Agenda, regular meeting — Monterey Park City Council, April 17, 2024 (part 1 of 5)

CITY COUNCIL OF MONTEREY PARK

THE CITY COUNCIL ACTING ON BEHALF OF THE SUCCESSOR AGENCY OF THE FORMER

REDEVELOPMENT AGENCY, THE HOUSING AUTHORITY, THE MONTEREY PARK FINANCING

AUTHORITY AND THE MONTEREY PARK GEOLOGIC HAZARD ABATEMENT DISTRICT AGENDA

REGULAR CITY COUNCIL MEETING

MONTEREY PARK CITY HALL COUNCIL CHAMBERS
320 W. NEWMARK AVENUE, MONTEREY PARK, CA 91754

Wednesday
April 17, 2024
6:30 p.m.

GENERAL INFORMATION
Documents related to an Agenda item are available to the public in the City Clerk’s Office located at 320 West Newmark Avenue, Monterey Park, CA 91754, during normal business hours and the City’s website at http://www.montereypark.ca.gov/AgendaCenter/City-Council-17.

The public may watch the meeting live on the city’s cable channel MPKTV (AT&T U -verse, channel 99 or Charter Communications, channel 182) or by visiting the city’s website at http://www.montereypark.ca.gov/133/City-Council-Meeting-Videos.P er the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please call City Hall at (626) 307- 1359 for reasonable accommodation at least 24 hours before a meeting. Council Chambers are wheelchair accessible.

PUBLIC PARTICIPATION
You may speak up to 5 minutes on Agenda item. You may combine up to 2 minutes of time with another person’s speaking. No person may speak more than a total of 10 minutes. The Mayor and City Council may change the amount of time allowed for speakers. Written Communication will be accepted up to 24 hours before the meeting via email to [email protected].

While all comments are welcome, the Brown Act does not allow the City Council to take action on any item not on the agenda. The Council may briefly respond to comments after Public Communications is closed. Persons may, in addition to any other matter within the City Council's subject-matter jurisdiction, comment on Agenda Items at this time. If you provide public comment on a specific Agenda item at this time, however, you cannot later provide comments at the time the Agenda Item is considered.

MISSION STATEMENT
The mission of the City of Monterey Park is to provide excellent services to enhance the quality of life for our entire community.

LAND ACKNOWLEDGMENT
We would like to acknowledge that the land we inhabit today was once known as Tovangaar, the home of the Gabrieleño- Tongva people. We show our respect to the Gabrieleño-Tongva people, as well as all Indigenous people, past, present, and future, and honor t heir labor as original caretakers of this land. We commit to uplifting the Gabrieleño-Tongva people, invite you to acknowledge the history, and join us in caring for this land.

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Monterey Park City Council Agenda, April 17, 2024 - Page 2

CALL TO ORDER Mayor
FLAG SALUTE The Monterey Park Police Explorer
ROLL CALL Henry Lo, Vinh Ngo, Jose Sanchez, Thomas Wong, Yvonne Yiu

AGENDA ADDITIONS, DELETIONS, CHANGES AND ADOPTIONS

PUBLIC COMMUNICATIONS

STAFF COMMUNICATIONS:
• Finance
• Economic Development
• P olice Department
• Recreation and Community Services

[1.] PRESENTATION

1-A. SHORT TERM RENTAL UPDATES

[2.] OLD BUSINESS

2-A. RESOLUTION REGARDING THE EXECUTION AND DELIVERY OF AN INSTALLMENT

PURCHASE AGREEMENT FOR WATER REVENUE BONDS
It is recommended that the City Council consider:
(1) Adopting Resolution No. _____ of the City Council of the City of Monterey Park approving the execution and delivery of an Installment Purchase Agreement for the purpose of causing the issuance of not to exceed $22,000,000 aggregate principal amount of Water Revenue Bonds, Series 2024, and approving the execution and delivery of certain documents in connection therewith and certain other matters; and (2) Taking such additional, related, action that may be desirable.

It is recommended that the Monterey Park Financing Authority Board of Directors consider:
(3) Adopting Resolution No. MPFA -____ of the Board of Directors of the Monterey Park Financing Authority approving the sale of its Water Revenue Bonds, Series 2024, in an aggregate principal amount not to exceed $22,000,000 and approving the execution and delivery of certain documents in connection therewith and certain other matters; and (4) Taking such additional, related, action that may be desirable.

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Monterey Park City Council Agenda, April 17, 2024 - Page 3

2-B. ADOPTION OF THE MONTEREY PARK SUSTAINABILITY PLAN
It is recommended that the City Council consider:
(1) Adopting Resolution No. ____ to adopt the Monterey Park Sustainability Plan (the “Plan”); and
(2) Taking such additional, related, action that may be desirable.

CEQA ( California Environmental Quality Act):

The City reviewed the environmental impacts of the proposed Resolution pursuant to the California Environmental Quality Act (Public Resources Code §§ 21000, et seq. “CEQA”) and the regulations promulgated thereunder (14 Cal. Code of Regs. §§ 15000, et seq. , the “CEQA Guidelines”). CEQA Guidelines §§ 15060(c)(2), 15061(b)(3), 15378, and 15308 exempt activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, activities where there is possibility that it may have a significant effect on the environment, activities that do not constitute a “project” as defined, and actions to protect the environment, respectively. This activity is for general policies and procedure-making intended to promote environmental sustainability and protect the environment. Any subsequent construction or development will be evaluated separately under the CEQA Guidelines. Accordingly, this Resolution is exempt from further review.

[3.] CONSENT CALENDAR ITEM NOS. 3A-3H

All items under the Consent Calendar are considered by the City Council to be routine and will be enacted by one motion. Specific items may be removed from the Consent Calendar at the request of any member of the City Council for separate consideration.

3-A. MINUTES
It is recommended that the City Council consider:
(1) Approving the minutes from the regular meetings of January 17, 2024, February 7, 2024 and February 21, 2024 and the special meetings of January 17, 2024, February 3, 2024, February 7, and February 20, 2024; and
(2) Taking such additional, related, action that may be desirable.

3-B. MONTHLY INVESTMENT REPORT – MARCH 2024
It is recommended that the City Council consider:
(1) Receiving and filing the monthly investment report; and (2) Taking such additional, related, action that may be desirable.

3-C. TREE MEMORIAL PROGRAM RECOMMENDATION FOR LILY LEE CHEN It is recommended that the City Council consider:
(1) Authorizing the City Manager to take action to honor Lily Lee Chen with a memorial tree and plaque; and
(2) Taking such additional, related, action that may be desirable.

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Monterey Park City Council Agenda, April 17, 2024 - Page 4

3-D. A RESOLUTION OF THE CITY COUNCIL OF MONTEREY PARK SUPPORTING A

PERMANENT BILATERAL CEASEFIRE TO THE CONFLICT AND HUMANITARIAN CRISIS

IMPACTING GAZA AND ISRAEL
It is recommended that the City Council consider:
(1) Adopting a Resolution of the City Council of Monterey Park supporting a permanent bilateral ceasefire to the conflict and humanitarian crisis impacting Gaza and Israel; and (2) Taking such additional, related, action that may be desirable.

3-E. RESOLUTION SUPPORTING AB 2485 (RHNA TRANSPARENCY REFORM ACT) It is recommended that the City Council consider:
(1) Adopting the resolution in support of AB 2485 (Carrillo, RHNA Transparency Reform Act) (2) Taking such additional, related, action that may be desirable.

3-F. NATIONAL CRIME VICTIMS’ RIGHTS WEEK RESOLUTION
It is recommended that the City Council consider:
(1) Adopting a Resolution Declaring the week of April 21 through 27, 2024 to be National Crime Victims’ Rights Week in the City of Monterey Park; and (2) Taking such additional, related, action that may be desirable.

3-G A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MONTEREY PARK, CALIFORNIA, DECLARING WEDNESDAY, APRIL 24, 2024, TO BE “DENIM DAY

MONTEREY PARK
It is recommended that the City Council consider:
(1) Adopting a resolution declaring Wednesday, April 24, 2024, as “Denim Day Monterey Park”; and
(2) Taking such additional, related, action that may be desirable.

3-H. NOTICE OF COMPLETION – VARIOUS CAPITAL IMPROVEMENT PROJECTS It is recommended that the City Council consider:
(1) Receiving and filing the Notice of Completion recorded by the Public Works Director on December 18, 2023 accepting the Edison Trails Park Playground Replacement Project completed by R.E. Schultz Construction, Inc.;
(2) Receiving and filing the Notice of Completion recorded by the Public Works Director on January 2, 2024 accepting the Northeast Area Phase III Water Main Improvement Project completed by Big Ben, Inc.;
(3) Receiving and filing the Notice of Completion recorded by the Public Works Director on January 2, 2024 accepting the FY 22-23 Concrete Improvements Project completed by CT & T Concrete Paving Inc.; and
(4) Taking such additional, related, action that may be desirable.

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Monterey Park City Council Agenda, April 17, 2024 - Page 5

[4.] PUBLIC HEARING – None.

[5.] NEW BUSINESS – None.

[6.] CITY COMMUNICATIONS (CITY COUNCIL)

[7.] FUTURE AGENDA ITEMS

[8.] CLOSED SESSION (IF REQUIRED; CITY ATTORNEY TO ANNOUNCE)

ADJOURN

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City Council Staff Report
DATE: April 17, 2024
AGENDA ITEM NO:

TO: The Honorable Mayor and City Council
FROM: Martha Garcia, Finance Director
Shawn Igoe, Public Works Director
SUBJECT: Resolution regarding the Execution and Delivery of an Installment Purchase Agreement for Water Revenue Bonds
RECOMMENDATION:

It is recommended that the City Council consider:

1. Adopting Resolution No. _____ of the City Council of the City of Monterey Park approving the execution and delivery of an Installment Purchase Agreement for the purpose of causing the issuance of not to exceed $22,000,000 aggregate principal amount of Water Revenue Bonds, Series 2024, and approving the execution and delivery of certain documents in connection therewith and certain other matters; and

2. Taking such additional, related, action that may be desirable.

It is recommended that the Monterey Park Financing Authority Board of Directors consider:

3. Adopting Resolution No. MPFA-____ of the Board of Directors of the Monterey Park Financing Authority approving the sale of its Water Revenue Bonds, Series 2024, in an aggregate principal amount not to exceed $22,000,000 and approving the execution and delivery of certain documents in connection therewith and certain other matters; and

4. Taking such additional, related, action that may be desirable.

EXECUTIVE SUMMARY:

Issuing the proposed 2024 Water Revenue Bonds would allow the City to utilize $20.6 million in financing to replace aging infrastructure and install advanced water meter infrastructure. Consequently, the City Council may maintain the lower cumulative water rates approved in February 2024 and became effective March 2024, instead of increasing such rates over the next five years. To implement the financing, the City would enter into an Installment Purchase Agreement with the Monterey Park Financing Authority the “Authority”), and the Authority would issue the 2024 Water Revenue Bonds in an amount not to exceed $22,000,000. Debt service will be repaid by the City from net revenues of the City’s water system.

Old Business - 2A

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Staff Report

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April 17, 2024

BACKGROUND:

The Public Works Director identified $20.6 million in water improvements that are a high priority and that can be implemented within the next 3 years.

2024 Projects Estimated Cost
Water Meter Replacement $9,000,000
Russell St. Reservoir Rehabilitation 3,500,000
Russel Booster Station 2,500,000
Phase 4 North East Water Main Replacements 2,400,000
N Atlantic Water Main Upgrade Project 2,200,000
Program Logic Controller Upgrade 1,000,000
Total $20,600,000

The City Council previously considered the replacement of water meters (which would result in improvements to the process of meter reading and billing ) and improving infrastructure. Were such projects paid by rates – rather than bond financing – such water rates would require maximum water rate increases of 32%, 8%, 8%, 7%, and 8% from Fiscal Year 2023-24 through Fiscal Year 2027 -28. Financing the improvements allows for a longer repayment period, resulting in lower rates to water customers.

On February 21, 2024, the City Council directed the City Manager to implement rate increases of 28%, 8%, 7%, 7%, and 6%. These rates assume a $20 .6 million bond issuance and are projected to generate enough revenue to meet the obligations of the Water System, including but not limited to operations, services to customers, capital needs, and debt service rate covenants over the next 5-years.

The proposed Resolutions approve all documents and actions needed to authorize the delivery and sale of the 2024 Water Revenue Bonds, including the following form of financing documents together with any changes or additions deemed advisable by the Bond Counsel (Stradling Yocca Carlson & Rauth , LLP) and approved by the Mayor, Mayor Pro Tem, City Manager, Director of Public Works, or the Director of Finance (a “Designated Officer”).

1) Installment Purchase Agreement between the City and the Authority under which the Authority agrees to provide financing for the water improvements, and the City agrees to purchase the completed improvements, in consideration of the payment by the City of semiannual installment payments, to be made from the net revenues of the City’s water system.

2) Indenture of Trust between the Authority and the Trustee (US Bank) which sets forth the material terms, covenants, and provisions relating to the 2024 Water Revenue Bonds.

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Staff Report

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April 17, 2024

3) Bond Purchase Agreement among the City, the Authority, and the underwriter (Ramirez and Co., Inc.), pursuant to the terms and provisions of which the 2024 Water Revenue Bonds will be sold through a negotiated method of sale, such terms and provisions including a true interest co st of the 2024 Water Revenue Bonds not to exceed 4.75% and the underwriter’s discount no to exceed 1.15% of the par amount of the 2024 Water Revenue Bonds.

4) Preliminary Official Statement that will be distributed to prospective purchasers of the 2024 Water Revenue Bonds that must contain all facts material to the 2024 Water Revenue Bonds and the City’s water system and must not omit any material facts.

The City Council must ensure that the Preliminary Official Statement includes all information that would be material to a prospective investor’s decision whether to purchase the 2024 Water Revenue Bonds. While the City’s bond counsel, consultants, and the underwriter have participated in preparing the document, the City is ultimately responsible for ensuring that the Preliminary Official Statement is accurate, contains no misleading information and does not omit any information necessary to make Preliminary Official Statement not misleading to investors.

5) Continuing Disclosure Certificate included as Appendix E of the Preliminary Official Statement that commits the City to providing certain annual reports and notices of listed events to investors in order to allow the underwriter to comply with federal securities laws.

If the proposed Resolutions are adopted by the City Council and the Authority Board, the sale of the 2024 Water Revenue Bonds is expected to be completed on or about the week of April 22, 2024, with a delivery/closing date on or about the week of May 6, 20 24, at which time bond proceeds will be available for the water improvements.

FISCAL IMPACT:

In accordance with Government Code § 5852.1, good faith estimates are provided with respect to the 2024 Water Revenue Bonds in Exhibit A of the Resolutions.

It is anticipated that a new rate study and Prop 218 Process will occur for the adoption of 5-year rate increases beginning in Fiscal Year 2028-29. Currently, it is expected that there will be 3% annual rate adjustments from Fiscal Year 2028 -29 through Fiscal Year 2032-

33. Annual adjustments in rates are standard for municipal utilities to accommodate inflation growth in service delivery costs while also meeting existing debt service rate covenants and other Water System obligations. The 3% annual rate inc reases are an estimate, and actual required rate increases will be determined in the future with a new rate study. Rate increases may vary from this expectation due to economic conditions.

Based on recent market interest rates, an aggregate principal amount of approximately $19.385 million in 2024 Water Revenue Bonds (with approximately $1.88 million of

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Staff Report

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April 17, 2024

premium) are expected to be sold in order to generate $20.6 million in project proceeds and $665,593 in finance charges. The true interest cost for the 2024 Water Revenue Bonds is estimated to be approximately 4.28%. The final maturity of the bonds will be in 2054, and the total debt service over the 30-year term is estimated to be $37.3 million, with average annual debt service estimated to be $1.25 million.

Respectfully submitted by: Respectfully submitted by:

Martha Garcia
Finance Director

Shawn Igoe
Public Works Director

Approved by:

Reviewed by:

Inez Alvarez
City Manager
Karl H. Berger
City Attorney

ATTACHMENTS:

1. Preliminary Official Statement (with the Continuing Disclosure Certificate included as Appendix E)

2. Indenture of Trust

3. Installment Purchase Agreement

4. Bond Purchase Agreement

5. Authority Resolution

6. City Resolution

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Staff Report
April 17, 2024

ATTACHMENT 1
Preliminary Official Statement
(with the Continuing Disclosure Certificate
included as Appendix E)

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Stradling Yocca Carlson & Rauth
Draft of 4/2/24
4879-4703-4262v14/022483-0008
PRELIMINARY OFFICIAL STATEMENT DATED APRIL __, 2024
NEW ISSUE – BOOK-ENTRY ONLY Rating: S&P: __
See the caption “RATING”
In the opinion of Stradling Yocca Carlson & Rauth LLP, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX MATTERS” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations for tax years beginning after December 31, 2022. $19,385,000*

MONTEREY PARK FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2024

Dated: Date of Delivery Due: February 1, as shown on inside front cover page The Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in denominations of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certific ates representing their beneficial ownership in the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds is payable on August 1, 2024 and each February 1 and August 1 thereafter. Payment of the principal of and interest on the Bonds is to be made to Cede & Co., which is to disburse said payments to the Beneficial Owners of the Bonds through their nominees.

The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity, all as more fully described herein.

The Bonds are being issued to provide funds to: (i) finance certain capital improvements to the City’s municipal water system; (ii) fund a debt service reserve fund for the Bonds; and (iii) pay costs incurred in connection with the issuance of the Bonds.

The Bonds are being issued pursuant to the Indenture of Trust, dated as of May 1 , 2024, by and between the Monterey Park Financing Authority and U.S. Bank Trust Company, National Association, as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLE LY FROM AUTHORITY REVENUES, WHICH CONSIS T OF SERIES 2024

INSTALLMENT PAYMENTS TO BE MADE BY THE CITY TO THE AUTHORITY PURSUANT TO THE INS TALLMENT PURCHASE AGREEMENT, DATED AS OF MAY 1 , 2024, BY AND BETWE EN THE CITY AND THE AUTHORITY, AND FROM CERTAIN OTHER FUNDS AND ACCOUNTS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE. NEITHER THE FULL

FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF

PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS

OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

The Series 2024 Installment Payments are payable from Net Revenues of the City’s Water System, which consist of Revenues of the City’s Water System remaining after payment of Operation and Maintenance Costs of the City’s Water System. The City may incur additional obligations payable from Net Revenues on a parity with the obligation to pay Series 2024 Installment Payments, subject to the terms and conditions of the Installment Purchase Agreement, as more fully described herein.

THE OBLIGATION OF THE CITY TO MAKE SERIES 2024 INSTALLMENT PAYMENTS PURSUANT TO THE

INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS

OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE SERIES 2024 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES OF THE CITY’S WATER

SYSTEM AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY

POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

The Authority has applied for a municipal bond insurance policy and a debt service reserve fund surety bond with respect to the Bonds. If a municipal bond insurance policy is obtained, the municipal bond insurance policy would guarantee the scheduled payment of principal of and interest on all or a portion of the Bonds. N o assurance can be given as to whether the Authority will purchase a municipal bond insurance policy or a debt service reserve fund surety bond.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

MATURITY SCHEDULE
(See inside front cover page)
The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the Bonds by Stradling Yocca Carlson & Rauth LLP, Bond Counsel, and certain other conditions. Certain matters w ill be passed upon for the City and the Authority by Burke, Williams & Sorensen, LLP, as City Attorney, and by Stradling Yocca Carlson & Rauth LLP, as Disclosure Counsel, for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about May __, 2024.

Ramirez & Co., Inc.

Dated: April __, 2024

* Preliminary, subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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4879-4703-4262v14/022483-0008
$__________*

MONTEREY PARK FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2024

MATURITY SCHEDULE
BASE CUSIP† 61255R
Maturity
(February 1)
Principal
Amount Interest Rate Yield Price CUSIP†
$ % %

* Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database.

CUSIP® numbers are provide d for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.

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4879-4703-4262v14/022483-0008

MONTEREY PARK FINANCING AUTHORITY

BOARD OF DIRECTORS
Thomas Wong, Chair
Vinh T. Ngo, Vice Chair
Yvonne Yiu, Director
Jose Sanchez, Director
Henry Lo, Director

CITY OF MONTEREY PARK

CITY COUNCIL
Thomas Wong, Mayor
Vinh T. Ngo, Mayor Pro-Tem
Yvonne Yiu, Council Member
Jose Sanchez, Council Member
Henry Lo, Council Member

ELECTED OFFICIALS

Amy Lee, City Treasurer
Maychelle Yee, City Clerk/Authority Secretary

APPOINTED OFFICIALS
Inez Alvarez, City Manager/Authority Executive Director Karl H. Berger, City Attorney/General Counsel
Diana Garcia, Assistant City Manager
Martha Garcia, Director of Finance/Authority Treasurer

SPECIAL SERVICES
Municipal Advisor
Urban Futures, Inc
Tustin, California
Bond Counsel and Disclosure Counsel
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California
Trustee
U.S. Bank Trust Company, National Association
Los Angeles, California

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4879-4703-4262v14/022483-0008
No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

This Official Statement and the information that is contained herein are subject to completion or amendment without notice, and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties that are described herein since the date hereof. These securities may not be sold, nor may an offer to buy them be accepted, prior to the time that the Official Statement is delivered in final form.

This Official Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.

Certain statements which are included or incorporated by reference in this Official Statement constitute “forward- looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as “plan,” “ex pect,” “estimate,” “project,” “budget,” “intend” or similar words.

Such forward-looking statements include, but are not limited to, certain statements contained under the captions “THE CITY,” “THE WATER SYSTEM” AND “WATER SYSTEM FINANCIAL INFORMATION.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH

FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER

FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE

MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD- LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN

EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS

FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

IN CONNECTION WITH THE OFFERING OF THE BON DS, THE UNDERWRITER MAY OVERALLOT OR

EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS

TO CERTAIN DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE

PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN

RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

The City maintains a website and certain social media accounts; however, information presented on such website and accounts is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.

