demand. See “THE WATER UTILITY SYSTEM — Water Quality.” Implementation of the SGMA and the groundwater sustainability plan for the Modesto basin may limit groundwater pumping, increase landfall following, and increase costs. Implementation of the GSP recommendations could also result in claims against the City for failure to comply with applicable laws and regulations. Adequacy of supply also could be adversely affected by drought and drought regulations . See “THE WATER UTILITY SYSTEM - Sources of Water” and “ - Treatment and Delivery Agreement.” In addition to the potential problems of insufficient water to meet system-wide demand discussed above, it is possible that the supply of water to meet the demands of particular portions of the City’s water service area will be inadequate for such purposes. Some portions of the service area lack the wells necessary to supply them with groundwater, and other portions lack the infrastructure which would be required in order to deliver water from other portions of the service area.

Water Utility System Expenses
There can be no assurance that the Maintenance and Operation Costs will be consistent with the projections in this Remarketing Memorandum. Increases in such costs could require a significant increase in rates or charges in order to pay for existing and future improvements to the Water Utility System and comply with the Rate Covenant.

Such rate increases could increase the likelihood of nonpayment by customers and could also decrease demand. #33..
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62 Cybersecurity
The Water Utility System relies on a complex technology environment to conduct its operations. As a recipient and provider of personal, private, and sensitive information, the City and its departments and offices including the Water Utility System face multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. The City has implemented several preventive measures to protect against cybersecurity threats. These include, but are not limited to, firewalls, email filtering, web content filtering, anti-malware, endpoint protection, and maintaining current patch levels on operating systems, network equipment, and endpoint devices. To date, neither the City nor the Water Utility System has experienced any cyberattacks that have resulted in major operational disruptions or financial consequences.

The City currently maintains insurance coverage with respect to certain information security and privacy liability claims which include the Water Utility System.

Parity Obligations
In addition to the existing Parity Obligations, the City may at any time execute additional Parity Obligations, subject to the specific conditions set forth in the Master Contract. See “SECURITY FOR THE 2008 CERTIFICATES - Existing and Future Parity Obligations” and “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES.”
Limitations of the Liquidity Facility
The ability to obtain funds under a Liquidity Facility in accordance with its terms may be limited by federal or State law. Bankruptcy, conservatorship, receivership and similar laws governing financial institutions or any issuer of a Liquidity Facility may prevent or restrict payment under such Liquidity Facility. To the extent the short-term rating on the 2008 Certificates depends in any manner on the rating of the Liquidity Facility Provider, the short-term ratings on the 2008 Certificates could be downgraded or withdrawn if the Liquidity Facility Provider were to be downgraded, placed on credit watch or have its ratings suspended or withdrawn or were to refuse to perform under the Liquidity Facility.

The obligation of the Liquidity Facility Provider under the Liquidity Facility to purchase unremarketed 2008 Certificates is subject to the conditions and limitations set forth therein, and is also subject to all rights and defenses available to contracting parties generally. The Liquidity Facility is not a guaranty to pay the purchase price of any 2008 Certificates tendered for purchase. The Liquidity Facility is a general contract, subject to certain conditions and limitations, and is not a letter of credit. Purchasers of any 2008 Certificates should consult their legal counsel for an explanation of the differences between a general contract and a letter of credit or guaranty. The following is included as a summary of selected differences and does not purport to be complete or definitive.

In general, a letter of credit is an independent, special contract by a bank to pay a third party such as a bond trustee holding the letter of credit for the benefit of owners of such bonds. Banks are required by law to honor their letters of credit except in specified circumstances. If a dispute were to develop between a bank and its borrower, except in limited circumstances, the dispute should not jeopardize payment under the letter of credit because (a) the letter of credit would be independent of the disputed contract between the borrower and the bank and (b) the beneficiary of the letter of credit (typically, the bond trustee) would have direct rights under the letter of credit.

Further, and although there are defenses to payment of letters of credit, such defenses are limited by law to specified circumstances.

In contrast, a standby bond purchase agreement, such as the Liquidity Facility, is merely a general contract.

No law expressly requires performance of the contract, although the non-breaching party would be entitled to allowable damages if there were a breach of contract. Although the Trustee is authorized to draw funds in accordance with the Liquidity Facility, the Liquidity Facility Provider has no independent obligation to the Trustee. If a dispute were to develop, the Liquidity Facility Provider will have all defenses allowed at law or in equity to their payment under or other performance of the Liquidity Facility, including but not limited to disputes (whether valid or not) #33..
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63 regarding the authority of any party to enter into or perform under the Liquidity Facility. In general, the provider of a standby bond purchase agreement has more defenses against performance than the provider of a letter of credit.