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TABLE OF CONTENTS
Page

i
4879-4703-4262v14/022483-0008
SUMMARY STATEMENT .................................................................................................................................. i INTRODUCTION ................................................................................................................................................ 1 THE 2024 PROJECT ............................................................................................................................................ 2 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 2 THE BONDS ........................................................................................................................................................ 3 General Provisions ......................................................................................................................................... 3 Book-Entry Only System ............................................................................................................................... 3 Transfers and Exchanges Upon Termination of Book-Entry Only System ................................................... 3 Redemption .................................................................................................................................................... 4 Selection of Bonds for Redemption ............................................................................................................... 5 Notice of Redemption .................................................................................................................................... 5 Effect of Redemption ..................................................................................................................................... 5 DEBT SERVICE SCHEDULE............................................................................................................................. 6 SECURITY FOR THE BONDS ........................................................................................................................... 6 General ........................................................................................................................................................... 6 Series 2024 Installment Payments Payable From Net Revenues ................................................................... 7 Rate Covenant ................................................................................................................................................ 8 Reserve Fund ................................................................................................................................................. 9 Rate Stabilization Fund .................................................................................................................................. 9 Additional Parity Bonds and Contracts .......................................................................................................... 9 [BOND INSURANCE] ....................................................................................................................................... 10 THE CITY .......................................................................................................................................................... 10 General ......................................................................................................................................................... 10 Land Use and Service Area .......................................................................................................................... 11 Governance and Management ...................................................................................................................... 11 Financial Policies ......................................................................................................................................... 12 Employees .................................................................................................................................................... 14 Budget Process ............................................................................................................................................. 14 City Insurance .............................................................................................................................................. 15 Outstanding Parity Obligations .................................................................................................................... 16 No Outstanding Subordinate Obligations .................................................................................................... 16 Financial Statements .................................................................................................................................... 17 THE WATER SYSTEM ..................................................................................................................................... 19 General ......................................................................................................................................................... 19 Water Supply ............................................................................................................................................... 19 Water Quality and Treatment ....................................................................................................................... 21 Drought Declarations ................................................................................................................................... 24 Historical Water System Supply .................................................................................................................. 26 Historical Water System Deliveries ............................................................................................................. 27 Historical Water System Connections ......................................................................................................... 27 Historical Water System Sales Revenues .................................................................................................... 28 Largest Water System Customers ................................................................................................................ 29 Water System Rates and Charges ................................................................................................................ 29 Water System Collection Procedures ........................................................................................................... 31

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Future Water System Improvements ............................................................................................................ 33 Projected Water System Supply ................................................................................................................... 34 Projected Water System Deliveries .............................................................................................................. 34 Projected Water System Connections .......................................................................................................... 34 Projected Water System Sales Revenues ..................................................................................................... 35 WATER SYSTEM FINANCIAL INFORMATION .......................................................................................... 36 Available Cash ............................................................................................................................................. 36 Historical Operating Results and Debt Service Coverage............................................................................ 36 Projected Operating Results and Debt Service Coverage ............................................................................ 38 Employees’ Retirement Plan – CalPERS ..................................................................................................... 40 Employees’ Retirement Plan – Massachusetts Mutual Retirement Plan (MMRP) ...................................... 47 Employees’ Retirement Plan – Defined Contribution Pension Plan. ........................................................... 49 Other Post-Employment Benefits ................................................................................................................ 50 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 54 Article XIIIB ................................................................................................................................................ 54 Proposition 218 ............................................................................................................................................ 54 Proposition 26 .............................................................................................................................................. 56 Future Initiatives .......................................................................................................................................... 56 CERTAIN RISKS TO BONDHOLDERS .......................................................................................................... 56 Limited Obligations ..................................................................................................................................... 57 Accuracy of Assumptions ............................................................................................................................ 57 Water System Demand................................................................................................................................. 57 System Expenses .......................................................................................................................................... 57 Limited Recourse on Default ....................................................................................................................... 57 Rate-Setting Process under Proposition 218 ................................................................................................ 58 Statutory and Regulatory Compliance ......................................................................................................... 58 Natural Disasters .......................................................................................................................................... 58 Limitations on Remedies ............................................................................................................................. 59 Loss of Tax Exemption ................................................................................................................................ 59 Secondary Market ........................................................................................................................................ 59 Parity Obligations ........................................................................................................................................ 60 Climate Change ............................................................................................................................................ 60 Cyber Security ............................................................................................................................................. 60 Rate Covenant Not a Guarantee ................................................................................................................... 60 Initiative Measure Relating to Water Revenues ........................................................................................... 61 THE AUTHORITY ............................................................................................................................................ 62 APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 62 LITIGATION ..................................................................................................................................................... 62 The City ....................................................................................................................................................... 62 The Authority ............................................................................................................................................... 63 TAX MATTERS................................................................................................................................................. 63 CONTINUING DISCLOSURE .......................................................................................................................... 65 RATING ............................................................................................................................................................. 65

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MUNICIPAL ADVISOR ................................................................................................................................... 66 UNDERWRITING ............................................................................................................................................. 66 FINANCIAL INTERESTS ................................................................................................................................. 66 MISCELLANEOUS ........................................................................................................................................... 67

APPENDIX A - CITY OF MONTEREY PARK COMPREHENSIVE AUDITED FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 ............................................................ A-1

APPENDIX B - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE .......................... B-1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL ....................................................................... C-1 APPENDIX D - INFORMATION CONCERNING DTC ............................................................................... D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE ................................................ E-1 APPENDIX F CITY SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2023.....................F-1

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SUMMARY STATEMENT
This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms that are used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement.

Purpose. The Bonds are being issued to provide funds to: (i) finance certain capital improvements to the City’s Water System, as described under the caption “THE 2024 PROJECT”; (ii) fund a debt service reserve fund for the Bonds; and (iii) pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.”
Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2024 Installment Payments to be made by the City to the Authority pursuant to the Installment Purchase Agreement and amounts on deposit in certain funds and accounts established by the Indenture. Neither the full faith and credit nor any other revenues or funds of the Authority are pledged to or available for the payment of debt service on the Bonds. THE OBLIGATION OF THE

AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT

CONSTITUTE AN OBL IGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR

PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

The obligation of the City to make Series 2024 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City’s Water System, which consist of Revenues of the Water System remaining after payment of Operation and Maintenance Costs of the Water System. See the caption “SECURITY FOR THE BONDS.”
The obligation of the City to make the Series 2024 Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments that are required thereunder have been paid in full (or provision for the payment thereof has been made as provided for in the Installment Purchase Agreement), the City will not discontinue or suspend any Series 2024 Installment Payments required to be made by it under the Installment Purchase Agreement when due, whether or not the Water System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and whether or not the 2024 Project has been completed, and such payments wi ll not be subject to reduction whether by offset or otherwise and will not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever.

THE OBLIGATION OF THE CITY TO MAKE SERIES 2024 INSTALLMENT P AYMENTS

PURSUANT TO THE INSTALLMENT PURCHASE AGR EEMENT DOES NOT CONS TITUTE AN

OBLIGATION FOR WHICH THE CITY IS OBLIGAT ED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE SERIES 2024 INSTALLMENT PAYMENTS IS A SPECIAL

LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES AND DOES NOT

CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL

SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

Application for Bond Insurance . The Authority has applied for a municipal bond insurance policy guaranteeing the scheduled payment of principal of and interest on some or all of the maturities of the Bonds when due. The Authority will determine whether to purchase such a policy in connection with the pricing of the Bonds. No assurance can be given as to whether the Authority will purchase a municipal bond insurance policy.

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Reserve Fund. A Reserve Fund for the Bonds is established pursuant to the Indenture in an amount equal to the Reserve Requirement of $_______. See the caption “SECURITY FOR THE BONDS —Reserve Fund.”
The Authority has applied for a debt service reserve fund surety bond with respect to the Bonds. No assurance can be given as to whether the Authority will purchase a debt service reserve fund surety bond. See “INTRODUCTION” herein.

Rate Stabilization Fund. The City has agreed and covenanted to maintain, so long as any Bonds remain outstanding, a Rate Stabilization Fund. There is $0 on deposit in the Rate Stabilization Fund as of the date of the initial issuance of the Bonds. The City may deposit amounts therein from time to time in its sole discretion.

The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Parity Bonds and Contracts as provided herein. The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Installment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations under the additional debt test and the rate covenant under the Installment Purchase Agreement in such Fiscal Year to the extent provided in the definition of “Revenues” in the Installment Purchase Agreement. See the caption “SECURITY FOR THE BONDS—Rate Stabilization Fund.”
Rate Covenant . The City will, to the fullest extent permitted by law, fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service in such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements. S ee the caption “SECURITY FOR THE BONDS —Rate Covenant.”
No Parity or Senior Obligations. The City has no outstanding obligations payable from Net Revenues on a parity or senior basis to the Series 2024 Installment Payments.

Additional Indebtedness. The Installment Purchase Agreement does not permit the City to make any additional pledge of, or to place any additional lien on, the Revenues, or any portion thereof, which is senior to the pledge and lien securing the payment of the Series 2024 Installment Payments. The Installment Purchase Agreement does permit the City to issue or incur Parity Bonds and Contracts payable on a parity with the Series 2024 Installment Payments provided that certain conditions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the City from entering into obligations which are Operation and Maintenance Costs and, therefore, payable from Revenues prior to the Series 2024 Installment Payments, or from issuing any bonds or executing any cont racts the payments under which are payable from Net Revenues on a subordinate basis to the Series 2024 Installment Payments and Parity Bonds and Contracts of the City. See the caption “SECURITY FOR THE BONDS—Additional Parity Bonds and Contracts.” Subject to certain conditions, amounts transferred from the Rate Stabilization Fund shall be considered Revenues for purposes of satisfying the test for issuing or incurring Parity Bonds and Contracts payable from Net Revenues on a parity with the obligation to make the Series 2024 Installment Payments, as more particularly described under the caption “SECURITY FOR THE BONDS “—Rate Stabilization Fund” herein.

Redemption. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See the caption “THE BONDS—Redemption.”

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The City and the Water System. The City was incorporated in 1916 and operates as a general law city.

The City operates under a council -manager form of municipal government and is governed by a five -member City Council. The City is a full-service City, offering its residents a wide range of municipal services, including public safety, highways and streets, sanitation, water and sewer services, development and public infrastructure improvements, culture and leisure programming, and general government functions. The City encompasses approximately 7.73 square miles in the San Gabriel Valley in the County of Los Angeles (the “County”), about 8 miles east of downtown Los Angeles. The City is bounded by the City of Los Angeles to the west, the City of Alhambra to the north, the City of San Gabriel to the east and the City of Montebello to the South.

The City supplies potable water to approximately 11,066 single family residential customers, 1,530 multi-family residential c ustomers, 798 commercial and industrial customers and 213 other customers. The Water System serves approximately 95% of the residents and businesses within the City, with private water companies serving the remaining portion.

The City’s main source of water is groundwater pumped from the Main San Gabriel Basin (the “Main Basin”), which is a sub -basin of the San Gabriel Valley Basin. The City also purchases supplemental groundwater from the San Gabriel Valley Water Company (“SGVWC”). See the caption “THE WATER SYSTEM—Water Supply.”
The Water System includes 12 groundwater wells in the Main Basin (of which eight are currently active, three are standby wells and one is inactive), approximately 136.6 miles of transmission and distribution pipe ranging in size from 2-inches to 36-inches in diameter, five primary pressure zones, eight closed sub-zones, 11 active service zone storage reservoirs (with a total storage capacity of approximately 15.8 million gallons), two settling tanks, 11 booster pump stations, 20 pressure reducing stations, one imported water supply connection with SGVWC and four emergency interconnections.

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$__________*

MONTEREY PARK FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2024

INTRODUCTION
This Official Statement, including the front cover page, the inside front cover page and the appendices, provides certain information concerning the sale and delivery of the Monterey Park Financing Authority Water Revenue Bonds, Series 2024 (the “Bonds”). Descriptions and summaries of various documents that are set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document. Capitalized terms that are used and not otherwise defined in this Official Statement have the meanings ascribed thereto in Appendix B.

The Bonds are being issued to provide funds to: (i) finance certain capital improvements to the City’s Water System, as described under the caption “THE 2024 PROJECT”; (ii) fund a debt service reserve fund for the Bonds; and (iii) pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.”
The Bonds are being issued pursuant to an Indenture of Trust, dated as of May 1, 2024 (the “Indenture”), by and between the Monterey Park Financing Authority (the “Authority”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are limited obligations of the Authority payable solely from Authority Revenues, which consist of payments (the “Series 2024 Installment Payments”) to be made by the City of Monterey Park (the “City”) to the Authority pursuant to an Installment Purchase Agreement, dated as of May 1 , 2024 (the “Installment Purchase Agreement”), by and between the City and the Authority, and amounts on deposit in certain funds and accounts established by the Indenture.

The obligation of the City to make Series 2024 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City’s Water System, which consist of Revenues of the City’s Water System remaining after payment of Operation and Maintenance Costs of the City’s Water System. The term “Water System” means the whole and each and every part of t he potable water system serving the City, whether owned or operated by the City or another party, including the existing Water System and all additions, betterments, extensions and improvements to such water system or any part thereof hereafter acquired or constructed. See the caption “SECURITY FOR THE BONDS.” The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See the caption “THE BONDS—Redemption.”
The City has no outstanding obligations payable from Net Revenues on a parity or senior basis to the Series 2024 Installment Payments. The City is permitted to incur additional obligations payable on a parity with the Series 2024 Installment Payments provided that certain conditions are satisfied as described herein. See the caption “SECURITY FOR THE BONDS—Additional Parity Bonds and Contracts.” A debt service reserve fund has been established under the Indenture in connection with the issuance of the Bonds. “SECURITY FOR THE BONDS—Reserve Fund.”
The City has undertaken to provide annual reports to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) pursuant to a continuing disclosure certificate. See the caption “CONTINUING DISCLOSURE” and Appendix E.

* Preliminary, subject to change.

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Auditor Findings. As a recipient of federal funds, the City is required to undergo an audit in accordance with the Single Audit Act of 1996 and the U.S. Office of Management and Budget Circular A-133. In its Single Audit of Federally Assisted Grant Programs for Fiscal Year 20 22-23 prepared by The Pun Group LLP, Santa Ana, California (the “Auditor”) and attached hereto as Appendix F (the “Single Audit Report”), the Auditor found certain deficiencies in the City’s internal control over financial reporting. See the caption “THE CITY— Single Audit Report” and Appendix F — “CITY SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2023.”
THE 2024 PROJECT
The City expects to finance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within the City’s Water System, referred to herein as the “2024 Project.” Following is a description of the projects comprising the 2024 Project to be financed with proceeds of the Bonds. 2024 Projects Estimated Cost
Water Meter Replacement $ 9,000,000
Russell St. Reservoir Rehabilitation 3,500,000
Russel Booster Station 2,500,000
Phase 4 North East Water Main Replacements 2,400,000
N Atlantic Water Main Upgrade Project 2,200,000
Program Logic Controller Upgrade 1,000,000
Total $ 20,600,000

The City intends to apply proceeds of the Bonds and other moneys on deposit in the Revenue Fund to pay for the costs of the 2024 Project. The City expects to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2024 Project as required by law, and to complete the 2024 Project by March 2027.

Pursuant to the Installment Purchase Agreement, the City may substitute or add additional projects to the 2024 Project. Se e Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT — ACQUISITION OF 2024 PROJECT—Changes to the 2024 Project.”

ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the estimated sources and uses of funds in connection with the issuance of the Bonds:

Sources(1)
Principal Amount of Bonds $
Plus/Less [Net] Original Issue [Premium/Discount]
Total Sources $

Uses(1)
Acquisition Fund $
Costs of Issuance(2)
Total Uses $

(1) Amounts rounded to the nearest dollar. Totals may not add due to rounding. (2) Includes certain legal, municipal advisory, financing, rating agency and Trustee fees, Underwriter’s discount, premiums for the bond insurance policy and debt service reserve fund surety bond, if obtained, and printing costs.

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THE BONDS
General Provisions
The Bonds will bear interest from and be dated the date of initial issuance, and will be payable upon maturity on the dates set forth on the inside front cover page hereof. Interest on the Bonds will be payable on August 1, 2024 and each February 1 and August 1 thereafter. Interest will be calculated at the rates set forth on the inside front cover page hereof on the basis of a year of 360 days comprised of twelve 30 day months.

The Bonds will be delivered only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Ownership interests in the Bonds may be purchased in book- entry form only in denominations of $5,000 or any integral multiple thereof. See the caption “ —Book-Entry Only System” and Appendix D.

In the event that the book-entry only system that is described below is discontinued, the principal of and interest on any Bond will be payable by check or draft of the Trustee upon presentation and surrender thereof at maturity or upon prior redemption at the Office of the Trustee in Los Angeles, California. Such principal and interest will be payable in lawful money of the United States of America.

Book-Entry Only System
One fully-registered Bond will be issued for each maturity of the Bonds in the principal amount of the Bonds of such maturity. Each such Bond will be registered in the name of Cede & Co. and will be deposited with DTC. As long as the ownership of the Bonds is registered in the name of Cede & Co., the term “Owner” as used in this Official Statement will refer to Cede & Co. and not to the actual purchasers of the Bonds (the “Beneficial Owners”).

The Authority may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered and will be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer.

The Authority cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis. See Appendix D for additional information concerning DTC.

Transfers and Exchanges Upon Termination of Book-Entry Only System In the event that the book-entry system that is described above is discontinued, the Bonds will be printed and delivered as provided in the Indenture. Thereafter, any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form a cceptable to the Trustee. The Trustee is not required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption or any Bond that has been selected for redemption.

Whenever any Bond is surrendered for tra nsfer, the Authority will execute and the Trustee will authenticate and deliver a new Bond or Bonds of authorized denominations for a like series and aggregate principal amount of the same maturity and series. The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds that it has received.

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Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book- entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Internal Revenue Code of 1986, as amended (the “ Code”). The Trustee will conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information.

Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee is not required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption or any Bond that has been selected for redemption. The Trustee will require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds that it has received.

Redemption*

Optional Redemption. The Bonds with stated maturities on or after February 1, 20__, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to redemption, by lot within each maturity in integral multiples of $5,000, on February 1, 20__ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The Bonds with stated maturities on February 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on February 1, 20__ and each Fe bruary 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:

Redemption Date
(February 1)
Principal
Amount
$

* Maturity.

The Bonds with stated maturities on February 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on February 1, 20__ and each February 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:

Redemption Date
(February 1)
Principal
Amount
$

* Maturity.

If some but not all of the Bonds maturing on February 1, 20__ or February 1, 20__ are redeemed as described under the subcaption “—Optional Redemption,” the principal amount of the applicable Bonds to be redeemed pursuant to the Indenture on any subsequent February 1 will be reduced, by $5,000 or an integral

* Preliminary, subject to change.

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multiple thereof, as designated by the Authority in a Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions may not exceed the aggregate amount of the applicable Bonds redeemed.

Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate and maturity.

Selection of Bonds for Redemption
Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds for redemption as a whole or in part on any date as directed by the Authority and by lot within each maturity in integral multiples of $5,000 in accordance with the Indenture. The Trustee will promptly notify the Authority in writing of the numbers of the Bonds or portions thereof so selected for redemption.

Notice of Redemption
Notice of redemption will be mailed by first class mail not less than 20 days nor more than 60 days before any Redemption Date, to the respective Owners of any Bonds that are designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services.

Each notice of redemption will state the date of notice, the redemption date, the place or places of redemption and the Redemption Price, and will designate the maturities, CUSIP numbers, if any, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the redemption date there will become due and payable on each of said Bonds or parts thereof that are designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with, interest accrued thereon to the redemption date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such redemption date interest thereon will cease to accrue, and will require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any Bond. Notice of redemption of Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.

With respect to any notice of optional redemption of Bonds, such notice may state that such redemption will be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee wil l within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.

Effect of Redemption
Notice of redemption having been duly given as described above under the caption “ —Notice of Redemption,” and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, said Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee will, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the provisions of the Indenture will be canceled upon surrender thereof.

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DEBT SERVICE SCHEDULE
Set forth below is a schedule of debt service on the Bonds. Debt service on the Bonds equals the Series 2024 Installment Payments for each annual period ending on June 30 in the years indicated. The below tabl e assumes that there are no optional redemptions of the Bonds.

Period
Ending
June 30 Principal Interest Total Debt Service
2024 $ $ $
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
TOTAL $ $ $

Source: Underwriter.

SECURITY FOR THE BONDS
General
Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2024 Installment Payments to be made by the City under the Installment Purchase Agreement and certain other funds and accounts established pursuant to the Indenture. NEITHER THE FULL

FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION

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OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES

NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR

PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

The Authority has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee pursuant to the Indenture, for the benefit of the Owners of the Bonds, including its right to receive Series 2024 Installment Payments and its rights as may be necessary to enforce payment of the Series 2024 Installment Payments when due.

Series 2024 Installment Payments Payable From Net Revenues All of the Authority Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture (except the Rebate Fund) have been irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture. Such pledge constitutes a lien on and security interest in such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act, and will be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice hereof.

The obligation of the City to make the Series 2024 Installment Payments is payable solely from Net Revenues of the City’s Water System, which consist of Revenues of the City’s Water System remaining after the payment of Operation and Maintenance Costs of t he City’s Water System. All Revenues (as such term is defined below) of the City’s Water System, other amounts that are on deposit in the Revenue Fund and any other amounts (including proceeds of the sale of the Bonds) which are held in any fund or account that is established pursuant to the Installment Purchase Agreement (including the Rate Stabilization Fund) have been irrevocably pledged to the payment of the Series 2024 Installment Payments as provided in the Installment Purchase Agreement.

The Revenues will not be used for any other purpose while any of the Series 2024 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreemen t, including but not limited to the payment of Operation and Maintenance Costs of the Water System. Such pledge, together with the pledge created by all other Bonds and Contracts (as such terms are defined in Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Definitions” and referred to in the forepart of this Official Statement as “ Parity Bonds and Contracts” or “Parity Bonds or Contracts,” as applicable), constitutes a first lien on Revenues and, subject to application of Revenues and all amounts on deposit in the Revenue Fund as permitted in the Installment Purchase Agreement, the Revenue Fund, the Rate Stabilization Fund and other funds and accounts created thereunder for the payment of the Series 2024 Installment Payments and all other P arity Bonds and Contracts in accordance with the terms thereof and of the Indenture.

The term “Revenues” m
eans all income, rents, rates, fees, charges and other moneys derived from the ownership of or operation of the Water System, including, without limiting the generality of the foregoing:
(1) all in lieu charges (including investment earnings thereon) collected by or on behalf of the City; (2) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the City from the sale, furnishing and supplying of the water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System; (3) the earnings on and inc ome derived from the investment of such income, rents, rates, fees, charges, proceeds or other moneys, including City reserves; and (4) deposits to the Revenue Fund from amounts on deposit in the Rate Stabilization Fund in accordance with the Installment P urchase Agreement; but excluding in all cases:
(w) any Revenues transferred from the Revenue Fund to the Rate Stabilization Fund in accordance with the Installment Purchase Agreement; (x) all amounts reasonably anticipated to be reimbursed to the City by the

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United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009), or any future similar program), to the extent that such amounts have been or will be deducted from the calculation of Debt Service; (y) customers’ deposits or any other deposits or advances that are subject to refund until such deposits or advances have become the property of the Cit y; and (z) proceeds of taxes or benefit assessments restricted by law to be used by the City to pay amounts due on bonds or other obligations hereafter incurred.

The term “Operation and Maintenance Costs” means: (1) costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles applicable to governmental agencies, including, but not limited to, the reasonable expenses of management and repair and other expenses that are necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, paym ents to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the City or charges (other than debt service payments) required to be paid by it to comply with the terms of the Bonds or of the Installment Purchase Agreement or any Contract or of any resolution or indenture authorizing the issuance of any Parity Bonds or Contracts or of such Parity Bonds or Contracts; and (2) all payments under any contract for the purchase of water; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature.

Notwithstanding anything contained in the Installment Purchase Agreement, the City is not required to advance any moneys derived from any source of income other than the Revenues, the Revenue Fund and the Rate Stabilization Fund for the payment of amounts due under the Installment Purchase Agreement or for the performance of any agreements or covenants that are required to be performed by it contained therein. The City may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose.

THE OBLIGATION OF THE CITY TO MAKE SERIES 2024 INSTALLMENT PAYMENTS

PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN

OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE SERIES 2024 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PA YABLE SOLELY FROM NET REVENUES OF THE CITY’S

WATER SYSTEM AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OR OF

ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

Rate Covenant
The City will, to the fullest extent permitted by law, fix and prescribe, at the commencement of each fiscal year of the City ending June 30 (each, a “Fiscal Year”), rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service in such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements.

So long as the City has complied with its obligations set forth in the prior paragraph, the failure of Net Revenues to meet the thresholds set forth in the prior paragraph will not constitute a default or an Event of Default under the Installment Purchase Agreement or the Indenture.

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Reserve Fund
A Reserve Fund for the Bonds is established pursuant to the Indenture in an amount equal to the Reserve Requirement of $_______. The Authority has applied for a debt service reserve fund surety bond to satisfy all or a portion of the Reserve Requirement. No assurance can be given as to whether the Authority will purchase such debt service reserve fund surety bond. See “INTRODUCTION” herein.

See Appendix B — “DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDE NTURE” under the caption “REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST— Reserve Fund” for further information with respect to the Reserve Fund.

Rate Stabilization Fund
There has been established with the City a fund to be known as the “Rate Stabilization Fund.” The City has agreed and covenanted in the Installment Purchase Agreement to maintain, so long as any Bonds remain outstanding, the Rate Stabilization Fund. There will be $0 on deposit in the Rate Stabilization Fund as of the date of the initial issuance of the Bonds. The City may deposit amounts into the Rate Stabilization Fund from time to time in its sole discretion.

Amounts in the Rate Stabilization Fund will be disbursed, allocated and applied by the City solely to the uses and purposes described in the Installment Purchase Agreement, and will be accounted for separately and apart from all other accounts, funds, money or other resources of the City.

The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Bonds and Parity Bonds and Contracts as provided in the Installment Purchase Agreement; provided that amounts on deposit in the Rate Stabilization Fund may be apportioned for such purposes as are expressly permitted ther ein. The foregoing pledge constitutes a first lien on amounts on deposit in the Rate Stabilization Fund for the payment of Contracts and Bonds in accordance with the terms of the Installment Purchase Agreement.

The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Installment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Installment Purchase Agreement during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations under the additional debt test or the rate covenant in such Fiscal Year to the extent provided in the definition of “Revenues.” See the captions “—Rate Covenant” and “— Additional Parity Bonds and Contracts.”
Additional Parity Bonds and Contracts
The City may at any time issue or execute, as applicable, any Parity Bonds or Contracts, as the case may be, in accordance herewith; provided that:
(a) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of the Debt Service for such Fiscal Year or consecutive 12 month period; and (b) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution

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authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year or consecutive 12 month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of: (i) the Debt Service for such Fiscal Year or consecutive 12 month period; plus (ii) the Debt Service which would have accrued on any then-outstanding Parity Bonds which were issued or any then -outstanding Contracts which were executed since the end of such audited Fiscal Year or consecutive 12 month period, assuming that such Parity Bonds or Contracts had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period; plus (iii) the Debt Service which would have accrued on the proposed additional Parity Bonds or the proposed additional Contract, assuming that such proposed additional Parity Bonds or proposed additional Contract had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period.

Notwithstanding the foregoing, Parity Bonds issued or Contracts executed to refund outstanding Parity Bonds or to prepay outstanding Contracts may be delivered without satisfying the conditions set forth above if total Debt Service after such Parity Bonds are issued or Contracts executed is not greater than the total Debt Service which would have been payable prior to the issuance of such Parity Bonds or execution of such Contracts.
[BOND INSURANCE]
The information under this caption has been prepared by the Insurer for inclusion in this Official Statement. None of the Authority, the City or the Underwriter has reviewed this information, nor do the Authority, the City or the Underwriter make any representation with respect to the accuracy or completeness thereof. The following information is not a complete summary of the terms of the Policy (as such term is defined below) and reference is made to Appendix F for a specimen of the Policy. [TO COME FROM BOND INSURER]

THE CITY
General
The City was incorporated in 1916 and operates as a general law city. The City operates under a council- manager form of municipal government and is governed by a five -member City Council. The City is a full - service City, offering its residents a wide ran ge of municipal services, including public safety, highways and streets, sanitation, water and sewer services, development and public infrastructure improvements, culture and leisure programming, and general government functions. The City encompasses appr oximately 7.73 square miles in the San Gabriel Valley in the County of Los Angeles (the “County”), about 8 miles east of downtown Los Angeles. The City is bounded by the City of Los Angeles to the west, the City of Alhambra to the north, the City of San Gabriel to the east and the City of Montebello to the South.

The City supplies potable water to approximately 11,066 single family residential customers, 1,530 multi-family residential customers, 798 commercial and industrial customers and 213 other customers. The Water System serves approximately 95% of the residents and businesses within the City, with private water companies serving the remaining portion.

The City’s main source of water is groundwater pumped from the Main San Gabriel Valley Basin (the “Main Basin”), which is a sub -basin of the San Gabriel Valley Basin. The City also purchases supplemental groundwater from the San Gabriel Valley Water Company (“SGVWC”). See the caption “THE WATER SYSTEM—Water Supply.”

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The Water System includes 12 groundwater wells in the Main Basin (of which eight are currently active, three are standby wells and one is inactive), approximately 136.6 miles of transmission and distribution pipe ranging in size from 2-inches to 36-inches in diameter, five primary pressure zones, eight closed sub-zones, 11 active service zone storage reservoirs (with a total storage capacity of approximately 15.8 million gallons), two settling tanks, 11 booster pump stations, 20 pressure reducing stations, one imported water supply connecti on with SGVWC and four emergency interconnections.

Land Use and Service Area
The Water System’s service area is approximately seven square miles, and is primarily a residential community, with 78% of its land zoned for single and multiple family housing. The remaining portion of the City is made up of commercial, employment/technology, mixed uses, open space and public facilities. As of January 1, 2023, the estimated population of the City was approximately 59,288. Because the City is essentially at full build out, it is not expected that the City’s population will increase significantly in the future.

The Water System provides retail water service to 95% of the City’s residents and businesses within the City, with private water companies serving the remaining portion of the City. The Water System’s service area generally coincides with the City’s boundaries with four exceptions: (1) Mark Keppel High School, located north of Hellman Avenue and west of New Avenue, is outside the City limits but is served b y the Water System; (2) in the northwest portion of the City, the area south of the Sheriff’s Academy and west of Long Beach Freeway is served by California Water Services Company; (3) in the southwest portion of the City, the East Los Angeles Community College and adjacent areas generally south of Floral Drive and west of Gerhart Avenue are served by California Water Services Company; and (4) in the east portion of the City, the area east of Alisar Avenue and north of Portrero Grande Drive is served by SGVWC.

Principal employers in the City comprise a diverse group of industries, including healthcare centers and big-box retailers. As of June 30, 2023 the largest principal employers in the City included Garfield Medical Center, Southern California Gas Company, Costco, Monterey Park Hospital and Home Depot. Additionally, the City recently completed Phase I of The Market Place, the largest development in the City’s history which includes nationally and locally recognized tenants such as Home Depot, In-N-Out, Chick-Fil-A and Starbucks.

Two additional phases could allow for up to 140,000 square feet of commercial development. In April of 2021, a new 288 room Courtyard by Marriott hotel opened along the 10 freeway (the San Bernardino Freeway).

Additionally, a new Holiday Inn and Suites development is underway in the City. The Holiday Inn and Suites will be a mixed -use development including hotel rooms, and 85 condominium units, and retail uses. The condominium units were completed in 2023 and are being sold to individual homebuyers. The hotel and retail developments are anticipated to be completed in Fiscal Year 2024-25.

The topography varies throughout the City. The northeast portion of the City is generally flat. There are four separate hilly areas separated by valleys that provide for the major thoroughfares such as Atlantic Boulevard, Monterey Pass Road, and the Long Beach Freeway. The highest elevation in the City is approximately 702 feet, located at the easterly end of Sombrero Drive (site of Sombrero Reservoir and Pump Station). The lowest elevation is about 260 feet at the southern border of the City along Pomona Boulevard.

Governance and Management
The City operates under a council -manager form of government. Council Members are elected by districts for four -year, overlapping terms of office. The Mayor, who is selected during each Council reorganization every nine and half months, presides over all Council meetings and is the ceremonial head of the City for all official functions. The current members of the City Council and the expiration dates of their respective terms are as follows:

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CITY OF MONTEREY PARK
City Council
Name District Term Expires
Thomas Wong, Mayor 1 2026
Vinh T. Ngo, Mayor Pro-Tem 5 2026
Yvonne Yiu 2 2024
Henry Lo 4 2024
Jose Sanchez 3 2024

Source: City of Monterey Park.

The City Council appoints the City Manager who heads the executive branch of the government, implements City Council directives and policies and manages the administrative and operational functions through the various departmental heads, who are appointed by the City Manager.

Day-to-day management of the City is delegated to the City Manager, Inez Alvarez. Prior to being appointed to the position of City Manager by the City Council in November of 2023, Ms. Alvarez served as the Assistant City Manager of the City of Monterey Park and, prior to that, as the City’s Director of Recreation and Community Services.

Amy Lee serves as the City’s Treasurer. Ms. Lee was first elected as the City’s Treasurer in 2022. Ms.

Lee is also an attorney with over 20 years of experience. Ms. Lee received her law degree from Loyola Law School and is currently licensed to practice law in the State of California and is an active member of the California State Bar. Ms. Lee’s law practice is based Monterey Park.

Martha Garcia serves as the City’s Director of Finance. Ms. Garcia has over 34 years of experience in governmental accounting. For the first 26 years, Ms. Garcia worked for Kern County where she served the last four years as the Lead Accountant over the Human Services Department’s Internal Audit Division. In February of 2016, Ms. Garcia was hired by the City of Tracy as its new Finance Division Manager, where she oversaw the day-to-day functions of the division. Ms. Garcia was hired as Director of Finance for the City of Monterey Park in February of 2020.

Shawn Igoe serves as the City’s Director of Public Works. Mr. Igoe has been the City’s Public Works Director since 2022 and provides oversight to the various Divisions within the Department, including Water, Engineering, Parks, Streets, Sewer and Fleet. Mr. Igoe previously worked for the cities of La Verne, Manhattan Beach and Monrovia. Over his 22- year career Mr. Igoe has held various positions such as Water Su pervisor, Utilities Manager and Maintenance Manager. Mr. Igoe currently holds his State Water Resources Control Board, Water Distribution Grade D4 certification and Water Treatment Grade T3 certification.

Karl H. Berger is a partner with the law firm of B urke, Williams & Sorensen, LLP and serves as the City Attorney. Mr. Berger has served as the City Attorney since August 19, 2020. Mr. Berger has practiced law since 1995 and specializes in the field of public law, including conflicts of interest, open meeting laws, public works contracts, redevelopment and successor agencies, personnel matters, all aspects of land use and planning laws and CEQA.

Financial Policies
General. The City has adopted a comprehensive set of financial policies to serve as a guide line for financial matters as further described below.

General Management and Budget Policies. The City is required to adopt a balanced budget for its General Fund prior to the beginning of the Fiscal Year. A balanced budget means current revenues are equal to

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current expenditures. The City’s long-term financial plan takes into account its capital improvement plan and financial forecast as part of its expenditure projections, revenue estimates and future debt position. The City is required to avoid budgetary procedures that finance current expenditures at the expense of meeting future obligations (e.g., postponing expenditures, accruing future year revenues or rolling over short-term debt).

Revenue Policy. The City has adopted a revenue policy under which it endeavors to maintain a diversified and stable revenue base to minimize the effects of economic fluctuations on revenue accumulation.

Under the policy the City estimates revenue using objective, analytical processes and conservative projections are utilized in cases of assumption uncertainty. The estimated growth rates used to project revenues are based on analysis as adjusted for the City’s experience and outlook as well as State economic conditions. The City funds all current expenditures from current revenues and avoids procedures that balance current budgets by postponing needed expenditures, accruing future revenues or rolling over short -term debt. The City identifies basic tax-provided services and establishes user fees and charges for services provided in excess of basic services and/or to non-taxpaying users.

Fund Balance Policy. The City’s fund balance classification includes five components: nonspendable, restricted, committed, assigned, and unassigned. The City has adopted a fund balance policy (the “Fund Balance Policy”) under which the unrestricted General Fund balance, including committed, assigned and unassigned must be maintained at a minimum level of two months of the General Fund regular revenues or operating expenditures. The City’s maximum unrestricted fund balance may not exceed 50% of General Fund operating expenditures. The General Fund committed fund balance includes amounts for Potential Catastrophic Events and Economic Stabilization and the funding of the committed fund balance account is reviewed each year during the City’s midyear fiscal review. The assigned fund balance for future capital projects captures accumulated, nonrecurring or unanticipated revenues or expenditures savings and is carried forward from year to year to provide resources for the City Council to fund future infrastructure and other onetime expenditure needs of the City. Under the Fund Balance Policy the City maintains an adequate reserve to fund annual paid and committed claims in the General Lia bility Fund and Workers’ Compensation Fund, scheduled vehicle maintenance and replacement in the Auto Shop Fund, accrued leave liability in the Separation Benefit Fund and technology and telephone replace in the Technology/Data Processing Fund. The City targets a balance in the Enterprise Fund for working capital at a minimum of two months’ annual operating expenses.

Debt Management Policy. The City has adopted a debt management policy (the “Debt Management Policy”) in compliance with California Government Code Section 8855. The Debt Management Policy establishes guidelines and parameters for the effective governance, management and administration of debt and other financing obligation issued by the City and related entities with the goal of protecting and enhancing the viability of the General Fund and other associated operating funds to enable the City to continue to deliver top services to City residents. The Debt Management Policy is intended to improve the quality of decisions, assist with the determination of the structure of debt issuance, identify policy goals and demonstrate a commitment to long-term financial planning, including a multi-year capital plan. Under the Debt Management Policy, the City uses debt financing only for capital improvements or projects that cannot be financed from current revenues and the project’s useful life or the estimated service life of the equipment must be equal or exceed the term of financing. Debt financing is not considered appropriate for any recurring purpose such as current operating and normal maintenance expenditures.

Pension Funding Policy. The City issued pension obligation bonds in 2021 for the purpose of paying the City’s then existing unfunded actuarial liability to CalPERS; however, it is possible that the City may incur additional pension liabilities in subsequent years. The City has implemented a pension funding policy (the “Pension Funding Policy”) which addresses future unfunded pension liabilities. The Pension Funding Policy establishes guidelines directing the City Council to contribute more than the required annual payment to CalPERS to reduce the accrual of interest, set up a timeline to payoff any new liabilities within a certain number of years and refinance the liability at a lower interest rate. For more information regarding the City’s CalPERS plans, see the caption “WATER SYSTEM FINANCIAL INFORMATION —Employees’ Retirement Plan — CalPERS.”

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Capital Improvement Program Policy. The City has adopted a capital improvement program policy (the “Capital Improvement Program Policy”) under which the City utilizes a five -year capital improvement program to systematically plan, schedule and finance capital projects as determined by the City Council. The five-year program includes major ongoing maintenance and rehabilitation costs to existing infrastructure and facilities, as well as the cost of new facilities or capital improvements. The City’s capital improvement plan identifies each proposed project, the year the project will start and the proposed method of financing. The City will actively pursue grant and other outside funding for all capital improvement projects. The City maintains all of its assets at a level adequate to protect the City’s capital infrastructure and to minimize future mainte nance and replacement costs. Whenever the City finances capital projects through the issuance of bonds, it must repay the bonds within a period not to exceed the expected useful life of the project. The City confines long- term borrowing to capital improvements or projects that cannot be financed from current revenues. For more information regarding future improvements to the Water System, see the caption “THE WATER SYSTEM — Future Water System Improvements.”
The City also adheres to the following additional financial policies: Policy for Disclosures Procedures, Investment Policy and OPEB Policy. The City is developing a climate risk/sustainability policy for future approval by the City Council.

Employees
As of June 30, 2023, the City had approximately 292 full-time equivalent employees, of which 6 worked exclusively for the Water System, 26 worked in the Public Works Department with responsibility for the Water System and other public works functions and 260 worked in general government services, including finance.

Confidential employees are represented by the Confidential Employees Association (the “CEA”).

General miscellaneous employees, including those employees working exclusively for the Water System, are represented by the Monterey Park Service Employees’ International Union (the “SEIU”) Local 721. Managers, including managers in the Water Department, are represented by the Mid-Managers Association (the “MMA”).

The City’s labor agreements with CEA, SEIU, and MMA expire on June 30, 2025. The City has never experienced a strike, slowdown or work stoppage.

Budget Process
The City’s budget preparations follow a three-phase approach that begins each year with the preparation of the midyear budget review report, which includes a comprehensive long- term financial plan and establishes preparatory guidelines for the budget. The Fiscal Year of the City begins on the first day of July of each year and ends on the 30th day of June of the following year (each a “Fiscal Year”). The City Manager presents the proposed budget to the City Council for review prior to the beginning of each Fiscal Year and the City Council holds public hearings to review and approve the proposed budget. The final adopted budget, reflecting the City Council’s directions, is approved no later than June 30 of each year. The budgeting process generally spans an approximately four-month timeframe beginning in mid-February of each year.

Legal budgetary control for operating budgets is exercised at the department and fund level. The City is required to adopt a balanced budget for its General Fund at the beginning of the Fiscal Year. Formal budgetary integration and encumbrance accounting are employed as management control devices during the year for all funds.

The City Manager is responsible for preparing and submitting to the City Council the annual budget for the operations of the City for each Fiscal Year. The annual budget adopted by the City Council serves as a guideline for operations of the City. From the effective date of the budget, the date of formal adoption by the City Council, expenditure amounts as proposed are appropriated to departments and offices for the respective expenditure objects and purposes named or described. Budget expenditures are controlled at the fund and the department level. The City Manager is authorized to transfer appropriations between the accounts of any

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department within individual funds. Council approval is required only for transfers between funds, or an increase in total appropriations.

The City Manager presents a midyear fiscal (budget) review (the “Midyear Review”) which provides a written analysis of the City’s financial health. The Midyear Review is an update for significant events and charges occurring since the last update in the previous year. As part of the Midyear Review, all of the key assumptions underlying the current budget are reviewed and revised as necessary. Appropriated amounts are as originally adopted or as adjusted by the City Council throughout the year.

The budget is formally integrated into the accounting system and employed as a management control device during the year for all governmental funds. At Fiscal Year-end, unexpended and unencumbered budget appropriations lapse. Encumbrances outstanding at Fiscal Year -end are carried into the following Fiscal Year for continuing appropriation.

Under Article XIIIB of the California Constitution, the City is restricted as to the amount of annual appropriations, and if certain proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller or refunded to the taxpayers through revised tax rate or revised fee schedules.

For the Fiscal Year ended June 30, 2023, based on calculations by the City, proceeds of taxes did not exceed the appropriations limit.

The City Council adopted the budget for Fiscal Year 2023-24 on June 21, 2023.

City Insurance
The City is exposed to various risks of losses related to torts, theft of, damage to and destruction of assets, errors and omissions, and natural disasters. The City is partially self-insured for workers’ compensation, general liability, and automobile liability. The City is fully self -insured for unemployment insurance claims (reimbursable account with Employment Development Department). The Workers’ Compensation Internal Service Fund and the General Liability Internal Service Fund were established to account for the collection of premiums from various City departments related to the City’s insurance and self-insurance programs.

The City retains the risk for the first $500,000 of each Workers’ Compensation claim and is a member of PRISM, for coverage up to $5,000,000 per occurrence. The City has also purchased excess workers’ compensation insurance up to statutory limits. The City retains the risk for the first $1,000,000 of each General Liability and Automobile Liability claim and claims that exceed the City’s self -insurance limit are insured through PRISM for coverage up to $25 million per occurrence. The City also purchases insurance through PRISM for other risks of loss, including property loss, emergency vehicle physical damage, cyber, and special events. The City’s property insurance currently includes flood and earthquake coverage (although such coverage is not required to be maintained by the Installment Purchase Agreement) and covers certain facilities in the Water System, but not, for example, underground pipelines.

PRISM is comprised of around 300 public entities through out the State of California. The comprehensive general liability insurance includes monetary damages for personal liability, property damage, and public officials’ errors and omissions. PRISM excess insurance premiums are based on losses incurred by the insured, the risk pool entities, and current market for general liability coverages.

There have been no significant changes in insurance coverage as compared to Fiscal Year 2022-23 and the City has not paid out any settlement in excess of the applicable insurance coverage during the past three Fiscal Years. Estimates for liabilities have been accrued in the Workers’ Compensation and General Liability Internal Service Funds. These funds also include an estimate for incurred but not reported claims.

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At June 30, 2023 total estimated claims payable were as follows.

General Liability $ 9,386,265
Workers’ Compensation 14,509,962
Total $ 23,896,227

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

No assurance can be given as to the adequacy of the insurance maintained now or in the future by the City to fund necessary repairs or replacement of any portion of the Water System, and the City does not have any obligation under the Installment Purchase Agreement to maintain earthquake coverage or other coverage in the current coverage amounts. Significant damage to the Water System could affect the City’s ability to generate sufficient Net Revenues to pay the Bonds. See the caption “RISK FACTORS—Natural Disasters.” The City has not settled any claims that exceeded its insurance coverage in the past three years.

See Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT —COVENANTS OF THE CITY—Insurance” for a description of insurance coverages that are required to be maintained while the Bonds are outstanding.

Outstanding Parity Obligations
The City has no outstanding obligations that are payable from Net Revenues of the Water System on a senior or parity basis to the Series 2024 Installment Payments.

Effective January 1, 2001, the City entered into an Enterprise Fund Installment Sale Agreement with the California Infrastructure and Economic Development Bank (the “2001 Installment Sale Agreement”) pursuant to which the City was obligated to make payments from Net Revenues. The outstanding balance of the 2001 Installment Sale Agreement of $668,075.54 plus accrued interest was paid in full on March 12, 2024.

Outstanding Subordinate Obligations
On September 23, 2014, the City entered into that certain Master Lease Purchase Agreement dated September 23, 2014, by and between the City, as lessee, and Siemens Public Inc., as lessor (the “Siemens Lease”), the proceeds of which were used to finance various energy efficiency improvements and upgrades, including replacement water meters. The City pays approximately 85% of the Siemens Lease pa yments from Net Revenues; however the City’s obligation to make payments on the Siemens Lease is not secured by a pledge of such Net Revenues. The City’s obligation under the Siemens Lease matures in June 2030.

Effective March 1, 2021, the City entered into a Loan Agreement (the “2021 Loan Agreement”) with San Gabriel Valley Municipal Water District pursuant to which the City is obligated to make annual payments of $400,000 through 2030 from Revenues. The 2021 Loan Agreement does not bear interest so long as the City makes all required payments when due. The City’s obligation to make payments under the 2021 Loan Agreement is an unsecured obligation of the City payable from Revenues on a subordinate basis to the Series 2024 Installment Payments.

The City is permitted to incur additional obligations that are payable from Net Revenues on a parity with the Series 2024 Installment Payments in the future upon satisfaction of the conditions that are described under the caption “SECURITY FOR THE BONDS —Additional P arity Bonds and Contracts.” Any Parity Contract entered into by the City must comply with the additional bonds test set forth in the Installment Purchase Agreement and described under the caption “SECURITY FOR THE BONDS —Additional Parity Bonds and Contracts.” The City does not currently expect to issue or incur any Parity Bonds or Contracts in the next five years. See the caption “THE WATER SYSTEM—Future Water System Improvements.”