The Liquidity Facility Provider, the Authority or the City may seek to have any future dispute resolved in court and appealed to final judgment before it performs under the Liquidity Facility. Further, even if the Authority were to prevail against the Liquidity Facility Provider, a court would not necessarily order the Liquidity Facility Provider to perform under the Liquidity Facility; it could instead award damages for breach of contract to the Authority. Any such award would not necessarily be in an amount sufficient to pay the purchase price of the applicable 2008 Certificates.

Rate Process
The passage of Proposition 218 by the California electorate affects the City’s ability to impose future rate increases, and no assurance can be given that future rate increases will not encounter majority protest opposition under Proposition 218. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES.”
Statutory and Regulatory Impact
Laws and regulations governing the treatment and delivery of water are enacted and promulgated by governmental agencies on the federal, state and local levels. Compliance with these laws and regulations may prove costly; and, as more stringent statutory and regulatory standards are developed to protect both the health of consumers and environment, these costs will likely continue to increase. Claims against the City with respect to the Water Utility System could be significant, and such claims will be payable from Gross Revenues. Future compliance with such orders can also impose substantial additional cost on the City’s Water Utility System. No assurance can be given that the cost of compliance with applicable laws and regulations will not materially adversely affect the ability of the City to generate sufficient Gross Revenues to pay the 2008 Certificates and comply with the Rate Covenant. See “THE WATER UTILITY SYSTEM — DBCP Settlement Agreement,” “— PCE Litigation” and “— TCP Litigation” above.

Limitations on Remedies and Bankruptcy
The ability of the City to increase fees and charges for water service and to comply with the Rate Covenant may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or payers of fees and charges. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND WATER RATES AND CHARGES.” Furthermore, any remedies available to the Owners of the 2008 Certificates upon the occurrence of an event of default under the Contract are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.

In addition to the limitations on remedies contained in the Contract, the rights and obligations under the 2008 Certificates and the Contract may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against cities in the State of California. Various legal opinions to be delivered concurrently with the issuance of the 2008 Certificates will be so qualified. In addition, the opinion to be delivered by Sidley Austin LLP, Original Special Counsel, concurrently with the execution and delivery of the 2008 Certificates, also stated that the enforceability of the Contract is subject to the limitations on the imposition of fees and charges by the City relating to the Water Utility System under Articles XIIIC and XIIID of the California Constitution. A copy of the proposed form of opinion of Special Counsel is set forth in Appendix C hereto. The opinion of Original Special Counsel has not been updated subsequent to the date of delivery of the 2008 Certificates or as of the date of this Remarketing Memorandum. In the event the City fails to comply with its covenants under the Contract or to pay principal or interest evidenced by the 2008 Certificates, there can be no assurance that available remedies will be adequate to fully protect the interests of the Owners of the 2008 Certificates.
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64 The enforcement of the remedies provided in the Contract could prove both expensive and time consuming.

In addition, the rights and remedies provided in the Contract may be limited by and are subject to provisions of the federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect creditors’ rights.

Chapter 9 of the United State Bankruptcy Code provides certain protections for bonds secured by “special revenues.” “Special revenues” includes “receipts derived from the ownership, operation, or disposition of projects or systems of the debtor that are primarily used or intended to be used primarily to provide transportation, utility, or other services, including the proceeds of borrowings to finance the projects or systems.’” The City believes that the Gross Revenues and other funds pledged under the Trust Agreement constitute “special revenues” under Chapter 9.

Section 928(a) of Chapter 9 provides that special revenues received by a municipal debtor after the commencement of a Chapter 9 case remain subject to any lien resulting from the pre-petition pledge provided under the Trust Agreement. Further, Section 922 provides that the automatic stay imposed by Chapter 9 does not stay the application of special revenues to the payment of bonded indebtedness. However, a bankruptcy court may determine that the Gross Revenues and other funds pledged under the Trust Agreement are not special revenues, or that the bankruptcy court has no power to control the municipality’s use of such special revenues during the pendency of the bankruptcy case.

In a recent bankruptcy court decision, entitled Opinion and Order Granting Motion to Dismiss Plaintiffs’ Complaint Pursuant to Fed. R. Civ. P. 12(B)(1) and (B)(6), and filed in U.S.D.C. (Puerto Rico) Case Nos. 17-00155 and 17-00156, respectively, involving instrumentalities of the Commonwealth of Puerto Rico, the bankruptcy court reiterated that the Bankruptcy Code could not be used to invalidate consensual prepetition liens on special revenues acquired by a debtor post-petition. However, the bankruptcy court held that the “special revenue” provisions of the Bankruptcy Code (made applicable to the Commonwealth by provisions of special legislation known as PROMESA) do not require the turnover of those special revenues to bondholders during the course of a bankruptcy proceeding.