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Audited Financial Statements
A copy of the most recent audited financial statements of the City prepared by The Pun Group LLP, Santa Ana, California (the “Auditor”) is set forth in Appendix A. The Auditor’s letter dated February 15, 2024 is located at the beginning of the Financial Section therein. The Auditor has not undertaken to update the audited financial statements of the City or 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 Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated December 30, 2023.

See Appendix A — “CITY OF MONTEREY PARK COMPREHENSIVE AUDITED FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”
The summary operating results that are contained under the caption “WATER SYSTEM FINANCIAL INFORMATION—Historical Operating Results and Debt Service Coverage” are derived from these financial statements and audited financial statements for prior Fiscal Yea rs (excluding certain non-cash items and after certain other adjustments), and are qualified in their entirety by reference to such statements, including the notes thereto.

The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (the “GASB”). A complete set of financial statements is prepared annually for the City Council and City staff in a Annual Comprehensive Financial Report for the City.

The government-wide financial statements are designed to provide information of the City’s financial activities in a manner similar to a private-sector company. Government-wide financial statements consist of the statement of net position and the statement of activities, which are prepared using the economic resources measurement focus and the accrual basis of accounting. These statements provide both short-term and long-term information about the City’s financial position, which is helpful in assessing the City’s economic condition at the end of the fiscal year.

The statement of net position presents all of the City’s financial resources along with its capital assets and long-term obligations. The difference between the assets and the liabilities is reported as the net position.

The statement of activities reports the gross and net costs of various activities carried out by the City and how the City’s net position changed during the fiscal year. This statement summarizes the cost of providing services by the City and includes all current year revenues and expenses.

Both government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (i.e. governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (i.e. business- type activities). The governmental activities of the City include general government, public safety, community development, culture and recreation, highways and streets, health, and debt service. The business-type activities reflect the City’s Water System operations, waste management activities, and sanitary sewer activities.

The government-wide financial statements inclu de not only the City but also those legally separate entities for which the City is financially accountable. These entities include the Monterey Park Housing Authority and the Monterey Park Financing Authority. Financial information for these component units is reported as an integral part of the City.

The City accounts for the Water System in the Water Utility Enterprise Fund. The City’s Water Utility Enterprise Fund is a proprietary fund used to account for operations that are financed and operated in a manner similar to private business enterprises and where the intent of the City is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. Proprietary funds distinguish operating revenues and expenses from

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nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Water Utility Enterprise Fund, Refuse Enterprise Fund, Sewer Enterprise Fund, and of the government’s internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Single Audit Report
As a recipient of fed eral funds, the City is required to undergo an audit in accordance with the Single Audit Act of 1996 and the U.S. Office of Management and Budget Circular A -133. In its Single Audit of Federally Assisted Grant Programs for Fiscal Year 2022 -23 prepared by the Auditor and attached hereto as Appendix F (the “Single Audit Report”), the Auditor found certain deficiencies in internal control over compliance that the Auditor considered to be “significant deficiencies,” as defined in the Auditor’s letter dated March 28, 2024, which accompanies the Single Audit Report.

The Single Audit Report notes that, during the Fiscal Year 2022-23 audit, the Auditor noted the certain conditions that in resulted adjustments to the financial statements, including prior period adj ustments (1) to correct the understated deferred outflow of pension amount at July 1, 2022 (Approximately $1.3 million), (2) to correct the beginning unavailable revenue and fund balance at July 1, 2022 of the Housing Special Revenue Fund (Approximately $1.19 million), (3) to reallocate the beginning balance of the pension related balances between government activities and business -type activities (Approximately $827,000), (4) to reallocated the beginning balance of the other postemployment benefits related balances between government activities and business-type activities (Approximately $1.2 million), and (5) to correct the allocation of interest payable on pension obligation bonds into internal service funds based on the bonds’ allocation. In response to this finding, the City plans to implement a monthly reporting cycle which will include review of internal control over financial reporting on a monthly basis. If and when errors are detected, journal entries will be prepared monthly to correct the financial reports. The City also plans to implement ongoing training for finance department staff.

The Los Angeles County Safe, Clean Water Program Implementation Ordinance and the Transfer Agreement between the City and the Los Angeles County Flood Control Dist rict relating to the Safe, Clean Water Program requires the City to prepare an annual expenditure plan and annual report. The Auditor noted two instances in which the City’s submission was late – the Annual Spending Plan for Fiscal Year 2022-23 was submitted six days late on April 7, 2022, and the Annual Progress/Expenditure Report for Fiscal Year 2022-23 was submitted approximately six weeks late on February 14, 2024. The Auditor noted that, without timely submitting the required annual spending plan and the annual reports, the City is not in compliance with the Safe Clean Water Program requirements and could potentially lose the funding.

The City is required to comply with a System for Award Management (“SAM”) in making subawards of federal funds. The Single Audit Report notes that for two out of five samples selected for testing, the City did not have documentation verifying the vendors against the SAM prior to entering into contracts with the vendors to ensure that they were not suspended or debarred from federally funded purchases. If the City does not verify whether vendors are suspended or debarred from working on federally funded projects, the City could contract with vendors that are prohibited from working on federally funded projects and potentially lose funding.

The Single Audit Report has been included herein in reliance upon the report of the Auditor. The Auditor has not undertaken to update the Single Audit Report, or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated as of March 28, 2024, except for the Schedule of Expenditures of Fe deral Awards, which is dated as of February 15, 2024.

See Appendix F — “CITY SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2023”.

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THE WATER SYSTEM
General
The City supplies potable water to approximately 11,066 single family residential customers, 1,530 multi-family residential customers, 798 commercial and industrial customers and 213 other customers. See the caption “THE CITY—Land Use and Service Area.”
The City’s main source of water is groundwater pumped from the Main San Gabriel Valley Basin (the “Main Basin”), which is a sub -basin of the San Gabriel Valley Basin. The City also purchases supplemental groundwater from the San Gabriel Valley Water Company (“SGVWC”). See the caption “THE WATER SYSTEM—Water Supply.”
The Water System includes 12 groundwater wells in the Main Basin (of which eight are currently active, three are standby wells and one is inactive), approximately 136.6 miles of transmission and distribution pipe ranging in size from 2-inches to 36-inches in diameter, five primary pressure zones, eight closed sub-zones, 11 active service zone storage reservoirs (with a total storage capacity of approximately 15.8 million gallons), two settling tanks, 11 booster pump stations, 20 pressure reducing stations, one imported water supply connecti on with SGVWC and four emergency interconnections.

Water Supply
The City’s sources of water are groundwater pumped from the Main Basin through the City’s eight active groundwater wells and local groundwater purchased from SGVWC. See the captions “—Historical Water System Supply” and “—Projected Water System Supply” for historical and projected information with respect to the City’s sources of water supply.

Groundwater. The City’s main source of water for the Water System is groundwater pumped from the Main Basin, which is a sub-basin of the San Gabriel Valley Basin pursuant to California Department of Water Resources (“DWR”) Bulletin 118, Basin Number 4-013. Pursuant to the Sustainable Groundwater Management Act of 2014 (“SGMA”), the Main Basin was named as an adjudicated groundwater basin and is exempt from the requirements of developing a Groundwater Sustainability Plan and subsequently was designated a very -low- priority basin in DWR’s 2019 SGMA Basin Prioritization report. In compliance with SGMA, the Main Basin Watermaster (as defined below) submits its Annual Report to DWR.

The Main Basin lies in the heart of the San Gabriel Valley and has an estimated total fresh water storage capacity of approximately 9.5 million acre -feet. The Main Basin is replenished by stream runoff from the adjacent mountains and hills, by rainfall directly on the surface, subsurface inflow from Raymond Basin and Puente Basin, return flow from water applied for overlying uses, and imported water replenishment. The Main Basin is bounded by the San Gabriel Mountains to the north, the San Rafael and Merced Hills on the west, the Puente Hills and the San Jose Hills on the south, and a low divide between the San Gabriel River system and the Upper Santa Ana River system on the east. Only the northerly portion of the City overlies the Main Basin and, therefore, all of the City’s wells are located in the adjacent City of Rosemead directly overlying the Main Basin.

In the 1940s, the San Gabriel Valley experienced rapid urbanization and an increase in population that led to increased demand for water. By the 1950s, the Main Basin was put into a state of overdraft due to the increase in water consumption and periods of drought. The water production from the Main Basin exceeded the amount that was replaced. Downstream parties became especially concerned and legal action was initiated on their behalf, resulting in a court decision requiring the water uses in the area upstream of Whittier Narrows (the “Upper Area”) to guarantee a source of water to water users of the area downstream of Whittier Narrows (the “Lower Area”).

Whittier Narrows is a low gap between the Merced and Puente Hills, just northwest of the City of Whittier, through which the San Gabriel River and the Rio Hondo flow to the coastal plain of Los Angeles County.

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Initially, the Upper San Gabriel Valley Municipal Water District was responsible for the Upper Area’s obligations to the Lower Area. However, due to the fact that the Upper San Gabriel Valley Municipal Water District boundaries did not encompass the entire Main Basin, a complaint was filed that would adjudicate water rights in the Main Basin and bring all producers under control of one governing body. This led to the Main Basin Judgment in 1973.

The Long Beach Judgment, entered in September of 1965, divides the supply of the San Gabriel River system at Whittier Narrows, between San Gabriel Valley upstream and the coastal plain of Los Angeles County downstream. Under the Long Beach Judgment, the Lower Area is to receive a quantity of usable water annually from the San Gabriel River system comprised of usable surface flow, subsurface flow at Whittier Narrows and water exported to the Lower Area. A provision is made for the supply of make-up water by the Upper Area for years in which the guaranteed entitlement is not received by the Lower Area. The entitlement of the Lower Area varies annually, depending on the 10-year average annual rainfall in San Gabriel Valley for the 10 years ending in the entitlement year. The S an Gabriel River Watermaster, a separate watermaster from the Main Basin Watermaster, assures compliance with the Long Beach Judgment.

Under the Main Basin Judgment, entered in January of 1973, all rights to the diversion of surface water and production of groundwater within the Main Basin and its relevant watershed were adjudicated. The judgment provides administration of the provisions of the judgment by the Main San Gabriel Basin Watermaster (the “Main Basin Watermaster”). The Main Basin Watermaster is a nine-member board which administers the water rights and manages the water quality and supply of the Main Basin. The Main Basin Watermaster operates under a formal set of rules and regulations that define the procedures by which the Main Basin is oper ated and managed. Water producers must obtain Main Basin Watermaster approval for constructing or modifying a well, constructing a groundwater treatment plant, increasing groundwater extraction, spreading water in the basin, and spreading and storing supplemental water under a cyclic storage agreement.

The Main Basin Judgment does not restrict the quantity of water which parties may extract from the Main Basin. Rather, the Main Basin Judgment provides a means for replacing all annual extractions in excess of a producer’s annual right to extract water with supplemental imported water. Each year the Main Basin Watermaster reviews water supply conditions including local rainfall, groundwater levels, local stormwater runoff available for replenishment, imported water availability and the amount of imported water stored in the Main Basin for future demands and establishes an “Operating Safe Yield.” The Operating Safe Yield is the amount of groundwater that can safely be extracted for the succeeding fiscal year before more expensive imported water would need to be purchased to replenish the Main Basin for all production in excess of the water rights. Regardless of the Operating Safe Yield adopted there is never a restriction on the amount of water which may be pumped from the Main Basin, only the cost of producing the groundwater is impacted. The Main Basin Watermaster is not restricted as to when or how much untreated imported water be delivered to the Main Basin, only that it ultimately be delivered. In addit ion, the City has established an untreated imported water (cyclic) storage account in the Main Basin which the City may draw upon to offset its potential future production in excess of its water rights. In doing so, the City reduces its need to purchase untreated imported water in the future in the midst of a drought when imported water supplies may be limited.

Each water producer, including the City, is allocated its portion of the Operating Safe Yield. If a water producer extracts more than its allocated portion, it must pay a Replacement Water Assessment that is sufficient to purchase one acre-foot of supplemental water to be spread in the basin for each acre-foot of excess production.

The City has prescriptive right to 3.39216 percent of the Operating Safe Yield. Over the last ten fiscal years, the average Operating Safe Yield has been an average of 150,000 acre-feet per year and therefore the City’s average entitlement share over such period has been approximately 5,088.24 acre-feet per year.

The City is a sub-agency of San Gabriel Valley Municipal Water District (“San Gabriel District”), which is a wholesale water agency with responsibility for delivering supplemental water to the Main Basin on behalf of the City and the cities of Alhambra, Azusa and Sierra Madre. San Gabriel District has a contract with the State of California Department of Water Resources for the purchase of water from the State Water Project, which

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water San Gabriel District delivers directly to the spreading grounds in the Main B asin. When necessary to replenish the Main Basin, the Main Basin Watermaster purchases water from San Gabriel District for replenishment of the Main Basin.

See the captions “—Historical Water System Supply” and “—Projected Water System Supply” for more information with respect to the Water System’s historical and projected water supply from local groundwater in the Main Basin.

Purchased Local Groundwater. The City can purchase local groundwater from SGVWC. The City has a 10-inch connection with SGVWC, with a capacity of approximately 4,000 gallons per minute (gpm). The City purchases local groundwater from SGVWC as a supplemental water supply source during periods when the City’s own water system is down due to maintenance or emergency repair. Over the past five years, the City’s annual water purchases from SGVWC have ranged from 10 acre- feet to 2000 acre-feet, as shown in Table 1 .

The City generally purchases water from SGVWC when several of the City’s wells cannot operate either due to water contamination or maintenance. See the caption “THE WATER SYSTEM —Water Quality and Treatment—City Water Treatment Facilities” for a discussion of imported water purchases in Fiscal Years 2022- 23 and 2023-24 during the design, construction and testing of the CGTS facility.

Emergency Connections. The City also has four interconnections with the City of Montebello, the Golden State Water Company, Metropolitan Water District of Southern California and the California Water Service Company for emergency purposes only. The City has not used such interconnections in the past.

Water Quality and Treatment
General. During the late 1970s and early 1980s significant groundwater contamination was discovered in the San Gabriel Valley Basin. The contamination was caused in part by past practices of local industries that had carelessly disposed of industrial solvents referred to as Volatile Organic Compounds (“VOCs”) as well as by agricultural operations that infiltrated nitrates into the groundwater. Further investigation revealed widespread VOC contaminat ion significantly impacting the basin. This discovery led the United States Environmental Protection Agency (the “EPA”) to place four portions of the San Gabriel Valley Basin, including the portion designated as the South El Monte Operable Unit (where all of the City’s groundwater wells are located), on the National Priorities List under authority of Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), also known as the Superfund program. CERCLA requires parties respon sible for pollution to comply with the process of carrying out federal cleanup orders.

Cleanup efforts were undertaken at the local, state, and federal level. See the caption “—EPA Settlement” below.

Local water agencies adopted a joint resolution in 1989 regarding water quality issues that stated Main Basin Watermaster should coordinate local activities aimed at preserving and restoring the quality of groundwater in the Main Basin. The joint resolution also called for a cleanup plan. In 1991, the Court granted Main Basin Watermaster the authority to control pumping for water quality purposes. Accordingly, Main Basin Watermaster added Section 28 to its Rules and Regulations regarding water quality management. The new responsibilities included development of a Five -Year Water Quality and Supply Plan, updating it annually, submitting it to the California Regional Water Quality Control Board, Los Angeles Region, and making it available for public review by November 1 of each year.

The Main Basin Watermaster prepares and annually updates the Five -Year Water Quality and Supply Plan in accordance with the requirements of the Section 28 Rules and Regulations. The objective is to coordinate groundwater-related activities so that both water supply and water qual ity in the Main Basin are protected and improved. Many important issues are detailed in the Five -Year Plan, including how Main Basin Watermaster

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plans to: monitor groundwater supply and quality; develop projections of future groundwater supply and quality; ensure adequate supplemental water is available for groundwater replenishment; review and cooperate on cleanup projects, and provide technical assistance to other agencies; assure that pumping does not lead to further degradation of water quality in the Main Basin; address Perchlorate, N -nitrosodimethylamine (“NDMA”), and other emerging contaminants in the Main Basin; develop a cleanup and water supply program consistent with the EPA’s plans for its San Gabriel Valley Basin Superfund sites; and coordinate and manage the design, permitting, construction, and performance evaluation of the Baldwin Park Operable Unit cleanup and water supply plan.

The Main Basin Watermaster, in coordination with the Upper San Gabriel Valley Municipal Water District, has worked with state and federal regulators and local water companies to clean up water supplies.

Section 28 of the Main Basin Watermaster’s Rules and Regulations require all producers (including the City) to submit an application to 1) construct a new well, 2) modify an existing well, 3) destroy a well, or 4) construct a treatment facility. The Main Basin Watermaster prepares a report on the implications of the proposed activity.

As a party to the Main Basin Judgment, the City reviews a copy of these reports and is provided the opportunity to submit comments on the proposed activity before the Main Basin Watermaster Board takes final action.

The San Gabriel Water Quality Authority (“WQA”) was established by the State Legislature on February 11, 1993 to develop, finance and implement groundwater treatment programs in the San Gabriel Valley Basin, including the sub- basins such as the Main Basin. Section 406 of the act which created the WQA (the “WQA Act”) requires the WQA “to develop and adopt a basinwide groundwater quality management and remediation plan” (which is referred to as the “Section 406 Plan”) that is required to be consistent with the EPA’s National Contingency Plan (“NCP”) and Records of Decision (“ROD”) and all requirements of the Los Angeles Regional Water Quality Control Board (“LARWQCB”). According to the WQA Act, the Section 406 Plan, which is incorporated into the City’s Urban Water Management Plan, must include: characterization of basin contamination; a comprehensive cleanup plan; strategies fo r financing the design, construction, operation and maintenance of groundwater cleanup facilities; provision for a public information program; and coordination of activities with federal, state, and local entities.

WQA reviews and adopts the Section 406 Pl an on an annual basis and as necessary, makes revisions according to changing regulatory, political and/or funding environments. In support of the Section 406 Plan, WQA also adopts an annual budget which includes all projects (actual or planned) WQA is facilitating through its participation during that time period. The budget identifies the various funding sources, and combinations thereof, to ensure full funding for each can be achieved.

City Water Treatment Facilities . The City has installed treatment facilities to meet all applicable standards for drinking water and the City operates three separate treatment facilities. In 2016, City commenced the design of a new Centralized Groundwater Treatment System (the “CGTS”), which ties together Wells No. 5, No. 9, No. 12, and No. 15 and utilizes an Ultraviolet/Advanced Oxidation Process (UV/AOP) and Liquid Phase Granular Activated Carbon (“LGAC”) to treat VOC and PFAS/PFOA at these well sites. In late 2020, trace levels of PFAS were discovered, prompting the State Water Resources Control Board – Division of Drinking Water (DDW) to request the City to incorporate a PFAS/PFOA removal system into the CGTS. Responding to this additional concern, the City initiated the changes and updated the design and construction to include PFAS/PFOA removal in 2021. After approximately seven and a half years, the CGTS with the PFAS/PFOA removal component was completed in May 2023 with approval from DDW to operate the system.

Rigorous CGTS system testing, and water quality analy sis were conducted to ensure the system's efficiency and attain the required permitting by DDW. During construction and testing of the CGTS modifications required to address the PGAS/PFOA treatment requirements, the City’s regular production wells were unusable. During this time, the City was able to meet system demands by purchasing imported water through an interconnection with SGVMWC. This additional cost was significantly higher than well water, approximately $183,652 in Fiscal Year 2021-22, $1,028,170 in Fiscal Year 2022-23, and $1,840,160 in Fiscal

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Year 2023-24. See Tables 1, 9, 13 and 14. With the CGTS now online, the City does not expect to purchase imported water in the upcoming Fiscal Years. See Tables 9 and 14.

Wells No. 1, No. 10 and the Fern well flow to an LGAC treatment facility at the Delta Treatment Plant for VOC treatment. Production from Wells No. 12 and No. 15 are operated consistently with the South El Monte Operable Unit Record of Decision.

PFAS. In 2019, the State of California Water Resources Control Board’s Division of Drinking Water (the “ Division”) lowered the Notification Levels (the “ NLs”) for Perfluorooctanoic acid (“ PFOA”) and Perfluorooctanesulfonic acid (“PFOS ”) to 5.1 and 6.5 parts per trillion (“ PPT”), respectively. NLs are non - regulatory, precautionary health-based measures for concentrations of chemicals in drinking water that warrant notification and further monitoring and assessment. In 2020, the Division lowered the Response Level (the “RL”) for PFOA and PFOS from 70 PPT, combined, to 10 and 40 PPT, respectively. RLs are non-regulatory, precautionary health-based measures that are set at higher levels than NLs and represent thresholds at which the Division recommends that water systems remove a water source from use or treat it.

In addition, on March 14, 2023, Maximum Contaminant Levels of 4 PPT for PFOA and PFOS and cumulative limits for certain other chemicals which are described below were proposed by the United States Environmental Protection Agency (the “EPA”). The EPA proposal is currently subject to public comment and there can be no assurance as to the timing or substance of any final EPA rule with respect to PFOA and PFOS.

PFOA and PFOS are fluorinated organic chemicals which are part of a family of synthetic compounds referred to as per- and polyfluoroalkyl substances (“PFAS”). PFAS are water and lipid resistant substances that were previously used in a variety of manufacturing processes and industrial applications. They are often present in water supplies which are imp acted by wastewater treatment plant effluent or active or former military installations. Recent technological advances have enabled water agencies to detect PFAS compounds at very low concentrations.

In addition to PFOS and PFOA, the Division tasked the California Office of Environmental Health Hazard Assessment with evaluating and recommending NLs for the following additional PFAS compounds on February 6, 2020: perfluorohexane sulfonic acid (known as PFHxS), perfluorobutane sulfonic acid (known as PFBS), perfluorohexanoic acid (known as PFHxA), perfluoroheptanoic acid (known as PFHpA), perfluorononanoic acid (known as PFNA), perfluorodecanoic acid (known as PFDA) and 4,8-dioxia-3H- perfluorononanoic acid (known as ADONA). There can be no assurance as to the timing of the release of such recommendations. The establishment of a Hazard Index (a tool that assesses the cumulative health effect) for aggregate levels of the foregoing compounds other than ADONA is also included in the EPA’s March 14, 2023 regulatory proposal, which is described above.

The City is required to test its water supplies for PFAS and adopted PFAS testing in 2018. Water produced by the Water System meets all State and federal water quality standards. Further, the CGTS system described above provides a robust barrier to extract PFAS to a non-detect level.

The City does not anticipate that implementation of the lowered PFAS RL by the Division will have a material adverse effect on the operation of the Water System or the costs thereof. The projected operating results which are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume significant increases in water treatment or other Water System operating costs to meet State regulations relating to PFAS.

EPA Settlement. The City receives payments from the EPA (through WQA) pursuant to a settlement, under which the City receives reimbursement for costs incurred to treat water pumped from the City’s wells (the “EPA Settlement”). Pursuant to the EPA Settlement, the City received approximately $2.6 million in Fiscal Year 2019-20, approximately $1.855 million in Fiscal Year 2020-21, approximately $700,000 in Fiscal Year 2021-22, and approximately $7,000 in Fiscal Year 2022-23. The City expects to receive retroactive payments

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for Fiscal Year 2022-23 under the EPA Settlement in Fiscal Year 2023- 24 but the amount and timing of such payments is unknown. The City’s assumptions regarding the amount and timing of future EPA Se ttlement payments are described in footnote 1 to Table 14; however, the City cannot provide any assurance that payments under the EPA Settlement will be made in the amounts or at the times described in this Official Statement.

PFAS Settlement. The City i s a plaintiff to proposed class action settlements referred to as In re Aqueous Film-Forming Foam (“AFFF”) MDL No. 2873 (the “PFAS Settlements”), relating to groundwater contamination allegedly caused by the 3M Company and certain companies owned or controlled by the DuPont corporation. Pursuant to the PFAS Settlements, the City should receive payments totaling approximately $7.2 million over the next 10 years (after payment of contingency legal fees), with the first, and largest, payment to be made as soo n as the summer of 2024. The litigation to which the settlement relates, which is commonly referred to as the AFFF Multi-District Litigation (the “MDL Litigation”), involves hundreds of cases related to Aqueous Film-Forming Foams (AFFF) and their alleged contamination of groundwater with harmful substances.

The PFAS Settlement involves only 3M and DuPont; other defendants to the MDL Litigation are not parties to the PFAS Settlements and the City could receive settlement payments or recovery of damages in connection with the cases pending against those parties in the future. However, the PFAS Settlements would resolve approximately 75% of the City’s claims in the MDL Litigation. The PFAS settlements with DuPont and 3M have received final approval from the judge in the MDL Litigation. The City cannot guarantee that the City will receive the settlement payments in the amounts, or at the times, described above. Further, the City can provide no assurance that any other defendants in the MDL Litigation will enter into settlement agreements or that the City will receive any further payments as a result of the MDL Litigation. The projections set forth in Table 14 do not assume the receipt of settlement payments under the PFAS Settlements and the City can provide no assurance as to the amount and timing of any such payments.

Drought Declarations
State Orders . On January 17, 2014, the Governor declared a drought state of emergency (the “Declaration”) with immediate effect. The Declaration included an order encouraging local urban water suppliers, including the City, to implement their local water shortage contingency plans; the City’s plan is discussed under the subcaption “ —Water Shortage Contingency Plan.” On April 7, 2017, after significant improvement in water supply conditions across California, the Governor issued Executive Order B-40-17, which rescinded mandatory conservation measures for most California counties (including the County).

In 2018, the California Governor signed Senate Bill 606 and Assembly Bill 1668 into law. These bills relate to water conservation and drought planning and empower DWR and the State of California Water Resources Control Board to adopt long- term standards for the following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined as 55 gallons per person per day (“GPCD”) until January 2025; the standard will decrease over time to 50 GPCD in January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water budgets, based on these standards, for their service areas.

The City is unable to predict the effect on the Water System of the implementation of Senate Bill 606 and Assembly Bill 1668 or any future legislation with respect to water conservation. However, the City is meeting and believes that it will continue to be able to meet the 55 GPCD standard for indoor water use, along with annual State -mandated water use efficiency standards, based on the City’s current water demands and ongoing efforts to encourage conservation, as described below under the subcaption “—Water Shortage Contingency Plan.” The City also has a tiered rate structure for residential customers that further promotes water use efficiency by charging a higher rate for water use in excess of maximum amounts within each tier. See the caption “—Water System Rates and Charges—Current Rates and Charges.”

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On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. On March 28, 2022, the Governor requested that all water users voluntarily reduce water use by 20%. These declarations encouraged water agencies to draw upon supplies other than groundwater and to implement their water shortage contingency plans and authorized the State Water Resources Control Board (the “SWRCB”) to adopt regulations that prohibit wasteful water use (such as the use of potable water to wash paved surfaces or to irrigate landscaping during the two days following rainfall). Such regulations went into effect on June 10, 2022.

In order to achieve compliance with the SWRCB’s June 10, 2022 regulations, the City is currently implementing Stage 2 of its water shortage contingency plan. The City believes that it has signi ficant water supplies and storage and is well positioned to respond to both drought and regulatory requirements. At this time, the City does not foresee a water supply shortage. See the subcaption “—Water Shortage Contingency Plan.” There can be no assurance that subsequent State declarations will not impose mandatory water use restrictions should dry conditions return in future years. The City notes that the State experienced significant precipitation in the winter and early spring of 2023.

Water Shortage Contingency Plan. On September 15, 2021, the City adopted Ordinance No. 2214, which added water conservation regulations to the City’s municipal code. The City’s water shortage contingency plan, which is referred to as the Water Conservation Plan and which meets State guidelines for such plans, calls for the City to respond to a water shortage in stages as follows:
• Stage 1: Declaring a Stage 1 Drought Emergency demonstrates the need to reduce the City’s water demand by a maximum of 10% and includes voluntary water use restrictions, such as restricting watering outdoors without the use of drip irrigation or micro - spray systems to three times per week.
• Stage 2: Declaring a Stage 2 Drought Emergency demonstrates the need to reduce the City’s water demand between 11% and 20% and includes mandatory water use restrictions, such as restricting watering outdoors without the use of drip irrigation or micro - spray systems to two times per week, prohibiting the installation of non-drip irrigation or micro- spray sys tems used in outdoor watering in new commercial and residential developments requesting water service and prohibiting the use of potable water to irrigate ornamental turf on public street medians.
• Stage 3: Declaring a Stage 3 Drought Emergency demonstrates the need to reduce the City’s water demand between 21% and 30% and includes mandatory water use restrictions, such as restricting watering outdoors without the use of drip irrigation or micro - spray systems to one time per week, restricting the filling of swimming pools and hot stubs to not more than one time per week, restricting the use of potable water from fire hydrants to firefighting and emergency and public health related activities, prohibiting the installation of non-drip irrigation or micro -spray systems used in outdoor watering in new commercial and residential developments requesting water service, prohibiting the use of potable water to irrigate ornamental turf on public street medians and prohibiting the washing of vehicles unless performed at commercial car wash facilities.
• Stage 4: Declaring a Stage 4 Drought Emergency demonstrates the need to reduce the City’s water demand between 31% and 40% and includes mandatory water use restrictions such as completely prohibiting watering outdoors without the use of drip irrigation or micro-spray systems in addition to the other water use restrictions applicable under Stage 3. • Stage 5: Declaring a Stage 5 Drought Emergency demonstrates the need to reduce the City’s water demand between 41% and 50% and i ncludes the other water use restrictions described in the City’s water contingency plan.

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• Stage 6: Declaring a Stage 6 Drought Emergency demonstrates the need to reduce the City’s water demand by more than 60% and includes the other water use restrictions described in the City’s water contingency plan.

The City is empowered to enforce its water shortage contingency plan with successively increasing fines, the installation of flow restriction devices and the termination of water service.

The projected Water System operating results that are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not reflect the implementation of mandatory levels of the City’s water contingency plan. The City does not currently expect that the implementation of the City’s water contingency plan in the future will have a material adverse effect on its ability to pay the Series 2024 Installment Payments from Net Revenues. As discussed under the caption “— Water System Rates and Charges,” the City’s rate structure consists of variable and fixed rate components.

Decreased water consumption is partially offset by a decrease in related variable costs, while fixed water charges largely cover the Water System’s fixed operating and maintenance costs. In addition, the City has covenanted to set Water System rates and charges in amounts that it expects to be sufficient to pay the Series 2024 Installment Payments from Net Revenues. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” It is likely that a water shortage will arise again in the future. In such event legal issues exist as to whether different California Water Code provisions or State regulations will be invoked to manage the allocation of water. Any curtailment pursuant to State orders could necessitate an increase in the City’s water rates to Water System customers. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218” for a discussion of certain restrictions on the City’s ability to raise water rates.

Historical Water System Supply
The following table shows sources of supply for the Water System for the last five Fiscal Years.

Table 1
City of Monterey Park
Historical Water Supply in Acre Feet
Fiscal Year
Ending
June 30
Main Basin
Groundwater
Imported
Water(2) Total
Percentage
Increase/
(Decrease)
2019 7,540 0 7,540 N/A
2020 7,448 10 7,584 3.1%
2021 7,578 25 7,288 (3.9)
2022(1) 7,063 144 6,884 (5.5)
2023(1) 4,069 2,000 6,069 (11.8)

(1) Declines in Fiscal Years 2021-22 and 2022-23 result from conservation measures imposed by the City and low water demand for irrigation resulting from unusually high precipitation. (2) The City purchased imported water during the construction of the CGTS facility. See the caption “THE WATER SYSTEM— Water Quality and Treatment—City Water Treatment Facilities.” Source: The City.

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Historical Water System Deliveries
Historical water deliveries reflect connections to the Water System as well as water demand, which can be affected by weather conditions, State mandates and other factors. The following table shows potable water deliveries to Water System customers for the last five Fiscal Years.

Table 2
City of Monterey Park
Historical Water System Deliveries in Acre Feet(1)
Fiscal Year
Ending
June 30 Residential Commercial Institutional Government Total Percentage
Increase/
(Decrease)
2019 4,678 1,754 15 153 6,447 N/A
2020 4,778 1,605 16 125 6,524 1.2%
2021 5,324 1,539 18 207 7,088 8.6
2022(1) 4,763 1,558 17 167 6,505 (8.2)
2023(2) 4,240 1,386 13 120 5,759 (11.5)

(1) Declines in Fiscal Year 2021-22 result from drought conservation measures imposed by the City. (2) Declines in Fiscal Year 2022-23 result from low water demand for irrigation resulting from unusually high precipitation.

Source: The City.

Historical Water System Connections
The following table shows the number of connections to the Water System for the last five Fiscal Years.

Table 3
City of Monterey Park
Historical Water System Connections
Connection Type
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2010-21
Fiscal Year
2021-22
Fiscal Year
2022-23
Residential 12,643 12,643 12,591 12,629 12,750
Commercial 879 874 877 875 875
Institutional 7 7 7 7 7
Government 105 107 110 112 112 TOTAL 13,634 13,631 13,585 13,623 13,744
Percentage Increase/(Decrease) N/A (0.02%) (0.33%) 0.28% 0.89%

Source: The City.

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Historical Water System Sales Revenues
Water System sales revenues reflect water deliveries as well as adopted rates and charges. See the captions “—Historical Water System Deliveries” and “ —Water System Rates and Charges.” The following table shows the sales revenues of the Water System for the last five Fiscal Years. Connection fees are not included in the below numbers.

Table 4
City of Monterey Park
Historical Water System Sales Revenues
Fiscal Year
Ending
June 30 Residential Commercial Institutional Government Total Percentage
Increase/
(Decrease)
2019 $12,466,517 $2,632,193 $33,717 $ 2,205 $15,134,633 N/A 2020(1) 11,387,381 1,947,216 32,373 329,205 13,696,176 (9.5%) 2021(2) 12,920,533 2,233,052 35,092 759,710 15,948,387 16.4 2022(3) 11,545,187 1,887,079 28,604 628,762 14,089,633 (11.7) 2023(4) 10,464,100 1,789,337 24,332 307,930 12,585,699 (10.7)

(1) Decline in Fiscal Year 2019-20 due to nonpayment during COVID-19 pandemic, during which the City was prohibited from, and did not, shut off water for nonpayment. In addition, in Fiscal Year 2019-20, the City decreased water rates to just under Fiscal Year 2017 -18 levels. Revenues in Fiscal Year 2019 -20 include approximately $2.6 million received under the EPA Settlement. See the caption “—Water Quality and Treatment—EPA Settlement.” (2) Revenues in Fiscal Year 2020-21 include approximately $1.855 million received from the federal government under the EPA Settlement. See the caption “—Water Quality and Treatment—EPA Settlement.” Fiscal Year 2020-21 revenues also include approximately $577,276 from the State Water Resources Control Board under the American Rescue Plan Act. (3) Declines in Fiscal Year 2021-22 result from drought conservation measures imposed by the City and a reduction in the amount received under the EPA Settlement. In Fiscal Year 2021 -22 the City received approximately $700,000 under the EPA Settlement. See the caption “—Water Quality and Treatment—EPA Settlement.” (4) Declines in Fiscal Year 2022-23 result from low water demand for irrigation resulting from unusually high precipitation and a reduction in the amount received under the EPA Settlement: In Fiscal Year 2022-23 the City received approximately $7,000 under the EPA Settlement. The City expects to receive retroactive payments for Fiscal Year 2022 -23 under the EPA Settlement in Fiscal Year 2023-24 but the amount and timing of such payments is unknown. See the caption “—Water Quality and Treatment—EPA Settlement.” See Table 14 for assumptions relating to future payments under the EPA Settlement.

Source: The City.

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Largest Water System Customers
The following table shows the largest Water System customers for the Fiscal Year ended June 30, 2023, as determined by annual payments.

Table 5
City of Monterey Park
Ten Largest Water System Customers
Water Customer Customer Type Water Charges(2)
Percentage of Total
Revenues(2)
Garfield Medical Center(1) Commercial $ 112,800 0.70%
Atlantic Times Square II, LLC Commercial 101,697 0.63
Monterey Park 3600 LLC Commercial 100,915 0.63
Aespace America Inc Commercial 83,717 0.52
Moon Valley Nursery of Ca, Inc. Commercial 65,033 0.40 Garfield Estates Multi-Family 61,449 0.38
Monterey Park Hospital Commercial 55,599 0.35
Continental Homes Multi-Family 51,443 0.32
Emerald Hills LLC Commercial 45,441 0.28
Golden Age Village Multi-Family 39,776 0.25
Total $ 717,871 4.47%

(1) Reflects one property with multiple accounts.
(2) Based on the City’s audited financial statements for the Fiscal Year ended June 30, 2023.

Source: City.

Water System Rates and Charges
General. The Water System’s rates and charges are set by the City Council and are not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body. The City is, however, required to comply with the notice, hearing and majority protest provisions of Article XIIID of the State Constitution, which is popularly known as Proposition 218, as to Water Syst em rates and charges.

See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218” for further information with respect to Proposition 218.

The City Council determines the adequacy of the charge structure for water service in the service area after full consideration of expected operations, maintenance, capital costs and capital repayment obligations of the Water System. The City Council sets water rates and charges at a level that it determines is sufficient to pay all Operation and Maintenance Costs of the Water System, to make debt service payments and to maintain appropriate reserves for the Water System in compliance with the rate covenant set forth in the Installment Purchase Agreement.

The 2024 Project includes the replacement of all of the City’s existing water meters, which are past their useful life. The existing meters are Single -jet AMR meters. The new meters are expected to use ultrasonic technology, which holds its accuracy longer than standard meters. Additionally, the proposed replacement meters will provide instant data to the City and water users, including notification of leaks, which will reduce water waste. See the caption “THE 2024 PROJECT” for a further discussion regarding the 2024 Project.

Adopted Water Rates and Charges. On December 20, 2023, the City adopted rates (the “Adopted Rate Plan”) effective February 1, 2024 in accordance with the provisions of Proposition 218. The Adopted Rate Plan includes increases of up to 32% effective February 1, 2024, 8% effective July 1, 2024, 8% effective July 1, 2025, 7% effective July 1, 2026 and 8% effective July 1, 2027. On February, 21, 2024, the City Council approved the

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implementation of water rates and charges consistent with the Adopted Rate Plan, as follows: increases of 28% effective March 1, 2024, 8% effective July 1, 2024, 7% effective July 1, 2025, 7% effective July 1, 2026 and 6% effective July 1, 2027. The water rates described in the following tables reflect the implementation of the City Council’s February 21, 2024 direction. There can be no assurance that the City Council will not repeal or modify the rates that are set forth in the Adopted Rate Plan in the future or that the City’s ratepayers will not approve an initiative to repeal or modify any increase in water rates and charges approved by the City Council.

The Adopted Rate Plan includes a monthly service charge and a water consumption charge. The water rates for the Adopted Rate Plan are set forth below:

Table 6
City of Monterey Park
Monthly Water Service Charge
Meter Size
Monthly Service Charge
March 1, 2024 July 1, 2024 July 1, 2025 July 1, 2026 July 1, 2027 5/8” $ 19.48 $ 21.04 $ 22.51 $ 24.09 $ 25.53
3/4” 26.29 28.39 30.38 32.51 34.46
1” 39.91 43.10 46.12 49.34 52.30
1-1/2” 73.95 79.86 85.46 91.44 96.92
2” 114.80 123.98 132.66 141.95 150.47
3” 223.74 241.64 258.55 276.65 293.25
4” 346.29 373.99 400.17 428.19 453.88
6” 686.72 741.66 793.57 849.12 900.07
8” 1,095.23 1,182.85 1,265.65 1,354.25 1,435.50

Source: The City.

Table 7
City of Monterey Park
Monthly Water Consumption Rates Per Unit(1)
Water Use Type
Monthly Consumption Rate
March 1,
2024
July 1,
2024
July 1,
2025
July 1,
2026
July 1,
2027
Single Family Residential Tier 1
(0-10 units)
$3.17 $3.43 $3.67 $3.92 $4.16
Single Family Residential Tier 2
(11-16 units)

4.19 4.52 4.84 5.18 5.49
Single Family Residential Tier 3
(17 units and above)

7.92 8.55 9.15 9.79 10.38
All Other 3.95 4.27 4.57 4.89 5.18

(1) One unit equals 100 cubic feet or 748 gallons of water.

Source: The City.

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Meter Installation Fees. The City charges a connection fee for water meter installation to customers for connecting to the Water System. Current average connection fees by meter size are as follows:

City of Monterey Park
Water System Connection Fees
Meter Size
5/8” $ 0.00
3/4” & /1” fire 3,026.00
1” 5,448.00
1½” 8,474.00
2” 13,619.00
3” 24,211.00
4” 41,159.00
6” 84,739.00
8” 156,767.00

Comparison to Nearby Service Providers. The table below sets forth a comparison of the City’s typical water bill (monthly equivalent) for a single family residential user to those of certain nearby water purveyors.

Information for agencies other than the City is as of calendar year 2023 where available, while information for the City is as of the date of this Official Statement.

Table 8
City of Monterey Park
Water Rate Comparison
Water Service Provider
3/4” Meter Monthly
Fixed Rate(1)
Rate per
HCF(1)
Total Monthly
Water Bill(1)
City of Monterey Park (as of 3/1/2024) $26.29 $3.17 $57.99 City of Alhambra 34.90 2.73 62.20
City of Whitter 65.84 2.08 86.64
San Gabriel Valley Water Company 27.14 4.35 70.64
City of El Monte 37.15 3.64 73.55
City of Pasadena 49.32 1.44 63.72

(1) Based on 10 HCF of water use and ¾” meter size. All rates reflect first tier usage only for agencies that have a tiered rate structure, including the City.

Source: The City.

Water System Collection Procedures
The City is currently transitioning from a bimonthly to a monthly billing cycle for Water System customers. The transition is scheduled to be completed for all customers by the end of February 2024. At that time, a consolidated bill which includes wastewater and other utility charges is sent to customers every month for services rendered in the prior month. All accounts that remain unpaid on the 34th day following the delivery of an invoice incur a penalty of the lesser of 10% of the amount due or $10, and a notice is mailed to the billing and service address requiring payment within 48 days. If payment is not received by the 83rd day following the original delivery of an invoice, a two weeks-notice of shutoff is posted at the service address and a final notice is mailed to the billing address. If payment is not received by the second week following the posting of the shutoff notice, service is shut off. Accounts that have service discontinued without an alternate payment plan are not reconnected withou t full payment of the delinquent bill and all penalties, including a tagging fee, a reinstatement fee, and certain other charges.

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As of December 31, 2023, less than 3% of the Water System’s outstanding billings were delinquent, which is slightly higher than historical averages of approximately 2.81%. In January 2022, all delinquent accounts were brought to a zero balance as a result of payments from the State Water Resources Control Board COVID-19 Coronavirus State and Local Fiscal Recovery Fund, in the total amount of $577,276. This figure reflects an aging report and reflects the total of all bills not paid during prior Fiscal Years, including amounts shown as delinquent relating to the COVID -19 outbreak (during which the City did not shut off water for delinquent accounts through June 2023) and delinquencies being paid over time under customer payment plans.

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Future Water System Improvements
The City projects total capital improvements to the Water System of approximately $55.2 million during Fiscal Years 2023-24 through 2027-28, as reflected in the following table. Such capital improvements are expected to be financed using a combination of th e Bond proceeds and Revenues remaining after the payment of Operation and Maintenance Costs and Series 2024 Installment Payments.

Future Water Improvement Projects
Fiscal Year
2022-2023
Carryover
Balance
Fiscal Year
2023-24
Fiscal Year
2024-25
Fiscal Year
2025-26
Fiscal Year
2026-27
Fiscal Year
2027-28 Total*
Mira Valle Water Project - - $ 540,000 - - - $ 540,000 Monterey Park Golf Course Water Main Extension - - 630,000 - - - 630,000 Russell Street Reservoir Rehabilitation(1) $ 1,219,617 - 2,315,008 - - - 3,534,625 N. Atlantic Water Improvement(1) 1,678,928 - 545,922 - - - 2,224,850 Program Logic Controller Upgrade(1) 387,341 $ 612,659 - - - - 1,000,000 Water Meter Replacements(1)(2) 4,946,388 - 4,000,000 - - - 8,946,388 Water Main Replacement - Northeast (Phase 4)(1) - - 2,400,000 - - - 2,400,000 Water Main Replacement - Northeast (Phase 5) - - - $ 2,700,000 - - 2,700,000 De La Fuente St Mainline Replacement - - - 6,000,000 - - 6,000,000 Montechico Dr Mainline Replacement - - - 1,300,000 - - 1,300,000 Russell Booster Station(1) - - - 2,800,000 - - 2,800,000 Brockwell Ave Mainline Replacement - - - - $ 5,500,000 - 5,500,000 Replace Delta Settling Tanks - - - - 2,700,000 - 2,700,000 East Graves Ave Mainline Replacement - - - - - $ 670,000 670,000 Brightwood Booster Station Rehab - - - - - 1,900,000 1,900,000 Graylock Ave Mainline Replacement - - - - - 3,000,000 3,000,000 Pipeline Seismic Upgrade - - - - 200,000 200,000 Total* $ 8,232,274 $ 612,659 $10,430,930 $12,800,000 $ 8,200,000 $ 5,770,000 $ 46,045,863

* Totals may not sum due to rounding.
(1) Constitutes part of the 2024 Project. See the caption “THE 2024 PROJECT.” Source: The City.

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Projected Water System Supply
The following table shows the sources of supply for the Water System projected by the City for the current and next four Fiscal Years.

Table 9
City of Monterey Park
Projected Water Supply in Acre Feet
Fiscal Year
Ending
June 30
Main Basin
Groundwater
Imported
Water(2) Total
Percentage
Increase/
(Decrease)
2024 4,574 2,000 6,574 8.3%(1)
2025 6,702 0 6,702 1.9
2026 6,833 0 6,833 2.0
2027 6,965 0 6,965 1.9
2028 7,101 0 7,101 2.0

(1) See Table 1.
(2) The CGTS facility is operational and the City does not expect to purchase imported water in Fiscal Years 2024 -25 through 2027-28. See the caption “THE WATER SYSTEM—Water Quality and Treatment—City Water Treatment Facilities.” Source: The City.