Rather, the court found that Section 922(d) of the Bankruptcy Code merely authorized the debtor to permit special revenues to be turned over to bondholders to keep itself in compliance with state law, but did not give bondholders the right to compel such payments. The court further found that bondholders were prohibited by the automatic stay from enforcing their liens against the special revenues. The decision was appealed to the U.S. Court of Appeals for the First Circuit and affirmed by that court.

In addition, Chapter 9 provides that any application of “special revenues” to the payment of the municipality’s debt obligations is subject to prior use of such moneys for the payment of “necessary operating expenses” of the municipal enterprise. There can be no assurance that a bankruptcy court would not interpret the term “necessary operating expenses” to be more expansive than the meaning afforded “Maintenance and Operation Costs” under the Contract, thus potentially reducing Gross Revenues available to pay the 2008 Certificates.

In order to confirm a plan of adjustment in any bankruptcy proceeding of the City, it must still comply with the requirements of Section 943 of the Bankruptcy Code. This requires the City to demonstrate, among other things, that it is not prohibited by state law from taking any action necessary to carry out the proposed plan, including with respect its use of special revenues. However, because Section 943 was not likewise amended by Congress when the “special revenues” provisions were enacted, it is possible that, without the consent and over the objection of the Trustee and the Owners if the 2008 Certificates, the bankruptcy court may permit the alteration of the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources and uses, covenants (including taxrelated covenants and call protection), and other terms or provisions of the Trust Agreement and the 2008 Certificates, as long as the bankruptcy court determines that the alterations are fair and equitable.

Litigation
From time to time there are litigation matters against the City, which could, if determined adversely to the City, affect the expenditures and, in some cases, the Gross Revenues of the Water Utility System and cash flow. While there can be no assurances as to the ultimate resolution and fiscal impact of such litigation, the City believes that the resolutions of such litigation that is pending are unlikely to adversely affect payment of principal and interest evidenced by the 2008 Certificates when due. See “THE WATER UTILITY SYSTEM — DBCP Settlement Agreement,” “— PCE Litigation” and “— TCP Litigation” above. #33..
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65 Interest Rate Swaps Terminated During a Period of Negative Value Could Negatively Impact Financial Condition
The City has entered into the 2008 Swap Agreement and may enter into interest rate swap agreements payable from Gross Revenues to hedge interest rate risk in the future. Any interest rate swap or other hedge agreement may, at any time, have a negative value to the City. Such agreements may also be subject to early termination upon the occurrence of certain specified events. If either the City or the counterparty terminates such an agreement when the agreement has a negative value to the City, the City could be obligated to make a termination payment from Gross Revenues to the counterparty in the amount of such negative value and such payment could be substantial and potentially materially adverse to the Water Utility System’s financial condition. The occurrence of a termination event or changes in the market value of such agreements could negatively or positively impact the Water Utility System’s operating results and financial condition, and such impact could be material. In the event of an early termination of a swap agreement, there can be no assurance that (1) where the swap agreement has a positive value to the City, the City will receive any termination payment payable to it by the respective swap counterparty, (2) where the swap agreement has a negative value to the City, the City will have sufficient amounts to pay a termination payment payable by them to the respective swap counterparty, and (3) in any event, the City will be able to obtain a replacement swap agreement with comparable terms. The City may periodically enter into interest rate swap agreements that require it to post collateral to secure its obligations in certain circumstances. If the City is unable to secure its obligations under such interest rate swap agreement with sufficient collateral, the swap counterparty to such swap agreement may have the right to terminate the swap agreement.

Ratings May Be Lowered or Withdrawn; Unsolicited Ratings There can be no assurance that the ratings assigned to the 2008 Certificates will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for and marketability of the 2008 Certificates.

Such rating changes could occur due to changes in the rating of Assured Guaranty, the Liquidity Provider or the underlying credit of the Water Utility System. See also the information under the heading “RATINGS.” The 2008 Certificates are expected to receive credit ratings from two nationally recognized statistical rating organizations (“NRSROs”). A rating is not a recommendation to buy, sell or hold the 2008 Certificates. The ratings assigned to the 2008 Certificates are, respectively, based upon the delivery of the 2008 Certificate Insurance Policy by the Assured Guaranty[, notwithstanding the 2008 Certificate Insurance Policy] and based on delivery of the Liquidity Facility. See “RATINGS” below.