Projected Water System Deliveries
The following table shows Water System deliveries projected by the City for the current and next four Fiscal Years. Water System deliveries can be affected by a number of factors, including connections to the Water System, State mandates and weather conditions. See the capti on “ —Projected Water System Connections” below.

Table 10
City of Monterey Park
Projected Water System Deliveries in Acre Feet
Fiscal Year
Ending
June 30 Residential Commercial Institutional Government Total Percentage
Increase/
(Decrease)
2024 4,598 1,503 14 130 6,245 8.4%
2025 4,809 1,588 16 155 6,568 5.2
2026 4,903 1,619 16 158 6,696 2.0
2027 4,997 1,651 17 161 6,826 1.9
2028 5,095 1,683 17 164 6,959 2.0

(1) See Table 2.

Source: The City.

Projected Water System Connections
The following table shows the number of retail connections to the Water System projected by the City for the current and next four Fiscal Years. The City is essentially built out and therefore the City does not

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anticipate a significant increase in future connections to the Water System during the project ion period, as reflected in the following table.

Table 11
City of Monterey Park
Projected Water System Connections
Connection Type
Fiscal Year
2023-24
Fiscal Year
2024-25
Fiscal Year
2025-26
Fiscal Year
2026-27
Fiscal Year
2027-28
Residential 12755 12760 12765 12770 12775
Commercial 876 877 878 879 880
Institutional 7 7 7 7 7
Government 112 112 112 112 112 Total 13,750 13,756 13,762 13,768 13,774
Percentage Increase/(Decrease) 0.0%(1) 0.0% 0.0% 0.0% 0.0%

(1) See Table 3.

Source: The City.

Projected Water System Sales Revenues
The following table shows the sales revenues of the Water System projected by the City for the current and next four Fiscal Years. The projections: (i) are based on the projected water deliveries that are described under the caption “— Projected Water System Deliveries;” and (ii) assume Water System rate increases in accordance with the Adopted Rate Plan, as described under the caption “—Water System Rates and Charges— General.” See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.”
Table 12
City of Monterey Park
Projected Water System Sales Revenues(1)
Fiscal Year
Ending
June 30 Residential Commercial Institutional Government Total Percentage
Increase/
(Decrease)
2024 $13,634,141 $2,860,932 $38,343 $745,689 $17,279,104 37.3%(2) 2025 16,171,679 3,583,327 58,539 886,394 $20,699,940 19.8 2026 17,358,787 3,931,240 63,001 914,748 $22,267,777 7.6 2027 18,692,584 4,259,185 67,813 938,571 $23,958,154 7.6 2028 19,944,952 4,513,872 72,330 1,014,177 $25,545,332 6.6

(1) Revenues from water sales in this table include estimated EPA Settlement payments of $1.5 million in Fiscal Year 2023 -24 (including amounts owed but not paid in prior Fiscal Years) and $600,000 in each of Fiscal Years 2024- 25 through 2027-28.

See footnote 1 to Table 14.
(2) See Table 4.

Source: City.

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WATER SYSTEM FINANCIAL INFORMATION
Available Cash
As of June 30, 2023, the Water System had approximately $68,201,905 in available cash and investments (including $47.351,228 in reserves and funds that are restricted for capital expenditures). As of March 12, 2024, the Water System had approximately $63,304,557.13 in available cash and investments (including $48,220,610 in reserves and funds that are restricted for capital expenditures).

Management Discussion of Historic Operating Results and Debt Service Coverage As discussed in Note 17 to the City’s audited financial statements for Fiscal Year 2019- 20, the City restated the net position of the business-type activities and major enterprise fund at July 1, 2019. The beginning net position of the business-type activities in the government-wide financial statements and of the Water Utility Enterprise Fund in the proprietary fund financial statements have been restated (decreased) by $413,040 to correct the duplicate reporting of a grant reimburseme nt receivable in the prior year. Table 13 reflects this restatement.

GASB Statement No. 34 requires consolidated government-wide statements with a single Statement of Net Assets and a single Statement of Activities. As a general rule, the assets and liabi lities of internal service funds will be eliminated, for the most part, in the process of consolidation. Any remaining balances that are not eliminated normally will be reported in the appropriate business-type or governmental. In accordance with this procedure, the net position of the Water Fund was adjusted (decreased) to reflect the consolidation to the Internal Service Fund by the following amounts: $4,005,039 as of June 30, 2019, $5,105,729 as of June 30, 2020, $5,778,933 as of June 30, 2021, $6,415,914 as of June 30, 2022, and $6,829,215 as of as of June 30, 2023.

In the City’s audited financial statement for the year ended June 30, 2023, the beginning net position of the Water Utility Enterprise Fund was restated to reallocate the deferred outflo ws and inflows of the City’s pension and OPEB costs and liabilities, resulting in a net increase in the beginning net position of $1,523,021.

Historical Operating Results and Debt Service Coverage
The following table is a summary of operating results of the Water System for the last five Fiscal Years.

These results have been derived from the audited financial statements of the City for each of the Fiscal Years reflected in the table, but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non-cash items and include certain other adjustments.

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Table 13
City of Monterey Park
Historical Water System Operating Results and Debt Service Coverage Fiscal Year Ended June 30

Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Fiscal Year
2021-22
Fiscal Year
2022-23(14)
Revenues
Charges for Services(1) $ 15,134,633 $ 13,696,176 $ 15,948,387 $ 14,089,633 $ 12,585,699(15) Meter Installations(2) 116,691 95,264 139,336 141,629 166,426 Interest Income 448,388 414,414 18,680 9,787 650,145
Other(3) 1,806,647 2,260,426 1,410 4 -
Total Revenues $ 17,506,359 $ 16,466,280 $ 16,107,813 $ 14,241,053 $ 13,402,270

Operation and Maintenance Costs
Administration(4) $ 3,789,425 $ 3,553,680 $ 3,349,317 $ 842,223 $ - Commercial—Water(5) 951,425 1,061,068 1,209,198 1,326,338 - Production—Water(6) 3,019,332 3,357,468 4,064,639 4,220,297 - Distribution—Water(7) 733,727 816,467 875,651 2,386,203 - Treatment Plant Operations(8) 3,808,671 3,592,854 4,119,961 2,768,689 - Operation(9) - - - - 11,860,266(16)
Salaries and Benefits(10) - - - - 3,526,785
General and administrative(11) - - - - 1,155,284

Total Operation and Maintenance Costs $ 12,302,580 $ 12,381,537 $ 13,618,766 $ 11,543,750 $ 16,108,297

Net Revenues $ 5,203,779 $ 4,084,743 $ 2,489,047 $ 2,697,303 $ (2,706,027)

Debt Service
2001 Installment Sale Agreement(12) $ 113,572 $ 113,318 $ 113,053 $ 112,778 $ 112,491 Total Debt Service $ 113,572 $ 113,318 $ 113,053 $ 112,778 $ 112,491

Debt Service Coverage 45.82x 36.05x 22.02x 23.92x (24.06x)(17)

Remaining Net Revenues $ 5,090,207 $ 3,971,425 $ 2,375,994 $ 2,584,525 $ (2,818,518)

Subordinate Debt Service
Siemens Loan(13) $ 626,450 $ 666,526 $ 683,882 $ 721,163 $ 761,199

(1) See the caption “THE WATER SYSTEM —Historical Water Sales Revenues” and Table 4. Fiscal Years 2020 -21, 2021-22, and 2022-23 include amounts received under the EPA Settlement and payments from the State Water Resources Control Board pursuant to the American Rescue Plan Act. See Table 4 and the caption “ —Water Quality and Treatment —EPA Settlement.” EPA Settlement Amounts for F iscal Years 2018-19 and 2019-20 are included in “Other.” See footnote 3, below. (2) Connection Fees. See the caption “THE WATER SYSTEM—Water System Rates and Charges.” (3) Amount for Fiscal Year 2018 -19 includes $1,254,987 received under the EPA Settle ment. Amount for Fiscal Year 2019 -20 includes $1,413,909 received under the EPA Settlement. EPA Settlement Amounts for Fiscal Years 2020 -21, 2021-22, and 2022 -23 are shown in “Charges for Services.” See footnote 1, above. Also see the caption “—Water Quality and Treatment—EPA Settlement.” (4) Provides the overall direction and administrative guidance for the Water Utility Division, including preparation of all required water quality and production reports. Reduction in Fiscal Year 2021-22 is due to accounting for Administration costs moving to the “Distribution—Water” category. Beginning in Fiscal Year 2022-23, Administration costs are reflected in the “General and Administrative” category. (5) Provides coordination with the Management Services Department, provides for approximately 80,249 meter readings, billing, and collection of revenue from approximately 13,643 water meters. The City’s consumers average 917 requests for service per month for routine problems including billing, leaks, water quality, general water service inquiries, backflow/cross-connection, and water conservation education. (6) Provides for producing, treating, and delivering to the City’s customers, potable water that meets or exceeds all water quali ty standards established by Federal and State regulatory agencies. The operation and inspection of 12 wells, 11 pumping stations, and 13 reservoirs (including two abandoned reservoirs) are provided by California Department of Public Health certified water treatment personnel to meet an average daily demand of approximately 8 million gallons of water. (7) Provides for the installation of new service taps, renewed water service taps, repair of water mains and services as necessar y, and the maintenance of water facilities. Within the distribution system there are 13,456 water accounts, 134 miles of distribution mains, approximately 1,063 fire hydrants, and 2,073 gate valves.

[Footnotes continue on following page.]

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[Footnotes continue from previous page.]

(8) Provides for the costs associated with water remediation activities for the Dual Barrier treatment facility, which is operated for use by Well Nos. 9, 12, and 15 for removal of volatile organic compounds not removed by the Well No. 12 Air Stripper; as indicated by the Environmental Protection Agency’s Interim Action Record of Decision (IROD) to help facilitate the removal of Perchlorate and Volatile Organic Compounds (VOC) in the groundwater from the San Gabriel Valley Water Basin; ground water remediation for Wells No. 1, No. 3, No. 10 and Fern Well for volatile organic compounds (VOC) and future contaminants that may be found in the system. This includes the operation and maintenance of the Granular Activated Carbon (GAC) treatment system for these wells. This treatment p lant has a capacity of 4,500 gallons per minute and requires continual scheduled maintenance and monitoring; provides for the costs associated with ground water remediation for Well No. 5 for volatile organic compounds that may be found in the groundwater. Decrease in Fiscal Year 2021-22 reflects vacant Water System staff positions (a reduction of five full-time and one part-time Water System staff compared with Fiscal Year 2020-21). (9) Operations and maintenance costs of the Water System, excluding salary and benefits and administration expenses. Includes the cost to purchase imported water in the amount of approximately $183,652 in Fiscal Year 2021-22, $1,028,170 in Fiscal Year 2022-23, and $1,840,160 in Fiscal Year 2023 -24. See Table 1 and the caption “THE WATER SYSTEM —Water Quality and Treatment— City Water Treatment Facilities.”
(10) Salary and benefits include the fully burdened direct cost for service of employees in the water division. (11) Expenses of doing business not readily identified with a particular activity including City Manager, City Attorney, Finance, Human Resources, Risk Management, Technology, and City Clerk’s functions. (12) The 2001 Installment Sale Agreement was prepaid paid in full on March 12 , 2024 and is no longer outstanding. See “THE CITY —No Outstanding Parity Obligations.”
(13) Reflects approximately 85% of the annual Siemens Lease payment, which is allocated to the Water System and paid from Net Revenues on a subordinate basis to the Bonds. See “THE CITY—Outstanding Parity and Subordinate Obligations.” (14) The City retained the Auditor to prepare the City’s audited financial statements for Fiscal Year 2022- 23. The City’s audited financial statements for the prior fiscal years reflected in this table were prepared by another auditor. The categorization of Operation and Maintenance Costs for Fiscal Year 2022-23 and in Table 14 reflect the categorization required by the Auditor for Fiscal Year 2022-23. (15) The City’s current utility billing system does not allow for historical reporting, only present day reporting. The accrual report for Fiscal Year 2022-23 was collected from the utility billing system in July of 2023, whereas in prior years the accrual report was collected in August. The City estimates that by collecting the accrual report one month earlier than in prior years, the Fiscal Year 2022 -23 Revenues are understated by approximately $600,000.
(16) Operations costs for Fiscal Year 2022-23 include approximately $3,185,593 in one-time emergency repairs to the Monterey Pass Road water main and approximately $1,090,678 for costs of redesign and testing at the CGTS facility. (17) The 2001 Installment Sale Agreement includes a covenant to set water rates and charges sufficient to produce Net Revenues of at least 120% of debt service in each Fiscal Year (the “2001 Rate Covenant”). The 2001 Rate Covenant was not met in Fiscal Year 2022 -23. Fiscal Year 2022-23 debt service coverage would be increased to -18.72 times if Revenues for Fiscal Year were increased by $600,000 to account for the missed accrual described in footnote 15, above.

Source: The City.

Projected Operating Results and Debt Service Coverage
Estimated projected operating results for the Water System for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances (including those set forth in the footnotes to the table), are set forth below. All of such assumptions are material in the development of the City’s financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary significantly from those presented in the forecast; such variations may be material and may have a material adverse impact on the Net Revenues available to pay the Series 2024 Installment Payments.

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Table 14
City of Monterey Park
Projected Water System Operating Results and Debt Service Coverage Fiscal Year Ending June 30

Fiscal Year
2023-24
Fiscal Year
2024-25
Fiscal Year
2025-26
Fiscal Year
2026-27
Fiscal Year
2027-28
Revenues
Charges for Services(1) $ 17,279,104 $ 20,699,940 $ 22,267,777 $ 23,958,154 $ 25,545,332 Meter Installations(2) 103,000 106,090 109,273 112,551 115,927 Interest Income 60,477 36,834 29,741 28,687 26,668
Other(3) 3,090 3,183 3,278 3,377 3,478
Total Revenues $ 17,445,671 $ 20,846,047 $ 22,410,069 $ 24,102,769 $ 25,691,405

Operation and Maintenance Costs
Operation(4) $ 12,104,281 $ 12,329,279 $ 12,997,390 $ 13,698,753 $ 14,436,327 Salaries and Benefits(5) 3,830,859 4,022,402 4,223,522 4,434,698 4,656,433 General and administrative(6) 1,286,000 1,324,580 1,364,317 1,405,247 1,447,404 Total Operation and Maintenance Costs $ 17,221,140 $ 17,676,261 $ 18,585,229 $ 19,538,698 $ 20,540,164

Net Revenue $ 224,531 $ 3,169,786 $ 3,824,840 $ 4,564,071 $ 5,151,241

Debt Service
2001 Installment Sale Agreement(7) $ 112,193 $ - $ - $ - $ - 2024 Installment Purchase Agreement*(8) - 1,225,356 1,229,500 1,229,500 1,228,750 Total Debt Service* $ 112,193 $ 1,225,356 $ 1,229,500 $ 1,229,500 $ 1,228,750

Debt Service Coverage* 2.00x 2.59x 3.11x 3.71x 4.19x

Remaining Net Revenues* $ 112,338 $ 1,944,430 $ 2,595,340 $ 3,334,571 $ 3,922,491

Subordinate Debt Service
Siemens Loan(9) $ 804,774 $ 850,949 $ 888,341 $ 928,551 $ 970,447 San Gabriel Valley WD Loan(10) $ - $ 400,000 $ 400,000 $ 400,000 $ 400,000

* Preliminary, subject to change.
(1) See the caption “THE WATER SYSTEM—Projected Water Sales Revenues.” Projected Charges for Service reflect water charges at rates in effect through February 29, 2024 and increased rates implemented at the direction of the City Council as of March 1, 2024, and assuming rate increases as described under the caption “THE WATER SYSTEM— Water System Rates and Charges—Adopted Water Rates and Charges.” Amounts reflected in Charges for Service also include estimated EPA Settlement payments of $1.5 million in Fiscal Year 2023-24 (including amounts owed but not paid in prior Fiscal Years) and $600,000 in each of Fiscal Years 2024-25 through 2027-28. See the caption “—Water Quality and Treatment—EPA Settlement.”
(2) Connection Fees. See the caption “THE WATER SYSTEM—Water System Rates and Charges.” (3) Other Revenues includes amounts estimated to be received from sales of surplus Water System equipment. (4) Operations and maintenance costs of the Water System, excluding salary and benefits and administration expense s. Assumes an average annual increase in the cost of services and supplies of approximately 5.5%. (5) Salary and benefits include the fully burdened direct cost for service of employees in the water division. Estimated cost of salaries and benefits is based on the active MOUs, with annual increases of approximately 5% to account for cost of living adjustments and step increases. (6) Expenses of doing business not readily identified with a particular activity including City Manager, City Attorney, Finance, Human Resources, Risk Management, Technology, and City Clerk’s functions. (7) The $673,067.57 remaining balance of the 2001 Installment Sale Agreement was prepaid paid in full on March 12 , 2024 and is no longer outstanding. See “THE CITY —No Outstanding Parity Obligations.” The amount shown for Fiscal Year 2023 -24 is the Fiscal Year debt service requirement and does not reflect the prepayment amount. (8) Series 2024 Installment Payments under the Installment Purchase Agreement are pledged to payment of t he Bonds. See the caption “SECURITY FOR THE BONDS.”
(9) Reflects approximately 85% of the annual Siemens Lease payment, which is allocated to the Water System and paid from Net Revenues on a subordinate basis to the Bonds. See “THE CITY—Outstanding Parity and Subordinate Obligations.” (11) Payments under the 2021 Loan Agreement, which are paid from Net Revenues on a subordinate basis to the Bonds. Payments commence in Fiscal Year 2024-25. See “THE CITY—Outstanding Parity and Subordinate Obligations.” Source: The City.

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Employees’ Retirement Plan – CalPERS
This caption contains certain information relating to CalPERS. The information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The City and the Underwriter have not independently verified the information provided by CalPERS and neither makes any representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.

The annual comprehensive financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are forward-looking statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

Plan Description. All qualified permanent and probationary employees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple -employer defined benefit pension plans (the “Plans”) administered by CalPERS. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website via http://www.calpers.ca.gov.

Water System Share of CalPERS Plan. Salary and benefit costs of the Water System include funding of retirement benefits for employees assigned to the Water System who, as City employees, participate in the City’s Miscellaneous CalPERs Plan. City employees assigned to the Water System constitute approximately 2% of all City employees and payments made by the City to CalPERS from Revenues amounted to approximately $254,723.10 in Fiscal Year 2022- 23, or approximately 3.84% of the City’s total payments to CalPERS in 2022-23. The information under this caption “ —Employees’ Retirement Plan – CalPERS” describes the City’s overall Safety and Miscellaneous CalPERS plans; however, only the portion of the Miscellaneous CalPERS plan attributable to City employees assigned to the Water System is payable from Revenues.

Benefit Provided. CalPERS provides retirement and disability benefits, annual cost -of-living adjustments, and death benefits to plan members and beneficiaries. A classic CalPERS member or PEPRA Safety member becomes eligible for Service Requirement upon attainment of age 55 with at least 5 years of credited service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 62 with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay. Retirement benefits for classic miscellaneous employees are calculated as 2% to 2.7% of the average final 12 months of compensation.

Retirement benefits for PEPRA miscellaneous employees are calculated as 2% of the average final 36 months compensation. Retirement benefits for classic safety employees are calculated as 3% of the average final 12 months compensation. Retirement benefits for PEPRA safety employees are calculated as 2.7% of the average final 36 months of compensation.

A participant is eligible for non-industrial disability retirement if he or she becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non -industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service.

Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefit to safety employees. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation.

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An employee’s beneficiary may receive the basic death benefit if the employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee’s survivor who is eligible for any other pre -retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee’s accumulated contributions, where interest is currently credited at 7.15 percent per year, plus a lump sum in the amount of one month’s salary for each completed year of current service, up to a maximum of six months’ salary.

For purposes of this benefit, one month’s salary is define d as the member’s average monthly full -time rate of compensation during the 12 months preceding death.

Upon the death of a retiree, a one- time lump sum payment of $5,000 will be made to the retiree’s designated survivor(s), or to the retiree’s estate.

Benefit terms provide for annual cost -of-living adjustments to each employee’s retirement allowance.

Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent.

As of June 30, 2021, the valuation date, the following employees were covered by the benefit terms.

Plans
Miscellaneous Safety
Active employees 177 120
Transferred and terminated employees 354 103
Retired employees and beneficiaries 359 251
Total 890 484

Source: City Audited Financial Statements for Fiscal Year 2022-23.

Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and will be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. City contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contributions requirements are classified as plan member contributions. The liability for governmental activities is primarily liquidated from the General Fund and the liability for business -type activities is liquidated from the applicable enterprise funds.

Funding Policy. Required employer and employee contributions are determined by CalPERS based upon various actuarial assumptions which are revised annually. The City currently funds the normal pension costs, which are determined by CalPERS using the Entry Age Normal Cost Method, as well as an amortization of the City’s unfunded accrued liability.

Beginning with Fiscal Year 2017-18, CalPERS collects employer contributions towards the unfunded liability as a dollar amount instead of the prior method of using a contribution rate. The City funded such amounts in Fiscal Years 2017 -18 through 2022- 23 and currently expects to do s o in Fiscal Year 2023 -24.

Pursuant to the various Memorandums of Understanding (“MOUs”) with the City’s employee bargaining units, employees who participate in CalPERS pay 100% of their required employee contributions. The following tables show the City’s contribution rates, as determined by CalPERS for Fiscal Years 2017-18 to 2024-25.

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On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date. The information contained in this Official Statemen reflects the issuance of such pension obligation bonds as additional discretionary payments by the City.

Table 15
City of Monterey Park
CalPERS Contribution Rates
Fiscal Year 2017-18 to 2023-24
Miscellaneous Plan of the City of Monterey Park
Fiscal Year Employer Normal Cost
Unfunded Liability
Contribution
Additional
Discretionary
Payments
2017–18 10.028% $ 2,317,801 --
2018–19 10.286 2,661,702 $ 603,700
2019–20 10.841 3,025,584 757,873
2020–21 11.772 3,299,865 41,146,631(1)
2021–22 11.140 3,652,874 --
2022-23 10.700 181,144 --
2023-24 12.290 0 --
2024-25 12.250 393,664 --

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: CalPERS Miscellaneous Plan for the City of Monterey Park Annual Valuation Report as of June 30, 2022.

Safety Plan of the City of Monterey Park
Fiscal Year Employer Normal Cost
Unfunded Liability
Contribution
Additional
Discretionary
Payments
2017–18 17.181% $ 2,591,114 --
2018–19 17.823 3,214,037 --
2019–20 18.883 3,931,364 --
2020–21 19.821 4,473,666 $64,398,586(1)
2021–22 19.800 4,825,723 --
2022-23 19.440 13,209 --
2023-24 20.870 0 --
2024-25 20.800 347,780 --

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: CalPERS Safety Plan for the City of Monterey Park Annual Valuation Report as of June 30, 2022.

The required employer contributions for Fiscal Year 2024- 25 were determined as part of the June 30, 2022, actuarial valuations using the entry age actuarial cost method. See “—CalPERS Plan Actuarial Methods” below for a description of CalPERS actuarial assumptions.

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Funded Status. The following tables show the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll for the City’s Miscell aneous Plan and Safety Plan.