An NRSRO other than the NRSROs hired by the Authority or the City may issue ratings on the 2008 Certificates, an NRSRO other than an NRSRO hired by Assured Guaranty may issue ratings on Assured Guaranty or an NRSRO other than an NRSRO hired by the Liquidity Provider may issue ratings on the Liquidity Provider (“Unsolicited Ratings”), which may be lower, and could be significantly lower, than the ratings assigned by the respective hired NRSROs. Issuance of an Unsolicited Rating lower than the ratings assigned by the a hired NRSRO on the 2008 Certificates, Assured Guaranty or the Liquidity Provider might adversely affect the value of the 2008 Certificates. Investors in the 2008 Certificates should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO. Currently, Moody’s Investor’s Service, Inc. maintains an Unsolicited Rating of “A2” (financial strength rating) on Assured Guaranty.

None of the Authority, the City, the Remarketing Agent, Assured Guaranty, Liquidity Provider or any of their affiliates will have any obligation to inform the Owners of the 2008 Certificates of any Unsolicited Ratings assigned after the date of this Remarketing Memorandum. In addition, if the Authority, the City, Assured Guaranty or the Liquidity Provider fail to make available to a non-hired NRSRO any information provided to any hired rating agency for the purpose of assigning or monitoring the ratings on the 2008 Certificates, Assured Guaranty or the Liquidity Provider, a hired NRSRO could withdraw its ratings on the 2008 Certificates, Assured Guaranty or the Liquidity Provider, which could adversely affect the market value of the 2008 Certificates and/or limit the Owner’s ability to resell its 2008 Certificates.
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66 THE AUTHORITY
The Authority was established pursuant to the provisions of Sections 6500 et seq. of the California Government Code and a Joint Exercise of Powers Agreement, dated as of December 1, 1989, by and between the City and the Industrial Development Authority of the City of Modesto. The Authority was established for the purpose of financing the acquisition, construction, improvement and equipping of public capital improvements. The governing board of the Authority consists of the City Council of the City.

ABSENCE OF LITIGATION
There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the City or the Authority, threatened against the City or the Authority affecting the existence of the City or the Authority or the titles of their respective directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the 2008 Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the 2008 Certificates, the Trust Agreement, the Contract, or any action of the City or the Authority contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Remarketing Memorandum or any amendment or supplement thereto, or contesting the powers of the City or the Authority or their respective authority with respect to the 2008 Certificates or any action of the City or the Authority contemplated by any of said documents, nor to the knowledge of the City, is there any basis therefor.

TAX MATTERS
On the date of original execution and delivery of the 2008 Certificates, Sidley Austin LLP, as Special Counsel (“Original Special Counsel”) to the Authority and City in connection with the issuance of the 2008 Certificates, rendered its opinion that based on existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain covenants in the Trust Agreement and the 2008 Contract and requirements of the Internal Revenue Code of 1986, as amended (the “Code”), regarding the use, expenditure and investment of proceeds of the 2008 Certificates and the timely payment of certain investment earnings to the United States, interest with respect to the 2008 Certificates is not includable in the gross income of the owners of the 2008 Certificates for federal income tax purposes, and further, interest with respect to the 2008 Certificates is not treated as an item of tax preference in calculating the federal alternative minimum taxable income of individuals and corporations. Interest with respect to the 2008 Certificates, however, is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liability.

The opinion of Original Special Counsel was based on current legal authority as of the date of original execution and delivery of the 2008 Certificates, covered certain matters not directly addressed by such authorities, and represented Original Special Counsel’s judgment as to the proper treatment of the 2008 Certificates for federal income tax purposes. It was and is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Original Special Counsel could not give and has not given any opinion or assurance about the activities of the Authority or the City subsequent to the date of original issuance and delivery of the 2008 Certificates, or about the effect of changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS subsequent to such date.

Original Special Counsel is not obligated to defend the Authority, the City or the Beneficial Owners regarding the tax-exempt status of the 2008 Certificates in the event of an audit examination by the IRS. Under current procedures, parties other than the Authority and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority and the City legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the 2008 Certificates for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues, may affect the market price for, or the marketability of, the 2008 Certificates, and may cause the Authority, the City or the Beneficial Owners to incur significant expense. #33..
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67 RATINGS
Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”) are expected to assign their long-term ratings of “[__]” and “[__]” respectively, to the 2008 Certificates [based upon the delivery of the 2008 Certificate Insurance Policy by the Assured Guaranty. [Moody’s and S&P are also expected to assign their long-term ratings of “[__]” and “[__]” respectively, to the 2008 Certificates notwithstanding the 2008 Certificate Insurance Policy.] Moody’s and S&P are also expected to assign their short-term ratings of “[__]” and “[__]” respectively, to the 2008 Certificates based on the delivery of the Liquidity Facility. Generally, rating agencies base their ratings on information and material furnished directly to them and on investigations, studies and assumptions made by them. The ratings reflect only the views of such organizations and an explanation of the significance of such rating may be obtained from the rating agency furnishing such rating at the following address: S&P, 55 Water Street, New York, New York 10041. There is no assurance that the rating will continue for any given period of time or that it 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 2008 Certificates.

See “RISK FACTORS - Ratings May Be Lowered or Withdrawn; Unsolicited Ratings.”

MUNICIPAL ADVISOR
The City has retained Public Financial Management, LLC, of San Francisco, California, as Municipal Advisor (the “Municipal Advisor”) in connection with the execution and delivery of the 2008 Certificates. 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 Remarketing Memorandum. Public Financial Management, Inc. is an independent municipal advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

CERTAIN LEGAL MATTERS
On the date of issuance of the 2008 Certificates, Original Special Counsel, rendered its opinion as to the validity and enforceability of the 2008 Certificates. The opinion of Original Special Counsel has not been updated as of the date of this Remarketing Memorandum. A copy of opinion of Original Special Counsel rendered with respect to the 2008 Certificates is attached as Appendix C hereto. Norton Rose Fulbright US LLP is currently serving as Special Counsel and Disclosure Counsel to the Authority and the City. As Special Counsel to the Authority and the City, Norton Rose Fulbright US LLP is not providing any opinion to the Owners with respect to the validity and enforceability of the 2008 Certificates. Certain other legal matters with respect to the Authority and the City in connection with the delivery of the Liquidity Facility will be passed upon by Special Counsel. Certain legal matters with respect to the Authority and the City in connection with the delivery of the Liquidity Facility will be passed upon by its City Attorney. Certain legal matters will be passed upon for the Liquidity Facility Provider by its counsel, Hawkins, Delafield & Wood LLP, Los Angeles, California. [Remainder of page intentionally left blank.]
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68 MISCELLANEOUS
Reference is made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive, and reference is made to such documents and complete statement of the contents thereof.

Any statements in this Remarketing Memorandum involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Remarketing Memorandum is not to be construed as a contract or agreement between the City and the purchasers or holder of any 2008 Certificates.

The execution and delivery of this Remarketing Memorandum have been duly authorized by the City and the Authority.

CITY OF MODESTO, CALIFORNIA
By: /s/ DeAnna Christensen
Finance Director

MODESTO PUBLIC FINANCING AUTHORITY
By: /s/ DeAnna Christensen
Auditor and Treasurer
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134895681.5 A-1

APPENDIX A
EXCERPTS FROM THE CITY’S FINANCIAL STATEMENTS
The City has filed its Annual Comprehensive Financial Report (“ACFR”) for the Fiscal Year ended June 30, 2022 with the Nationally Recognized Municipal Securities Information Repositories. Such ACFR is incorporated herein by reference. The following are excerpts from the ACFR relating to the Water Utility System. #33..
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APPENDIX B

DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX C
COPY OF FINAL APPROVING OPINION OF ORIGINAL SPECIAL COUNSEL DATED MAY 29, 2008 #33..
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APPENDIX D

INFORMATION CONCERNING DTC
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the 2008 Certificates. The 2008 Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC.

One fully-registered certificate for the 2008 Certificates will be issued in the aggregate principal amount of each maturity of the 2008 Certificates, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company of DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of 2008 Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2008 Certificates on DTC’s records. The ownership interest of each actual purchaser of each 2008 Certificate (“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 2008 Certificates 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 beneficial ownership interests in the 2008 Certificates, except in the event that use of the book-entry system for the 2008 Certificates is discontinued.

To facilitate subsequent transfers, all 2008 Certificates 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 2008 Certificates 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 2008 Certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2008 Certificates are credited, which may or may not be the Beneficial Owners.

The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Beneficial Owners of 2008 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2008 Certificates, such as redemptions, defaults, and proposed amendments to the 2008 Certificate documents. For example, Beneficial Owners of 2008 Certificates may wish to ascertain that the nominee holding the 2008 Certificates for their benefit has agreed to obtain and transmit notices to Beneficial #33..
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Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the 2008 Certificates are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such 2008 Certificates to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2008 Certificates unless authorized by a Direct Participant in accordance with DTC’s Money Market Instrument Procedures.

Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 2008 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, redemption proceeds, and interest payments on the 2008 Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Trustee, on a payment 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 Participants and not of DTC nor of its nominee, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, redemption proceeds, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, 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.