Table 16
City of Monterey Park
CalPERS Plans Funded Status
Miscellaneous Plan of the City of Monterey Park
Valuation
Date
Accrued
Liability
Market Value
of Assets
Unfunded
Accrued Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/13 $102,009,772 $ 71,523,485 $ 30,486,287 70.1% $10,396,777 06/30/14 111,609,312 82,816,954 28,792,358 74.2 11,080,205 06/30/15 116,598,083 83,637,470 32,960,613 71.7 11,618,402 06/30/16 122,973,430 83,051,483 39,921,947 67.5 11,402,975 06/30/17 130,214,252 91,567,275 38,646,977 70.3 10,934,885 06/30/18 141,096,398 98,551,511 42,544,887 69.8 11,795,003 06/30/19 146,994,150 103,674,249 43,319,901 70.5 11,795,682 06/30/20 151,561,504 107,269,345 44,292,162 70.8 11,980,271 06/30/21 158,220,722 173,696,550 (15,475,828)(1) 109.8 11,331,367 06/30/22 165,179,985 155,048,385 10,131,600 93.9 10,893,283

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: CalPERS Miscellaneous Plan for the City of Monterey Park Annual Valuation Report as of June 30, 2022.

Safety Plan of the City of Monterey Park
Valuation
Date
Accrued
Liability
Market Value
of Assets
Unfunded
Accrued Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/13 $159,897,765 $122,234,753 $ 37,663,012 76.4% $11,077,952 06/30/14 174,578,515 139,395,546 35,182,969 79.8 11,205,479 06/30/15 181,456,621 138,488,204 42,968,417 76.3 11,258,518 06/30/16 189,787,783 135,246,032 54,541,751 71.3 11,502,280 06/30/17 203,696,957 146,662,354 57,034,603 72.0 12,055,535 06/30/18 220,781,074 154,992,334 65,788,740 70.2 13,043,559 06/30/19 227,241,185 161,913,577 65,327,608 71.3 13,075,259 06/30/20 235,646,817 166,504,712 69,142,105 70.7 12,488,188 06/30/21 247,337,027 272,109,279 (24,772,252)(1) 110.0 13,634,310 06/30/22 257,419,187 244,546,890 12,872,297 95.0 14,278,731

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: CalPERS Safety Plan for the City of Monterey Park Annual Valuation Report as of June 30, 2022.

CalPERS Plan Actuarial Methods . The staff actuaries at CalPERS prepare annually an actuarial valuation which is typically delivered in the time period from July through October of each year (thus, the actuarial valuation dated July 2023 (the most recent valuation provided to the City) covered CalPERS’ Fiscal Year ended June 30, 2022). The actuarial valuations express the City’s required contribution which the City must contribute in the fiscal year immediately following the fiscal year in which the actuarial valuation is prepared (thus, the City’s contribution requirement derived from the actuarial valuation as of June 30, 2022 affects the City’s Fiscal Year 2024-25 required contribution). CalPERS rules require the City to implement the actuary’s recommended rates.

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The annual actuarially required contribution rates consist of two components: the normal cost and the unfunded accrued liability (“UAL”). The normal cost represents the actuarial present value of benefits that CalPERS will fund under the CalPERS plans that are attributed to the current year, and the accrued liability (the “AAL”) represents the actuarial present value of benefits that CalPERS will fund that are attributed to past years.

The UAL represents an estimate of the actuarial shortfall between actuarial value of assets on deposit at CalPERS and the present value of the benefits that CalPERS will pay under the CalPERS plans to retirees and active employees upon their retirement. The UAL is based on several assumptions such as, among others, the expected rate of investment return, average life expectancy, average age of retirement, inflation, salary increases and occurrences of disabilities. In addition, the UAL includes certain actuarial adjustments such as, among others, the actuarial practice of smoothing losses and gains over multiple years (which is described in more detail below). As a result, the UAL may be considered an estimate of the unfunded actuarial present value of the benefits that CalPERS will pay under the CalPERS plans to retirees and active employees upon their retirement and not as a fixed expression of the liability the City owes to CalPERS under its CalPERS plans.

The CalPERS Chief Actuary considers various factors in determining the assumptions to be used in preparing the actuarial report. Demographic assumptions are based on a study of the actual history of retirement, rates of termination/separation of employment, years of life expectancy after retirement, disability, and other factors. This experience study is generally done once every four years. The most recent experience study was completed in 2021 in connection with the preparation of actuarial recommendations by the CalPERS Chief Actuary.

On June 25, 2012, the Governmental Accounting Standards Board approved GASB Statement No. 68 (“GASB 68”) with respect to pension accou nting and financial reporting standards for state and local governments and pension plans. GASB 68 states that, for pensions within the scope of the statement, a cost - sharing employer that does not have a special funding situation is required to recognize a net pension liability, deferred outflows of resources, deferred inflows of resources related to pensions, and pension expense based on its proportionate share of the net pension liability for benefits provided through the pension plan. While the new accounting standards change financial statement reporting requirements, they do not impact funding policies of the pension systems. On November 25, 2013 the Governmental Accounting Standards Board issued GASB Statement No. 71, which amended GASB 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. The audited financial statements of the City for Fiscal Year 2021-22 attached hereto as Appendix A reflects the application of the GASB 68 and GASB 71. GASB 68 is a change in accounting reporting standards but it does not change the City’s CalPERS plan funding obligations.

Net Pension Liability. The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

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Actuarial Cost Method Entry-Age Normal in accordance with the requ irement of GASB Statement No. 68
Actuarial Assumptions:

Discount Rate 6.9%
Inflation 2.3%
Salary Increases Varies by entry age and service.

Mortality Rate Table The mortality table was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019.

Pre-retirement and Post -retirement mortality rates include generational mortality improvement using 80% of Scale MP - 2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

Post Retirement Benefit Increase Contract COLA up to 2.3% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.3%
thereafter.

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The discount rate used to measure the total pension liability was 6.9 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long -term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building- block method in which expected future real rates of return (expected retur ns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long- term expected rate of return, CalPERS took into account both short -term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points.

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Asset Class(1)
Assumed Asset
Allocation
Real Return
Years
1 – 10(1) (2)
Global Equity - Cap-weighted 30.00% 4.54%
Global Equity - Non-cap-weighted 12.00 3.84
Private Equity 13.00 7.28
Treasury 5.00 0.27
Mortgage-backed Securities 5.00 0.50
Investment Grade Corporates 10.00 1.56
High Yield 5.00 2.27
Emerging Market Debt 5.00 2.48
Private Debt 5.00 3.57
Real Assets 15.00 3.21
Leverage (5.00) (0.59)
Total 100.00%

(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study.

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The following tables show the changes in net pension liability recognized over the measurement period ended June 30, 2022.

Miscellaneous Plan
Increase (Decrease)
Total
Pension
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net Pension
Liability
(Asset)
(c) = (a) - (b)
Balance at June 30, 2021 (Valuation Date) $ 153,625,934 $ 173,704,489 $ (20,078,555) Changes Recognized for the Measurement Period:

Service cost 2,277,310 -- 2,277,310
Interest on the total pension liability 10,590,605 -- 10,590,605 Changes of Assumptions 4,675,002 -- 4,675,002
Differences between expected and actual experience (1,948,123) -- (1,948,123) Contributions from the employer -- 1,281,326 (1,281,326) Contributions from employees -- 1,068,666 (1,068,666)
Net investment income -- (12,885,155) 12,885,155
Benefit payments, including refunds of employee contributions (8,008,871) (8,008,871) -- Administrative expenses -- (108,208) 108,208
Net Changes during July 1, 2021 to June 30, 2022 $ 7,585,923 $ (18,652,242) $ 26,238,165 Balance at June 30, 2022 (Measurement Date) $ 161,211,857 $$155,052,247 $ $6,159,610

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

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Safety Plan
Increase (Decrease)
Total
Pension
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net Pension
Liability
(Asset)
(c) = (a) - (b)
Balance at June 30, 2021 (Valuation Date) $ 240,619,835 $ 272,121,603 $ (31,501,768) Changes Recognized for the Measurement Period:

Service cost 4,273,500 -- 4,273,500
Interest on the total pension liability 16,606,680 -- 16,606,680 Changes of assumptions 6,196,586 -- 6,196,586
Differences between expected and actual experience (2,515,151) -- (2,515,151) Contributions from the employer -- 2,584,424(1) (2,584,424) Contributions from employees -- 1,804,252 (1,804,252)
Net investment income -- (20,264,806) 20,264,806
Benefit payments, including refunds of employee contributions (11,523,017) (11,523,017) -- Administrative expenses -- (169,516) 169,516
Net Changes during July 1, 2021 to June 30, 2022 $ 13,038,598 $ (27,568,663) $ 40,607,261 Balance at June 30, 2022 (Measurement Date) $ 253,658,433 $ 244,552,940 $ 9,105,493

(1) On February 16, 2021, the City issued $106,335,000 of pension obligation bonds which was used to pay the City’s total unfunded liability to CalPERS as of such date.

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The following table presents the net pension liability of the Plan as of June 30, 2021, calculated using the discount rate of 7.15%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15%) or 1 percentage-point higher (8.15%) than the current rate.

Miscellaneous Safety
1% Decrease 5.9% 5.9%
Net Pension Liability $27,218,134 $43,682,176

Current Discount Rate 6.9% 6.9%
Net Pension Liability $6,159,610 $9,105,493

1% Increase 7.9% 7.9%
Net Pension Liability $(11,216,859) $(19,251,003)

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

For the year ended June 30, 2023, the City recognized pension expense of $2,605,499 and $3,131,548, for the Miscellaneous and Safety plan, respectively.

For additional information relating to the City’s CalPERS plans, including certain actuarial assumptions of CalPERS and deferred outflows and deferred inflows of resources related to the CalPERS Plans, see Note 10 to the City’s financial statements set forth in Appendix A.

Employees’ Retirement Plan – Massachusetts Mutual Retirement Plan (MMRP) Plan Description . Certain miscellaneous employees are covered by a retirement plan through the Massachusetts Mutual Life Insurance Company (“MMRP”), a single-employer pension plan. All miscellaneous employees who were employed prior to April 1, 1976 participated in the MMRP . Miscellaneous employees under the age of 55 joined CalPERS on and after April 1, 1976. However, these employees still remain vested under the MMRP and are eligible to receive retirement benefits at the time of retirement. Miscellaneous

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employees over the age of 55 (on or before April 1, 1976) could not participate in CalPERS and remain wholly in the MMRP. The City does not issue a publicly available financial report for the MMRP.

Benefits Provided. The MMRP was amended in 1976 to provide equivalent retirement benefits to all miscellaneous employees, whether totally vested in CalPERS, totally vested in the MMRP or partially vested in both plans. Eligibility requirements for the MMRP are the same as those for CalPERS.

Employee Covered by Benefit Terms . MMRP is a closed plan. As of June 30, 2022, there are 38 individuals in the plan, all of whom are no longer employed by the City or are currently participating in CalPERS.

Contributions. MMRP is a contributory plan deriving funds from employee contribut ions as well as from employer contributions and earnings from investments. Employer contributions were based upon the actuarial methods and assumptions and there were no current year employee contributions required.

Net Pension Liability . For the measur ement period ended June 30, 2023, the total MMRP pension liability was determined by rolling forward the June 30, 2021 total pension liability to June 30, 2023 based on actual benefit payments. The total MMRP pension liability was based on the following actuarial methods and assumptions.

Contribution Policy City contributes full ADC
Actuarial Assumptions:

Discount Rate 3.65% at June 30, 2023 based on the Bond
Buyer 20-bond Index at 6/30/23

3.54% at June 30, 2022 based on the Bond
Buyer 20-bond Index at 6/30/22
Long-Term Expected Rate of Return on Assets 3.00% at June 30, 2023 (55% confidence level)

3.00% at June 30, 2022 (55% confidence level)
Municipal Bond Rate 3.65% at June 30, 2023 (Bond Buyer 20 Index)

3.54% at June 30, 2022 (Bond Buyer 20 Index)
General Inflation 2.50% annually
Investment Rate of Return 7.65%
Mortality CalPERS 1997-2015 Experience Study
Mortality Improvement Mortality projected fully generational with Scale MP-2021
Cost of Living Adjustment/PPPA 2.00%
Asset Fair Market Value Fair value factor of 89.274% as of 6/30/2023 supplied by the City

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

Plan assets are currently invested in Mass Mutual general investment account. Expected long term return on assets was 3.25%% for June 30, 2023 valuation and rounded to nearest 0.25%.

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The following table shows the changes in net pension liability recognized over the measurement period ended June 30, 2022.

Increase (Decrease)

Total
Pension
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net Pension
Liability
(Asset)
(c) = (a) - (b)
Balance at June 30, 2021 $ 4,361,041 $ 3,988,776 $ 372,265 Changes Recognized for the Measurement Period:

Service cost -- -- --
Interest on the total pension liability 147,660 -- 147,660 Changes in benefit terms -- -- --
Changes in assumptions (32,713) -- (32,713)
Differences between expected and actual experience -- -- -- Plan to plan resource movement -- -- --
Contributions from the employer -- -- --
Contributions from employees -- -- --
Net investment income -- 66,372 (66,372)
Benefit payments, including refunds (379,706) (379,706) -- Administrative Expense -- (10,140) 10,140
Net Changes during July 1, 2022 to June 30, 2023 $ (264,759) $ (323,474) $ 58,715 Balance at June 30, 2023 (Measurement Date) $ 4,096,282 $ 3,665,302 $ 430,980

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The following table presents the net pension liability of the MMRP as of the June 30, 2023 measurement date, calculated using the discount rate of 3.65%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage- point lower (2.65%) or 1 percentage-point higher (4.65%) than the current rate.
1% Decrease 2.65%
Net Pension Liability $749,599

Current Discount Rate 3.65%
Net Pension Liability $430,980

1% Increase 4.65%
Net Pension Liability $156,655

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

For additional information relating to the City’s MMRP plan, including deferred outflows and deferred inflows of resources relating to the plan, see Note 10 to the City’s financial statements set forth in Appendix A.

Employees’ Retirement Plan – Defined Contribution Pension Plan.

A defined contribution pension plan provides pension benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined instead of specifying the amount of benefits the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account and the returns earned on investments of the contributi ons. Part -time, nonbenefited, nonpersable employees of the City must participate in the plan. During the year ended June 30, 2023, 108 part -time employees participated in the plan. All contributions to the plan vest immediately. An employee who leaves the City is entitled to all contributions, including contributions made by the City, and earnings applied to the individual’s account through the date of separation, less legally required income tax withholding. Participants

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that become full-time employees and enter the CalPERS retirement plan will have the amount in their individual accounts transferred from this plan into a Section 457, deferred compensation plan, subject to all the rules governing Section 457 plans, including substantial penalties for withdrawal prior to the age of normal retirement.

Contribution levels into the deferred compensation plan were established by City Council resolution at 4% and

3.5% for the City and nonbenefited, nonpersable part -time employees, respectively. During the y ear, the City contributed $31,818 to the plan.

Other Post-Employment Benefits
Defined Benefit Plan Description . The City provides postretirement medical insurance benefits, in accordance with contractual provisions of the various Memoranda of Understanding with the City’s recognized employee organizations, to all vested employees who retire with CalPERS pension benefits immediately upon termination of employment from the City (the “OPEB Plan”). The City has established a California Employers’ Retiree Be nefit Trust (the “CERBT”), an agent -multi-employer trust for which CalPERS serves as trustee.

Eligible retirees and dependents may elect lifetime coverage through the City’s healthcare plans. The City makes contributions towards the retiree’s premium up to specified caps that vary depending on bargaining unit and whether the participant has more or less than 20 years of service. Retirees pay the portion of premium not paid by the City. In addition to the direct City contribution, retirees also receive p re-65 benefits that are subsidized as they are eligible to receive coverage based on blended (active and retiree) premium rates instead of normally higher retiree rates (implied subsidy). Members are eligible for the following benefits.

General Management Safety
Benefit Types Provided Medical Only Medical Only Medical Only Duration of Benefits Lifetime Lifetime Lifetime
Minimum Age 50 50 50
Dependent Coverage Yes Yes Yes
Required Years of Service 5 Years 5 Years 5 Years
City Contribution % 100% 100% 100%
City Cap:

Calendar Year 2021 $340-$435 per month $355-$1,375 $346-$650 Calendar Year 2022 $340-$435 per month $355-$1,375 $346-$650

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

Employees Covered. As of June 30, 2022, the following current and former employees are covered by the benefit terms under the plan.

Inactive employees or beneficiaries currently receiving benefits 236 Inactive employees or beneficiaries entitled to but not yet receiving benefits 60 Active employees 236
Total 532

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

Water System Share of OPEB Plan. Salary and benefit costs of the Water System include funding of other post-employment benefits for employees assigned to the Water System who, as City employees, participate in the City’s OPEB Plan. City employees assigned to the Water System constitute approximately 0.07% of all City employees and payments made by th e City pursuant to the OPEB Plan from Revenues amounted to approximately $79,621 in Fiscal year 2022-23, or approximately 0.08% of the City’s total OPEB Plan payments in 2022- 23. The information under this caption “ —Other Post-Employment Benefits” describes the City’s overall OPEB Plan; however, only the portion of the OPEB Plan attributable to City employees assigned to the Water System is payable from Revenues.

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Contributions. The contribution requirements are established and amended by the City. Employe r contributions are determined through an annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

For Fiscal Year 2022 -23, the City’s contributions to the plan included $1,000,000 to the irrevocable CERBT, an implied subsidy of $304,000, $17,344 in administrative expenses and $1,286,464 in cash benefit payments, resulting in total contributions of $2,607,808. The contributions to the OPEB Plan are generally made from the General Fund.

Funding Policy. There is no statutory requirement for the City to prefund its OPEB Plan obligation and the City has not prefunded its OPEB Plan obligation. The contribution requirements are established and amended by the City. The contribution is based on pay-as-you-go financing requirements.

Governmental Accounting Standards Board published Statement No. 45 (“GASB 45”), requiring governmental agencies that fund post-employment benefits on a pay-as-you-go basis, such as the City, to account for and report the outstanding obligations and commitments related to such post -employment benefits in essentially the same manner as for pensions.

In June 2015, GASB published Statement No. 75 (“GASB 75”), which replaced the requirements under GASB No. 45. The provisions in GASB 75 became effective for Fiscal Years beginning after June 15, 2017.

The primary objective of GASB 75 is to improve accounting an d financial reporting by state and local governments for postemployment benefits other than pensions (i.e. OPEB). GASB 75 requires that most changes in the net OPEB liability be included in OPEB expense in the period of the change. GASB 75 also requires certain descriptive information to be included in the notes to a public agency’s audited financial statements as well as additional supplementary information such as sources of changes in net OPEB liability and the components of the net OPEB liability. The City implemented GASB 75 with its audited financial statements for Fiscal Year 2019-20.

Actuarial Assumptions. For the measurement period ended June 30, 2021, the City’s total OPEB liability was determined in a June 30, 2021 actuarial accounting valuation. A summary of the principal assumptions and methods used to determine the net OPEB liability is shown below.

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Actuarial Valuation Date June 30, 2021
Contribution Policy Pre-funded through CERBT with Strategy 1 asset allocation.

Actuarial Assumptions:

Discount Rate and Long-Term Expected
Rate of Return on Assets

6.25% at June 30, 2022 and June 30, 2021
Expected City contributions projected to keep sufficient plan assets to pay all benefits from trust
Inflation 2.50% annually
Salary Increase Aggregate - 2.75% annually, Merit - CalPERS 2000-2019 Experience Study
Mortality, Retirement, Disability,
Termination CalPERS 2000-2019 experience study
Medical Trend Non-Medicare - 6.50% for 2023, decreasing to an ultimate rate of 3.75% in 2076
Medicare (Non-Kaiser) - 5.65% for 2023, decreasing to an ultimate rate of 3.75% in 2076
Medicare (Kaiser) - 4.60% for 2023, decreasing to an
ultimate rate of 3.75% in 2076
PEMHCA Minimum Increases 4.00% annually
Cap Increases All except Executive Management, CM and Elected Officials: 0% until the end of current MOU, 5% every 3
years thereafter
Executive Management, CM and Elected Officials: 5% per
year
Participation at Retirement Tier 1: 90%
PEMHCA Minimum Only: 80%

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The discount rate used to measure the total OPEB liability was 6.25%. The projection of cash flows used to determine the discount rate assumed that the City’s contributi ons will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long- term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

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Changes in the Net OPEB Liability. The changes in the net OPEB liability for the measurement period ending June 30, 2021 are as follows.

Increase (Decrease)
Total
OPEB Liability
Plan Fiduciary
Net Position
Net OPEB
Liability (Asset)
Balance at June 30, 2021
(Measurement Date) $ 32,884,222 $ 13,189,701 $ 19,694,521 Changes in the Year:

Service cost 757,555 -- 757,555
Interest on the total OPEB liability 2,050,988 -- 2,050,988 Contributions - employer -- 2,667,920 (2,667,920)
Net investment income -- (1,924,920) 1,924,920
Administrative expenses -- (19,451) 19,451
Benefit payments (1,651,920) (1,651,920) --
Net Changes during July 1, 2021 to June
30, 2022 $ 1,156,623 $ (928,371) $ 2,084,994
Balance at June 30, 2022
(Measurement Date) $ 34,040,845 $ 12,261,330 $ 21,779,515

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The following tables present the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1 -percentage point lower or 1 -percentage point higher than the current discount rate.
1% Decrease
(5.25%)
Discount Rate
(6.25%)
1% Increase
(7.25%)
Net OPEB Liability $26,392,956 $21,779,515 $17,995,425

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage point lower. 1% Decrease Current Trend 1% Increase
Net OPEB Liability $19,722,148 $21,779,515 $24,014,143

Source: City of Monterey Park Audited Financial Statements for Fiscal Year 2022-23.

For additional information relating to the City’s OPEB Plan, including deferred outflows and resources and deferred inflows of resources related to the OPEB Plan, see Note 12 to the City’s financial statements set forth in Appendix A.

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CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB
Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority, special district or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978- 79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or (c) the voters of the entity approve a change in the limit for a period of time not to exceed four years.

Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent that such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts that are permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

Certain expenditures are excluded from the appropriations limit, including payments of indebtedness that were existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters, and payments that are required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly.

The City is of the opinion that its charges for Water Service do not exceed the costs that it reasonably bears in providing such service and therefore are not subject to the limits of Article XIIIB. See the caption “SECURITY FOR THE BONDS —Rate Covenant” for a description of the City’s covenant to set rates and charges for the Water Service.

Proposition 218
General. An initiative measure entitled the “Right to Vote on Taxes Act” (“ Proposition 218”) was approved by the voters of the State at the November 5, 1996 general election. Proposition 218 added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of Proposition 218 prepared by the State Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.”
Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property -related service.” A “property -related service” is defined as “a public service having a direct relationship to property ownership.” Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership.

Article XIIID requires that any agency which imposes or increases any property -related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increa sed if a majority of owners of the identified parcels file written protests against it. As a

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result, because fees for water service are a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fees or charges may be limited by a majority protest.

In addition, Article XIIID includes a number of limitations that are applicable to existing fees and charges, including provisions to the effect that: (a) revenues that are derived from the fee or charge may not exceed the funds which are required to provide the property-related service; (b) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; (c) the amount of a fee or charge that is imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and (d) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted.

Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water and wastewater services that are “primarily based on the amount consumed” (i.e., metered water or wastewater rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The State Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the “ Bighorn Case”), however, that fees for ongoing water service through an existing connection were property -related fees and charges. The State Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The City complies with the notice, hearing and protest procedures in Article XIIID, as further explained by the State Supreme Court in the Bighorn Case, with respect to water rate increases.

On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the “ SJC Case”) upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage, including the capital costs of improvements to provide additional increments of water. The opinion included a finding that the City of San Juan Capistrano did not ma ke any attempt to calculate the actual costs of providing water at various tier levels. The City’s current residential water rate structure includes tiered rates based on usage. The City has reviewed the SJC Case decision and does not expect the decision to affect its rate structure. The City believes that its current water rates comply with the requirements of Proposition 218 because they are tied to the cost of service and capital improvements, and expects that any future water rate increases will comp ly with Proposition 218’s procedural and substantive requirements to the extent applicable thereto.

Article XIIIC. Article XIIIC provides that the initiative power may 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 is applicable to all local governments. Article XIIIC does not define the terms “local tax,” “assessment,” “fee” or “charge,” so it was unclear whether the definitions set forth in Article XIIID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the State Supreme Court noted that the decision did not address whether an ini tiative to reduce fees and charges could override statutory rate setting obligations.

On August 3, 2020, the State Supreme Court issued an opinion in Wilde v. City of Dunsmuir (2020) 9 Cal.5th 1105, holding that taxpayers do not have the right under Proposition 218 to challenge water rates by referendum, and the City does not believe that Article XIIIC grants to the voters within the City the power (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under Article XIIIC) to repeal or reduce rates and charges for the Water Service in a manner that would interfere with the contractual obligations of the City or the obligation of the City to maintain and operate the Water System.

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However, there can be no assurance as to the availability of particular remedies adequate to protect the Beneficial Owners of the Bonds. Remedies that are available to Beneficial Owners of the Bonds in the event of a default by the City are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. So long as the Bonds are held in book -entry form, DTC (or its nominee) will be the sole registered owner of the Bonds and the rights and remedies of the Bond Owner s will be exercised through the procedures of DTC.

Proposition 26
On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reaso nable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 applies to charges imposed or increased after November 2, 2010 and provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City believes that its water rates and charges meet the exception that is described in clause (g) above and are not taxes under Proposition 26.

Future Initiatives
Articles XIIIB, XIIIC and XIIID and Propositio n 26 were adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiatives could be proposed and adopted affecting the City’s water rates and charges or ability to increase Revenues. See the caption “CERTAIN RISKS TO BONDHOLDERS—Initiative Measure Relating to Water Revenues” for information regarding an initiative measure expected to appear on the November 2024 Statewide ballot, which would amend Article XIIIC and apply retroactively to January 1, 2022. If such retroactivity is upheld, the amendments contained in Initiative 1935 would apply to the City’s most recent water rate increases, which were adopted on December 6, 2023 after a noticed public hearing in compliance with Article XIIIC. The City was aware of Initiative 1935 when it went through the process prescribed by Proposition 218 and believes that its current water rates were adopted in compliance with Article XIIIC, as it would be amended if Initiative 1935 is approved by the voters.

CERTAIN RISKS TO BONDHOLDERS
The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal of or interest on the Bonds.

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Limited Obligations
The obligation of the City to pay the Series 2024 Installment Payments is a limited obligation of the City and is 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 Revenues of the Water System. The obligation of the City to pay the Series 2024 Installment 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.

Accuracy of Assumptions
To estimate the Net Revenues available to pay the Series 2024 Installment Payments, the City has made certain assumptions with regard to various matters, including but not limited to future development within the City and increases in revenues resulting therefrom, the rates and char ges to be imposed in future years, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The City believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the Series 2024 Installment Payments will, in all likelihood, be less than those projected herein. The City may choose, however, to maintain compliance with the rate covenant that is set forth in the Indenture in part by means of contributions from the Rate Stabilization Fund or other available reserves or resources. In such event, Net Revenues may generate amounts which are less than 120% of Debt Service in any given Fiscal Year. See the captions “SECURITY FOR THE BONDS—Rate Covenant,” “SECURITY FOR THE BONDS —Rate Stabilization Fund” and “WATER SYSTEM FINANCIAL INFORMATION—Projected Water System Operating Results and Debt Service Coverage.” Water System Demand
There can be no assurance that the demand for Water Service will occur as described in this Official Statement. Water deliveries and Revenues declined significantly in Fiscal Year 2021 -22 due to drought conservation measures and in Fiscal Year 2022-23 due to unusually high precipitation levels. Additional future decreases in demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Demand for Water Service could be reduced or may not occur as projected by the City as a result of reduced levels of development in the City’s service area, hydrological conditions, an economic downturn, voluntary conservation efforts or mandatory State conservation orders in response to drought conditions and other factors.

System Expenses
There can be no assurance that the City’s expenses will be consistent with the descriptions in this Official Statement. Operation and Maintenance Costs may vary with labor costs (including costs related to pension liabilities and the costs of retaining qualified personnel with the proper certifications to operate Water System treatment and other facilities), water treatment costs, energy costs, regulatory compliance costs, increased imported water purchase costs (including as a result of drought restrictions) and other factors.

Increases in Operation and Maintenance Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS —Rate Covenant.” Rate increases are subject to the provisions of Proposition 218 and there can be no assurance that the City will be able to increase rates as needed to address increases in Water System expenses. See the caption “— Rate-Setting Process under Proposition 218.”
Limited Recourse on Default
If the City defaults on its obligation to pay the Series 2024 Installment Payments, the Trustee, as assignee of the Authority, has the right to declare the total unpaid principal amount of the Series 2024 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, in the event

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of a default and such acceleration, there can be no assurance that the City will have sufficient funds to pay such accelerated amounts from Net Revenues.

Rate-Setting Process under Proposition 218
Proposition 218, which added Articles XIIIC and XIIID to the State Constitution, affects the City’s ability to maintain existing Water System rates and impose rate increases, and no assurance can be given that future proposals to increase Water System rates will not encounter majority protest opposition or be challenged by initiative action authorized under Proposition 218. In the event that future proposed Water System rate increases cannot be imposed as a result of majority protest or init iative, the City might thereafter be unable to generate Net Revenues in the amounts required by the Installment Purchase Agreement to pay the Series 2024 Installment Payments. The City believes that its current Water System rates approved by the City Council were effected in accordance with the public hearing and majority protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” The City also believes its current rates were adopted in compliance with the provision of Article XIIIC, as it would be amended if Initiative 1935 is approved by the voters in November 2024. See “ —Initiative Measure Relating to Water Revenues.”
Statutory and Regulatory Compliance
Laws and regulations governing treatment and delivery of water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase.

Claims against the Water System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Water System and constitute Operation and Maintenance Costs, or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for municipal water systems such as that operated by the City may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders can also impose substantial additional costs on the City. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the City to generate Net Revenues in amounts that are sufficient to pay the Bonds.

Natural Disasters
The occurrence of any natural disaster in 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 Bonds and result in substantial damage to and interference with the operations of the Water System.

Significant earthquake faults are located in the region surrounding the City. The Installment Purchase Agreement does not require the City to maintain earthquake insurance; however, the City currently maintains earthquake coverage as part of its property insurance coverage.

The City maintains liability insurance for the Water System and property casualty insurance (for losses other than from seismic events) for certain portions of the Water System. See the caption “THE CITY —City Insurance.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Furthermore, significant portions of the Water System, including underground pipelines, are not covered by property casualty insurance. Damage to such portions of the Water System as a result of natural disasters would result in uninsured losses to the City.

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Limitations on Remedies
The ability of the City to comply with its covenants under the Installment Purchase Agreement and to generate Net Revenues in amounts that are sufficient to pay the Series 2024 Installment Payments may be adversely affected by actions and events that are outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay asse ssments, fees and charges. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Furthermore, the remedies that are available to the owners of the Bonds upon the occurrence of an event of default under the Indenture 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, usual equity principles may limit the specific enforcement under State law of ce rtain remedies, as may the exercise by the United States of America of the powers delegated to it by the federal Constitution and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of t he State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium proceedings and other laws relating to or affecting creditors’ rights, or the exercise of powers by the federal or State government, if initiated, could subject the Beneficial Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights. Remedies may be limited because the Water System serves an essential public purpose.

The opinion to be delivered by Bond Counsel concurrently with the issuance of the Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the Series 2024 Installment Payments, which secure the payments of principal of and interest on the Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the Bonds.

Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the City have covenanted in the Indenture and the Installment Purchase Agreement, respectively, to comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and not to take any action or fail to take any action if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds thereunder. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of such Bonds as a result of acts or omissions of the Authority or the City in violation of this or other covenants in the Indenture or the Installment Purchase Agreement. The Bonds are not subject to redemption or any increase in interest rates should an event of taxability occur and will remain outstanding until maturity or prior redemption in accordance with the provisions contained in the Indenture. See the caption “TAX MATTERS.”
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices are suspended or terminated. Additionally, prices of issues for whic h a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

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Parity Obligations
The Installment Purchase Agreement permits the City to enter into Parity Bonds and Contracts payable from Net Revenues on a parity with the Series 2024 Installment Payments, which secure the Bonds, subject to the terms and conditions set forth therein. The entry into of Parity Bonds and Contracts could result in reduced Net Revenues available to pay the Series 2024 Installment Payments. The City has covenanted to set Water System rates and charges in an amount expected to produce Net Revenues of at least 120% of Debt Service, as further described under the caption “SECURITY FOR THE BONDS—Additional Parity Bonds and Contracts.” Climate Change
The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the City is difficult to predict, but it could be significant and it could have a material adverse effect on the Water System’s finances by requiring greater expenditures to counteract the effects of climate change, by changing the business and activities of Water System customers or by increasing the cost or decreasing the availability of water supplies from the Main Basin and SGVWC. See the captions “ —System Expenses” and “THE WATER SYSTEM—Drought Declarations.”
Cyber Security
The City relies on computers and technology to conduct its operations. The City and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of technology attacks. Recently, there have been significant cyber security incidents affecting municipal agencies, including a ransomware attack targeting Los Angeles Unified School District, a freeze affecting computer systems of the City of Atlanta, an attack on the City of Baltimore’s 911 system, an attack targeting the State of California Department of Finance, an attack on the Colorado Department of Transportation’s computers, an attack that resulted in the temporary closure of the Port of Los Angeles’ largest terminal and an attack on a water treatment facility in Oldsmar, Florida.

The City owns and operates its own enterprise class data network serving the municipal city government and its operations. The City has retained information technology professionals to support, maintain and protect these operations locally in a purpose-built and physically secure environment. This network and its operations are governed by and in compliance with all applicable governmental regulations as well as the City’s own administrative regulations. Within the City’s operations and guidance is an active cyber -security program designed to protect from, and to quickly identify and mitigate, a multitude of complex security threats. In 2021, the City implemented procedures that include annual cybersecurity audits. While no network is completely immune from all possible compromise, the City exercises its due diligence in protecting the data it possesses and the systems it operates. To date, there have been no significant cyber -attacks on the City’s computers and technologies.

While the City is rou tinely maintaining its technology systems and continuously implementing new information security controls, no assurances can be given that the City’s security and operational control measures will be successful in guarding against all cyber threats and att acks. The results of any attack on the City’s computer and technology could negatively impact the City’s operations, and the costs related to such attacks could be substantial.

Rate Covenant Not a Guarantee
The Series 2024 Installment Payments, which secure the Bonds, are payable from Net Revenues of the Water System. See the caption “SECURITY FOR THE BONDS.” The City’s ability to pay the Series 2024

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Installment Payments depends on its ability to generate Net Revenues at the levels required by the Installment Purchase Agreement. Although the City has covenanted in the Installment Purchase Agreement to impose rates and charges as more particularly described under the caption “SECURITY FOR THE BONDS —Rate Covenant,” and although the City expects that sufficient Revenues will be generated through the imposition and collection of such rates and charges, there is no assurance that the imposition and collection of such rates and charges will result in the generation of Net Revenues in amounts that are sufficient to pay the Series 2024 Installment Payments. Among other matters, the availability of and demand for water and changes in law and government regulations could adversely affect the amount of Revenues realized by the City. The failure to generate sufficient Revenues to pay the Series 2024 Installment Payments does not constitute a default or Event of Default under the Installment Purchase Agreement or the Indenture, provided that the City has set rates and charges at levels that it reasonably expects will generate sufficient Revenues at the beginning of each Fiscal Year.

Initiative Measure Relating to Water Revenues
On February 1, 2023, the California Secretary of State announced that a ballot initiative, designated as Initiative 1935 and known as the “Taxpayer Protection and Government Accountability Act,” had received the required number of signatures to appear on the November 5, 2024 ballot.

If approved by a majority of voters casting a ballot at the November 5, 2024 Statewide election, Initiative 1935 would make numerous significant changes to Articles XIII, XIIIA, XIIIC and XIIID of the California Constitution to further limit the authority of local governments, and electors via the initiative process, to adopt and impose taxes and fees. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES.” The full text of Initiative 1935 may be viewed at the website of the California Attorney General.

Among other things:
• Initiative 1935 would amend Article XIIIC to state that every levy, charge or exaction of any kind imposed by local law is either a “tax” or an “exempt charge,” and would amend the definition of “tax” added to Article XIIIC by Proposition 26 to state that “every levy, charge, or exaction of any kind imposed by a local law that is not an exempt charge” constitutes a tax. Initiative 1935 narrows the definition of “exempt charge” to mean a “reasonable charge for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the actual costs [as opposed to the reasonable costs] of providing the service or product to the payor.” “Exempt charges” also encompass existing exceptions from the definition of “tax” added to Article XIIIC by Proposition 26. “Actual costs” is defined in Initiative 1935 to mean “the minimum amount necessary to reimburse the government for the cost of providing the service or product to the payor … where the amount charged is not used by the government for any purpose other than reimbursing that cost. In computing “actual cost” the maximum amount that may be imposed is the actual cost less all other sources of revenue including, but not limited to taxes, other exempt charges, grants, and state or federal funds received to provide such service or product.” Initiative 1935 would retain an exemption from the definition of “tax” for assessments, fees or charges which are subject to Article XIIID. • Initiative 1935 would amend Article XIIIC to state that only the governing body of a local government, or an elector acting pursuant to the initiative power, has the authority to impose an exempt charge, and that exempt charges must be imposed by an ordinance specifying the type of exempt charge and the amount or rate of the exempt charge to be imposed, and passed by the governing body, other than for certain exempt charges imposed for a specific health care service. In addition, Initiative 1935 would amend Article XIIIC to prohibit any amendment to a municipal charter which provides for the imposition, extension or increase of a tax or exempt charge from being submitted to or approved by the electors. • Initiative 1935 would amend Article XIIIC to require the title, summary and ballot label or questions for a measure providing for the imposition of a tax to include: (a) the type and amount or rate of the

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tax; (b) the duration of the tax; and (c) the proposed use of the revenue derived from the tax; and (d) if the proposed tax is a general tax, the phrase “for general government use.” In addition, no advisory measure may appear on the same ballot that would indicate that the revenue from the general tax will, could or should be used for specific purposes.
• Initiative 1935 would amend Article XIIIC to require that any special tax, whether proposed by the governing body or by an elector, be approved by a two-thirds vote of the electorate. • Initiative 1935 would amend Article XIIIC to state that the local government bears the burden of proving by clear and convincing evidence (as opposed to a preponderance of the evidence) that: (a) a levy, charge or exaction is an exempt charge and not a tax; and (b) the amount of the exempt charge is reasonable and that the amount charged does not exceed the actual cost of providing the service or product to the payor. • Initiative 1935 would amend Article XIIIC to state that any tax or exempt charge adopted after January 1, 2022, but prior to the effective date of Initiative 1935, which was not adopted in compliance with the requirements thereof, will be void 12 months after the effective date of Initiative 1935, if adopted, unless the tax or exempt charge is reenacted in compliance with the provisions of Initiative 1935.

The City cannot predict whether Initiative 1935 will be approved by a majority of voters casting a ballot at the November 5, 2024 Statewide election. The City believes its water rates, adopted in December 2023, were adopted in compliance with and will comply with Initiative 1935; however, if Initiative 1935 is approved, the City cannot provide any assurances as to the effect of the implementation or judicial interpretations of Initiative 1935 on the finances of the State or the City.

THE AUTHORITY
The Monterey Park Financing Authority was formed pursuant to the provisions of Articles 1 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code and a Joint Exercise of Powers Agreement, dated as of June 16, 2021 (the “Joint Powers Agreement”), by and between the City and the Monterey Park Housing Authority (the “Housing Authority”). The Authority was formed for the purpose of assisting in the financing and refinancing of capital improvement projects of the City and related entities and to finance working capital for the City by exercising the powers referred to in the Joint Powers Agreement, including the power to issue bonds to pay the costs of public improvements. Neither the City nor the Housing Authority is responsible for repayment of the obligations of the other. The Authority is governed by a five-member board whose members are the same as the City Council. The Authority has no employees and all staff work is done by City staff or by consultants to the Authority.

APPROVAL OF LEGAL PROCEEDINGS
The valid, legal and binding nature of the Bonds is subject to the approval of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, acting as Bond Counsel. The form of such legal opinion is set forth in Appendix C, and such legal opinion will be attached to each Bond. Certain matters will be passed upon for the City and the Authority by Burke, Williams & Sore nsen, LLP, Los Angeles, California, as City Attorney and General Counsel to the Authority, and by Stradling Yocca Carlson & Rauth LLP, as Disclosure Counsel, for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel.

LITIGATION
The City
At the time of delivery of and payment for the Bonds, the City will certify that 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, threatened against the City affecting the existence of the City

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or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that could have a material adverse effect on the City’s ability to pay the Series 2024 Installment Payments, in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement or any action of the City contemplated by any of said documents, in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto or contesting the powers of the City or its authority with respect to the Bonds or any action of the City contemplated by any of said documents, nor to the knowledge of the City, is there any basis therefor.

The Authority
At the time of delivery of and payment for the Bonds, the Authority will certify that 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 Authority, threatened against the Authority affecting the existence of the Authority or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that could have a material adverse effect on the Authority’s ability to pay the Bonds, in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement or any action of the Authority contemplated by any of said documents, in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto or contesting the powers of the Authority or its authority with respect to the Bonds or any action of the Authority contemplated by any of said documents, nor to the knowledge of the Authority, is there any basis therefor.

TAX MATTERS
In the opinion of Stradling Yoc ca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. However, it should be noted that for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Code, generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) on the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations.

In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.

Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the Authority, the City and others and is subject to the condition that the Authority and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority and the City have covenanted to comply with all such requirements.

In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at m aturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before

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receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond.

The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax- exempt interest received with respect to the Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

The Internal Revenue Service (the “IRS ”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value.

SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR

LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR

INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE

OR LOCAL TAX TREATMENT OF THE BONDS, INCLUDING THE IMPOSITION OF ADDITIONAL

FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX- EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS . THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS . NO ASSURANCE CAN BE GIVEN THAT

SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE

INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS,

ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING

POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certific ate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth LLP.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the City continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.

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Should interest (and original issue discount) on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture.

A copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C.

CONTINUING DISCLOSURE
The City has covenanted in its continuing disclosure certificate (the “ Continuing Disclosure Certificate”) for the benefit of the Owners and Beneficial Owners of the Bonds to provide certain financial information and other operating data on an annual basis no later than nine months after the end of the City’s Fiscal Year (currently March 31 based on the City’s fiscal year end of June 30), commencing March 31, 2025, and to provide notice of certain enumerated events as required by Securities and Exchange Commission Rule 15c2-12(b)(5) under the Securities Exchange Act of 1934, as amended (the “Rule”). The specific nature of the information to be contained in the annual report and the list of enumerated events notice of which must be provided by the City are summarized under the caption APPENDIX E — “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriters in complying with the Rule.

Although the City has covenanted in the Continuing Disclosure Certificate to provide notice of rating changes with respect to the Bonds, information relating to rating changes may be publicly available from the rating agencies prior to such information being provided to the City and prior to the date by which the City is obligated to file a notice of rating change. Owners of the Bonds are directed to the rating agencies and official media outlets for the most current rating information with respect to the Bonds.

The City believes that it and its affiliated entities are currently in compliance with their respective outstanding continuing disclosure undertakings. Certain continuing disclosure filings during the past five years, were made after the required filing date. On March 16, 2021, the City entered into an Equipment Lease Purchase Agreement in the principal amount of $2,682,200 and failed to file a notice of incurrence of financial obligation within 10 business days. The City filed such notice on October 7, 2021. Except for this instance described above, the City complied, in all material respects, with its disclosure undertakings during the past five years. [UPDATE]
Except as set forth in the previous paragraph, the City and its affiliated entities have not failed to comply in all material respects with their respective prior continuing disclosure undertakings in the last five years. The City has adopted a written Policy for Disclosure Procedures and has engaged Urban Futures, Inc. as Dissemination Agent (the “ Dissemination Agent”) to ensure compliance with its continuing disclosure undertakings.

RATING
S&P has assigned the rating of “___” to the Bonds . A rating is not a recommendation to buy, sell or hold securities. Future events could have an adverse impact on the rating of the Bonds, and there is no assurance that any credit rating that is given to the Bonds will be maintained for any period of time or that a rating may not be qualified, downgraded, lowered or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such qualification, downgrade, lowering or withdrawal of a rating may have an adverse effect on the market price of the Bonds. The rating reflects only the views of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, a rating agency bases its ratings on the information and materials furnished to it (which may include information and material from the City that is not included in this Official Statement) and on investigations, studies and assumptions of its own.

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The City has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the Bonds with EMMA. See the caption “CONTINUING DISCLOSURE” and Appendix E.

Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from the rating agencies prior to the time that such information is provided to the City and prior to the date by which the City is obligated to file a notice of rating change. Purchasers of the Bonds are directed to the rating agencies and their respective websites and official media outlets for the most current ratings with respect to the Bonds after the initial issuance of the Bonds.

In providing a rating on the Bonds, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology, which may not reflect the provisions of the Indenture.

The City and the Authority make no representations as to any such calculations, and such calculations should not be construed as a representation by the City or the Authority as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose.

MUNICIPAL ADVISOR
The City has retained Urban Futures, Inc., Tustin, California (the “Municipal Advisor”), as its municipal advisor in connection with the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

UNDERWRITING
The Bonds are being purchased by Samuel A. Ramirez & Co., Inc. (the “ Underwriter”) pursuant to a purchase agreement, dated the date hereof, by and among the Authority, the City and the Underwriter. The Underwriter will purchase the Bonds from the Authority at an aggregate purchase price of $__________, representing the principal amount of the Bonds, plus/less $__________ of [net] original issue [premium/discount] and less $__________ of Underwriter’s discount.

The initial public offering prices stated on the inside front cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices.

FINANCIAL INTERESTS
The fees being paid to the Underwriter, Bond and Disclosure Counsel, Municipal Advisor, and counsel to the Underwriter are contingent upon the issuance and delivery of the Bonds. From time to time, Bond and Disclosure Counsel represents the Underwriter on matters unrelated to the Bonds.

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Monterey Park City CouncilApril 17, 2024

Monterey Park City Council
April 17, 2024