DTC may discontinue providing its services as depository with respect to the 2008 Certificates at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, 2008 Certificate certificates are required to be printed and delivered.

The City may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, 2008 Certificate certificates will be printed and delivered to DTC.

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

The Authority, the City and the Remarketing Agent cannot and do not give any assurances that DTC will distribute to Participants or that Participants or others will distribute to the Beneficial Owners payments of principal of, premium, if any, and interest on the 2008 Certificates paid or any redemption or other notices or that they will do so on a timely basis or will serve and act in the manner described in this Remarketing Memorandum. The City is not responsible or liable for the failure of DTC or any Direct Participant or Indirect Participant to make any payments or give any notice to a Beneficial Owner with respect to the 2008 Certificates or any error or delay relating thereto.

None of the Authority, the City, the Remarketing Agent or the Trustee will have any responsibility or obligation to Direct Participants, to Indirect Participants or to any Beneficial Owner with respect to (i) the accuracy of any records maintained by DTC, any Direct Participant, or any Indirect Participant; (ii) the payment by DTC or any Direct Participant or Indirect Participant of any amount with respect to the principal of or premium, if any, or interest on the 2008 Certificates; (iii) any notice that is permitted or required to be given to Holders under the Trust Agreement; (iv) the selection by DTC, any Direct Participant or any Indirect Participant of any person to receive payment in the event of a partial redemption of the 2008 Certificates; (v) any consent given or other action taken by DTC as Bondholder; or (vi) any other procedures or obligations of DTC, Direct Participants or Indirect Participants under the book-entry system. #33..
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134895681.5 E-3

APPENDIX E

FINANCIAL GUARANTY INSURANCE POLICY
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Norton Rose Fulbright US LLP draft 3/21/23

APPENDIX F

CERTAIN INFORMATION REGARDING THE CITY OF MODESTO
The following information with respect to the City is presented for information purposes only. The 2008 Certificates do not constitute an indebtedness of the City within the meaning of any constitutional, statutory or charter limitations and the City is not obligated to levy any ad valorem taxes therefor or to use any other funds of the City to pay debt service on the 2008 Certificates.

General Description
The City, which is the county seat of Stanislaus County, was incorporated in 1884. It covers approximately

37.4 square miles. The City operates under a council-manager form of government pursuant to a charter adopted in 1963. The City is located in central California approximately 93 miles east of the City and County of San Francisco.

The City Council (the “Council”) appoints the City Clerk and Auditor, the City Attorney, and the City Manager. The City Manager heads the executive branch of government, implements Council directives and policies, and manages the administrative and operational functions through the various department heads who are appointed by the City Manager.

The City provides the full range of services normally associated with a municipality, including public safety (police and fire), highways and streets, sanitation, health and social services, culture-recreation, public improvements, planning and zoning and general administrative services. The City also provides parking and airport facilities and water, sewer and bus service. The school districts in the City are separate governmental entities which receive no funding from the City.

Population
The following table represents historical population statistics for the City, the County and the State.

TABLE A-1

CITY OF MODESTO
Population Estimate(1)
Calendar Year City of Modesto Stanislaus County State of California 2018 218,674 550,964 39,586,646
2019 220,126 554,018 39,695,376
2020 222,335 557,709 39,782,870
2021 218,745 551,737 39,303,157
2022 217,880 549,466 39,185,605

(1) As of January 1 for 2018-19 and 2021-22. As of April 1 for 2020.

Source: California State Department of Finance, Population Estimates for City, County and State Population, 2011-2020 with 2010 Benchmark, and 2021-2022 with 2020 Benchmark.
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134737296.2 F-2
Employment
The following table summarizes the civilian labor force, employment and unemployment in the County for the calendar years 2017 through 2021. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City.

TABLE A-2

MODESTO METROPOLITAN STATISTICAL AREA
Industry Employment and Labor Force
(Annual Averages)
2017 2018 2019 2020 2021
Civilian Labor Force 242,000 243,100 242,900 241,700 239,500 Employment 223,700 227,200 227,900 214,900 219,500
Unemployment 18,200 15,800 14,900 26,800 20,000
Unemployment Rate 7.5% 6.5% 6.2% 11.1% 8.4%

Wage and Salary Employment:

Total Farm 14,300 14,400 14,900 14,500 13,800
Total Nonfarm 174,700 179,100 181,400 173,100 178,000
Natural Resources, Mining and
Construction 9,300 10,200 10,500 9,800 10,600
Manufacturing 21,400 21,600 21,400 21,200 22,000
Wholesale Trade 6,100 6,300 6,200 5,900 5,700
Retail Trade 23,200 23,200 22,800 21,900 23,000
Transport., Warehousing, Utilities 7,600 7,900 8,700 9,000 8,900 Information 1,000 1,000 1,000 800 800
Financial Activities 5,300 5,300 5,300 5,100 4,900
Professional and Business Services 14,900 15,400 15,300 15,100 15,300 Educational and Health Services 32,600 33,600 34,700 34,600 34,900 Leisure and Hospitality 19,200 19,300 19,200 15,800 18,100 Other Services 5,700 5,800 5,900 5,100 5,500
Federal Government 800 800 800 900 800
State Government 2,100 2,200 2,100 2,100 2,000
Local Government 25,500 26,600 27,400 25,900 25,700
Total All Industries 189,100 193,600 196,200 187,600 191,700

Note: Totals may not add up because of rounding.

Source: Labor Division of the California State Employment Development Department. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Major Employees
The following table summarizes the largest employers in the County of Stanislaus as of June 30, 2022.

TABLE A-3

COUNTY OF STANISLAUS
Principal Employers
as of June 30, 2022
No. Company Name
No.

Employees(1)

1. E & J Gallo Winery 6,700

2. Stanislaus County 3,886

3. Modesto City Schools 3,200

4. Doctors Medical Center 2,600

5. Memorial Medical Center 2,087

6. Foster Farms Poultry 2,000

7. Del Monte Foods Inc. 1,500

8. City of Modesto 1,273

9. Sylvan Union School District 900

10. Modesto Junior College 783

(1) The number of employees include both part-time and full time.

Source: City of Modesto Annual Comprehensive Financial Report, Fiscal Year Ended June 20, 2022. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Commercial Activity
The following table shows the dollar volume of taxable transactions in the City of Modesto from 2017 through 2021.

TABLE A-4

CITY OF MODESTO
Taxable Transactions
Calendar Years 2017 through 2021
(in Thousands of Dollars)
Retail Outlets 2017 2018 2019 2020 2021
Motor Vehicle and Parts
Dealers $252,304 $228,695 $225,114 $248,063 $287,959
Home Furnishings and
Appliance Stores 153,682 159,528 155,334 136,481 179,746 Building Material And
Garden Equip. and Supplies 172,798 177,802 177,144 214,352 229,818 Food and Beverage Stores 155,484 161,334 160,002 179,921 189,237 Gasoline Stations 211,768 242,906 258,243 202,652 280,349 Clothing and Clothing
Accessories Stores 261,562 262,644 262,974 195,279 312,711 General Merchandise Stores 439,803 439,547 432,202 419,354 498,672 Food Services and Drinking
Places 403,575 411,865 434,472 358,932 485,841
Other Retail Group 239,772 232,663 244,262 274,862 304,882 Total Retail and Food
Services $2,290,749 $2,316,985 $2,349,747 $2,229,895 $2,769,215 All Other Outlets 597,735 657,422 611,779 544,205 700,790 Totals All Outlets $2,888,484 $2,974,407 $2,961,526 $2,774,100 $3,470,005

Source: State of California, Board of Equalization.
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134737296.2 F-5
The following table shows the dollar volume of taxable transactions in the County of Construction Trends Stanislaus from 2017 through 2021.

TABLE A-5

COUNTY OF STANISLAUS
Taxable Transactions
Calendar Years 2017 through 2021
Retail Outlets 2017 2018 2019 2020 2021
Motor Vehicle and Parts Dealers $1,449,020,362 $1,439,880,600 $1,467,719,388 $1,591,266,449 $1,918,424,926 Furniture and Home Furnishings
Stores
266,575,427 278,676,783 278,192,441 295,717,551 368,219,189 Building Material and Garden Equip.
and Supplies
617,543,321 588,272,390 626,431,683 772,950,450 880,551,050 Food and Beverage Stores
340,687,751 353,824,777 357,393,747 402,906,218 424,791,658 Gasoline Stations
655,141,175 760,704,455 765,581,357 601,273,266 869,297,778 Clothing and Clothing Accessories
Stores
407,885,089 420,229,130 428,859,216 367,348,098 541,404,074 General Merchandise Stores 913,145,414 928,792,229 934,082,413 949,055,948 1,098,048,392 Food Services and Drinking Places 787,180,028 808,105,522 862,034,437 743,124,681 994,900,907 Other Retail Group 616,899,227 666,808,643 745,668,054 1,207,595,830 1,600,291,690 Total Retail and Food Services 6,054,077,794 6,245,294,529 6,465,962,736 6,931,238,491 8,695,929,664 All Other Outlets 2,918,542,604 3,053,646,245 3,213,863,724 3,156,056,716 3,640,635,387 Totals All Outlets 8,972,620,398 9,298,940,774 9,679,826,460 10,087,295,207 12,336,565,051

Source: State of California, Board of Equalization.

Construction Trends
“Single Family Housing,” includes detached, semi-detached, rowhouse and townhouse units. Rowhouses and townhouses are included when each unit is separated from the adjacent unit by an unbroken ground-to-roof party or fire wall. Condominiums are included in single-family when they are of zero-lot-line or zero-property-line construction; when units are separated by an air space; or, when units are separated by an unbroken ground-to-roof party or fire wall. “Multi-Family Housing,” includes duplexes, 3-4-unit structures and apartment-type structures with five units or more. Multifamily housing also includes condominium units in structures of more than one living unit that do not meet the above single-family housing definition. “Residential Alterations and Additions,” means alterations, additions, and conversions to residential structures, excluding special installation permits for electrical, plumbing, heating, air-conditioning, or similar mechanical work, or installation of fire escapes, elevators, signs, etc. “New Commercial,” includes new hotels and motels, office and bank buildings, stores and other mercantile buildings, parking garages, service stations, and amusement and recreational buildings. “New Industrial,” includes manufacturing plants and affiliated buildings. “Other New Nonresidential,” includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings, residential garages, public works and utilities buildings, and miscellaneous nonresidential structures. “Nonresidential Alterations and Additions,” means alterations, additions, and conversions to nonresidential structures, excluding special installation permits for electrical, plumbing, healing, air-conditioning, or similar mechanical work, or installation of fire escapes, elevators and signs, etc. #33..
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Provided below are the building permits and valuations for the City of Modesto for calendar years 2017 through 2021.

TABLE A-6

CITY OF MODESTO
Residential and Nonresidential Building Permit Valuations and Total Residential Building Permits
2017 2018 2019 2020 2021
Permit Valuation
New Single-family $23,800,808 $21,428,412 $21,173,429 $33,535,670 $17,012,856 New Multi-family $25,800,000 $280,000 $10,800,000 $8,474,999 $13,509,452 Res. Alterations & Additions $10,499,153 $10,315,164 $9,000,959 $8,382,751 $6,124,779 Total Residential $60,099,961 $32,023,576 $40,974,388 $50,393,420 $36,647,087 New Commercial $21,295,586 $8,940,300 $14,899,100 $16,934,862 $14,874,583 New Industrial $9,500,000 $3,100,000 $7,662,000 $2,500,000 $14,000,000 New Other $10,217,282 $70,356,893 $16,898,036 $19,071,819 $9,755,024 Non-Res. Alterations & Additions $24,510,447 $19,158,973 $43,326,295 $40,601,786 $15,477,294 Total Nonresidential $65,523,315 $101,556,166 $82,785,431 $79,108,467 $54,106,901 Total All Building $125,623,276 $133,579,742 $123,759,819 $129,501,887 $90,753,988

New Dwelling Units
Single Family 201 191 173 226 135
Multiple Family 83 4 101 50 56
Total 284 195 274 276 191

Note: Totals may not add up because of rounding.

Source: Building Permit Summary, Construction Industry Research Board and City of Modesto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Agriculture
The following table summarizes historical agricultural production within the County for calendar years 2017 through 2021.

TABLE A-7

STANISLAUS COUNTY
Agricultural Production
2017-2021
Commodity 2017 2018 2019 2020 2021

Apiary $80,706,000 $89,041,000 $109,523,000 $105,638,000 $111,811,000 Field Crops 207,574,000 212,742,000 214,113,000 172,816,000 219,525,000 Fruit and Nut Crops 1,392,747,000 1,390,010,000 1,484,057,000 1,365,573,000 1,376,029,000 Livestock & Poultry 582,477,000 588,352,000 636,561,000 608,798,000 503,209,000 Livestock & Poultry Products 715,117,000 680,197,000 659,186,000 782,421,000 849,181,000 Nursery Products 271,049,000 220,953,000 227,537,000 210,746,000 207,781,000 Organic Products 199,409,000 193,609,000 61,415,000 37,528,000 69,831,000 Other Agriculture 19,793,000 23,540,000 25,018,000 29,047,000 31,628,000 Vegetable Crops 179,320,000 171,546,000 180,994,000 163,526,000 176,679,000 TOTALS $3,648,192,000 $3,569,990,000 3,598,404,000 $3,476,093,000 $3,545,672,000

Source: Stanislaus County Department of Agriculture.
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CITY OF MODESTO

Modesto City CouncilApril 11, 2023

Modesto City Council
April 11, 2023